Company Name: Farmer Bros. Co.
Public Availability Date: September 29, 2006

Document Sections:

INQUIRY LETTER
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER

[INQUIRY LETTER]

July 27, 2006

VIA HAND DELIVERY

U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Farmer Bros. Co. Stockholder Proposal of Leonard Rosenthal Securities Exchange Act of 1934Rule 14a-8

Ladies and Gentlemen:

We are counsel to Farmer Bros. Co., a Delaware corporation (the "Company"). The Company has received a stockholder proposal concerning indemnification of directors (the "Proposal") and a supporting statement (the "Supporting Statement") from Leonard Rosenthal (the "Proponent") in connection with the Company's 2006 Annual Meeting of Stockholders (the "2006 Stockholders Meeting"). On behalf of the Company, we hereby notify the Division of Corporation Finance of the Securities and Exchange Commission (the "SEC") of the Company's intention to exclude the Proposal and Supporting Statement from its proxy statement and form of proxy for the 2006 Stockholders Meeting (collectively, the "2006 Proxy Materials") on the bases set forth below, and we respectfully request that the Staff of the Division of Corporate Finance (the "Staff") concur in our view that the Proposal and Supporting Statement are excludable on the bases set forth below.

Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and its attachments. As required by Rule 14a-8(j), a copy of this letter and its attachments are being mailed on this date to the Proponent informing him of the Company's intention to omit the Proposal and Supporting Statement from the 2006 Proxy Materials. The Company intends to begin distribution of its definitive 2006 Proxy Materials on or about October 20, 2006, and therefore this letter is being submitted more than eighty (80) days prior to the date the Company will file its definitive Proxy Materials with the Commission.

The Proposal relates to precluding indemnification in connection with certain actions of the Company's directors and would have the stockholders make a determination that none of the Company current directors (the "Directors") have satisfied the legal standard that would entitle them to indemnification before any action challenging their conduct has been asserted or any indemnification claim has been made.

We believe that the Proposal and Supporting Statement may properly be excluded from the Company's 2006 Proxy Materials pursuant to the following rules:

1. Rule 14a-8(i)(1), Rule 14a-8(i)(2) and Rule 14a-8(i)(6), because the Proposal, if implemented, is not a proper subject for stockholder action under Delaware law, would cause the Company to not comply with the legally authorized process of permissive indemnification and would otherwise contravene Delaware General Corporate Law ("DGCL") Section 145, and, therefore, cannot be implemented by the Company.

2. Rule 14a-8(i)(1), because the Proposal conflicts with the Company's Certificate of Incorporation (the "Certificate of Incorporation") and is, therefore, not a proper subject for action by the stockholders.

3. Rule 14a-8(i)(6), because the Proposal would cause the company to breach contractual obligations to its directors.

4. Rule 14a-8(i)(3), because the Proposal and Supporting Statement contain false and misleading statements in violation of Rule 14a-9.

I. THE PROPOSALINTRODUCTION; SUMMARY OF ARGUMENT

A copy of the Proposal and Supporting Statement is attached hereto as Exhibit 1. Attached hereto as Exhibits 2, 3, 4 and 5, respectively, are DGCL Section 145, the Company's Certificate of Incorporation (the "Certificate of Incorporation"), Article VIII of the Company's Bylaws ("Bylaws"), and the form of Indemnification Agreement entered into by the directors (the "Indemnification Agreement").

The Proposal purports to make a determination that the Directors are not entitled to indemnification for expenses and other amounts incurred in connection with any "threatened, pending or completed action or proceeding of the Securities and Exchange Commission ("SEC") ... concerning the failure of [the Company] to register and otherwise comply with the Investment Company Act of 1940 ("ICA")", because the Directors "have NOT met the applicable standard of conduct for indemnification established in DGCL 145(a)...."

Although the Proposal seeks to prohibit indemnification in connection with any threatened, pending or completed action, suit or proceeding of the SEC (collectively, "Actions"), there is currently no pending or completed Action and, to the best of the Company's knowledge, no such Action is threatened, against the Directors related to the ICA.

The Proposal is an attempt to short-circuit the legally mandated indemnification process with respect to any Action related to the ICA and adjudge the directors guilty of breach of duty before any accusations have been made, any legal actions brought or threatened, or any request for indemnification having been made by any Director. As such, the Proposal contravenes DGCL Section 145, the Certificate of Incorporation, the Bylaws and the Indemnification Agreement, and, if implemented, would cause the Company to breach its contractual indemnification duties to the Directors. Attached as Exhibit 6 is our legal opinion (the "Opinion") which concludes that the Proposal, if implemented, would contravene DGCL Section 145.

Finally, the Proposal contains an unsupported assertion of fact and the Supporting Statement misstates applicable law and would mislead stockholders concerning the effect of the Proposal.

II. THE PROPOSAL CONTRAVENES THE DELAWARE INDEMNIFICATION STATUTE, CONFLICTS WITH THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS AND, IF IMPLEMENTED, AND WOULD CAUSE A BREACH OF CONTRACT

(1) The Delaware Indemnification Statute.

DGCL Section 145 provides rules for determining whether indemnification of directors, officers and other agents is proper under Delaware law. This statute provides mandatory indemnification of a director if the director has been successful on the merits in defending an Action (subsection (c)) and provides for permissive indemnification (subsection (d)) in other cases upon a determination "in the specific case" that indemnification is proper in the circumstances because the director has met the applicable standard of conduct set forth in DGCL Sections 145(a) and (b). Any claim brought by the SEC against the Directors related to the ICA (e.g., a third-party claim) would be covered by DGCL Section 145(a) which provides that a corporation shall have the power to indemnify a director "if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful." The foregoing is referred to as the "Legal Standard." A corporation may determine whether a director has satisfied the Legal Standard by any of four alternative means: (1) by a majority of non-party directors even if less than a quorum, (2) by a committee of such non-party directors, (3) by a written opinion from independent legal counsel, or (4) by approval of the stockholders (DGCL Section 145(d)(1)-(4)).

According to the Supporting Statement, "[T]he proposed resolution provides an opportunity to exercise our stockholders' [sic] right to determine whether the conduct of the Company's current directors met the standards required for a Delaware corporation to authorize what is called 'permissive' indemnification pursuant to DGCL 145(d)." This statement is erroneous on its face as the Proposal, which purports to act as a right of stockholders to determine whether the conduct of the Directors satisfies the Legal Standard for authorizing permissive indemnification pursuant to DGCL Section 145(d)(4), is only one of the four alternative means of determining whether the Directors have satisfied the Legal Standard for authorizing permissive indemnification. The Proposal seeks to deny the Directors the ability to determine which of the four permissible methods for determining whether an indemnification claim is proper as provided by the statute, and is, therefore, as confirmed in the Opinion, not a proper subject for action of the stockholders.

In addition, DGCL Section 145(d) states that indemnification must be authorized or not "in the specific case upon a determination that indemnification of the ... director ... is proper in the circumstances because the person has met the applicable standard of conduct...." DGCL Section 145(d) is clearly intended to deal with the propriety of indemnification by determining whether the director has met the Legal Standard only after there is a specific action resulting in a claim for indemnification, and as stated in the Opinion, it is our view that under DGCL Section 145(d), indemnification can be neither granted nor denied in advance of the disposition of an Action and an actual claim for indemnification related to such Action. Since there is no specific Action resulting in a claim for indemnification, and in fact there is not even a pending or threatened Action against a Director that could give rise to a claim for indemnification related to the ICA and no claim for indemnification has been made, in our opinion the Proposal, which purports to be brought under DGCL Section 145(d), cannot be brought under that statute and for this reason contravenes Delaware law. Moreover, should such a claim be presented in the future, the failure to obtain a stockholder vote authorizing indemnification at this time would not preclude the other means specified by statute and (not referred to in the Supporting Statement) in which satisfaction of the Legal Standard for permissive indemnification can be determined, such as a written legal opinion, approval by a majority or committee of non-party directors even if less than a quorum, or a committee thereof, or even approval at a later date by disinterested stockholders. No facts presently exist, since no claim has yet been asserted, on which to base any determination of the satisfaction of the Legal Standard and appropriateness of indemnification under DGCL Section 145(d).

As such, the Proposal (i) is not a proper subject for the stockholders under Delaware law (Rule 14a-8(i)(1)), because, as confirmed in the Opinion, it seeks to deny the Directors the right to determine which of the four permissible methods for determining whether an indemnification claim is proper, (ii) contravenes DGCL Section 145, as confirmed in the Opinion (Rule 14a-8(i)(2)), and, therefore, (iii) cannot be implemented by the Company (Rule 14a-8(i)(6)). For these reasons, the Proposal may be excluded under Rule 14a-8(i)(1), Rule 14a-8(i)(2) and Rule 14a-8(i)(6).

In Farmer Bros. Co. (November 28, 2003), the Staff addressed a similar proposal by a stockholder of the Company prior to the Company's reincorporation from California to Delaware. The proposal in Farmer Bros. Co. also sought to deny indemnification to directors involving issues related to the ICA. In Farmer Bros. Co. the Company argued, and the Staff concurred that the proposal was not a proper subject for stockholder action under California law because it sought to deny directors the ability to determine the propriety of a claim for indemnification provided under California law. The Delaware indemnification statute, DGCL Section 145, is substantially similar to the California statute in question in Farmer Bros. Co. In Travelers Group, January 29, 1998, the Staff agreed that a proposal which would prohibit indemnification for defense costs despite a successful defense on the merits and alter the procedures for authorizing indemnification of corporate agents violated the Delaware indemnification statute and could be excluded under what is now Rule 14a-8(i)(2). Similarly, in Western Union, July 22, 1987, the Staff concurred that Western Union could exclude a proposal to limit indemnification in a manner contrary to the Delaware statute under what are now Rules 14a-8(i)(2) and 14a-8(i)(6).

(2) Conflict with Certificate of Incorporation.

Article Seventh of the Certificate of Incorporation states in pertinent part: "The Corporation shall indemnify its directors and officers to the fullest extent ... permitted by law, as now or hereafter in effect.... The rights to indemnification ... shall not be exclusive of any other right which any person may have or hereafter acquire under this Certificate of Incorporation, the By-Laws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise.... Any repeal or modification of this Article SEVENTH shall not adversely affect any rights to indemnification ... with respect to any acts or omissions occurring prior to such repeal or modification." Thus, the Certificate of Incorporation makes mandatory the indemnification permitted by DGCL Sections 145(a) and (b).

The Proposal is in conflict with the Certificate of Incorporation because it purports to revoke the Company's authority to indemnify directors for Actions related to the ICA. The Proposal, therefore, may be excluded under Rule 14a-8(i)(1) because it does not present a proper subject for action by the Company's stockholders. See Purepac Laboratories Corporation, April 11, 1974, where the Staff concurred that Purepac could exclude under what is now Rule 14a-8(i)(1) a proposed bylaw amendment that was in conflict with the certificate of incorporation on the ground that it did not present a proper subject for action by such company's stockholders.

(3) Breach of Contract.

In addition to the indemnification rights provided by the Certificate of Incorporation, Article VIII of the Bylaws confers indemnification rights on the directors. Section 8.¹ of the Bylaws requires the Company to indemnify Directors for third party claims such as an Action related to the ICA if, consistent with DGCL Section 145(a), they satisfied the Legal Standard. Section 8.3 follows Section 145(d) and provides for the four alternative means referenced in DGCL Section 145(d), as described in Section II (1), above, for determining whether the Directors have satisfied the Legal Standard. Section 8.4 of the Bylaws defines in more detail the standard of conduct for indemnification. Section 8.7 of the Bylaws makes clear that it is the policy of the Corporation that indemnification shall be made to the fullest extent permitted by law.

Each of the Directors has previously entered into an Indemnification Agreement. Section 3 of the Indemnification Agreement affirms the right of the directors to indemnification from third party claims if they have satisfied the Legal Standard. Section 12 of the Indemnification Agreement makes clear that the Directors may elect to determine whether a Director is entitled to indemnification by either a majority vote of the "Disinterested Directors" or an opinion of "Independent Counsel." Section 13(a) of the Indemnification Agreement states that the persons making a determination as to whether indemnification is proper shall "presume that Indemnitee is entitled to indemnification ... and the Company shall have the burden of proof to overcome that presumption...."

The Directors have relied on the indemnification provisions in the Certificate of Incorporation, the Bylaws and the Indemnification Agreement, and such provisions create contractual rights in favor of the Directors. See FOLK ON THE DELAWARE GENERAL CORPORATION LAW, Sections 242.2 (doctrine that charter is a contract is long established in Delaware) and 109.7 (By-laws generally have the force of a contract between the corporation and the directors) The Proposal seeks to (i) nullify those contractual rights by removing from the Directors, or independent counsel, the ability to determine whether the Directors have satisfied the Legal Standard, and (ii) nullify the requirement that the Company bear the burden of proving that one or more of the statutory grounds for denying indemnification exists. Giving effect to the Proposal would cause the Company to breach its existing contractual obligations with the Directors as provided in the Certificate of Incorporation, Bylaws and the Indemnification Agreement. For this reason, the Proposal may be excluded by the Company under Rules 14(a)-8(i)(2) and 14(a)-8(i)(6). See Western Union, July 22, 1987, in which the Staff permitted exclusion under what are now Rules 14a-8(i)(2) and 14a-8(i)(6) of a proposal which both violated the Delaware indemnification statute and would have caused a breach of a contract to indemnify.

In Staff Legal Bulletin No. 14, dated July 13, 2001, at Question E.5, the Staff states that, with respect to Rules 14a-8(i)(2) and 14a-8(i)(6), "[I]f implementing the proposal would require the company to breach existing contractual obligations, we may permit the stockholder to revise the proposal so that it applies only to the company's future contractual obligations." However, the contractual rights in question derive from the Certificate of Incorporation, the Bylaws and Indemnification Agreement which will not expire. Accordingly, the Proposal cannot be revised to cure this problem and is excludable under Rule 14a-8(i)(2) and Rule 14a-8(i)(6).

III. THE PROPOSAL AND SUPPORTING STATEMENT ARE FALSE AND MISLEADING

The Proposal contains an unsupported assertion of fact:

"[T]he Company's current directors have NOT met the applicable standard of conduct for indemnification established in DGCL 145(a)...."

The Proposal did not provide any factual support for this statement, other than the sweeping statement that the Company has deliberately rejected actions to comply with the ICA since August 2002. See Staff Legal Bulletin No. 14 July 13, 2001, Paragraph G, Substantive Issues 4: "In drafting a proposal and supporting statement, stockholders should avoid making unsupported assertions of fact." This unsupported statement is misleading and violates Rule 14a-9. The Note to Rule 14a-9 states that "misleading" materials include "[m]aterial which directly or indirectly ... makes charges concerning improper, illegal or immoral conduct or associations, without factual foundation." The Proponent provides no facts to support the above statement and it should be excluded under Rule 14a-8(i)(3) as misleading in violation of Rule 14a-9.

The misstatements in the Supporting Statement include:

(1) "This Proposed resolution provides an opportunity to exercise our stockholder's right to determine whether the conduct of the Company's current directors met the standards required for a Delaware corporation to authorize what is called 'permissive' indemnification pursuant to DGCL 145(d)." The stockholders have no right to determine if the Directors have satisfied the Standard of Conduct. Only if a matter of permissive indemnification is submitted to them for approval under DGCL Section 145(d)(4) do they have the right to vote. The statement ignores the fact that indemnification can also be authorized under DGCL Section 145(d) by vote of non-party directors even if less than a quorum or by the written opinion of independent legal counsel.

(2) "Our vote will not interfere with the legitimate indemnification rights of a director who succeeds in any defense or obtains a court order...." This statement is also misleading because it omits to state that it is also legitimate for a director to be entitled to indemnification if satisfaction of the Standard of Conduct is determined by non-party directors or by an opinion of independent legal counsel.

All of these misstatements result from Proponent's failure to comprehend the fact that the Proposal cannot change the rules governing indemnification as provided by DGCL Section 145, the Certificate of Incorporation, the Bylaws and the Indemnification Agreement, and therefore the Proposal cannot achieve its intended result. Accordingly, the Proponent's statements concerning the effect of the Proposal are false and misleading.

Please take note that the Proponent is a college professor and author with ample resources and ability to have researched applicable law and drafted a proper proposal. Although the Company does not believe this Proposal can be salvaged by revisions, the Company submits that affording this Proponent any further opportunity to make a proper proposal would be inappropriate and deleterious to the efficient operation of the stockholder proposal process. See Pacific Enterprises, March 9, 1990. The request for a no-action letter in Pacific Enterprises contains citations to a number of other no-action letters on this point.

Would you kindly advise us by fax at (213) 687-5600 of your response.

Thank you for your consideration.

Respectfully submitted,

/s/

Joseph J. Giunta

JJG:C

[INQUIRY LETTER]

Leonard Rosenthal
106 Walnut Hill Rd.
Newton, MA 02461

June 26, 2006

By telecopier and overnight delivery

Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, CA 90502

Attention: Corporate Secretary

Dear Sir or Madam:

I have beneficially owned shares of Farmer Bros. Co. ("Company") having a market value of more than $2,000 continuously for more than a year, and intend to continue ownership of such shares through the date of the next annual meeting of stockholders. I am submitting the accompanying proposal and supporting statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, for inclusion in the Company's proxy statement for the next meeting of stockholders. I intend to present the proposal at the meeting, personally or through a qualified representative.

I am the beneficial owner of shares in street name. A statement from the record holder of street name shares will be furnished to you upon your request. Please let me know, at the mailing address shown on this letterhead, if you have any questions or require any additional information.

Very truly yours,

/s/

Leonard Rosenthal

[APPENDIX]

PROPOSAL: INDEMNIFICATION OF DIRECTORS

RESOLVED, that in relation to any threatened, pending or completed action, suit or proceeding of the Securities and Exchange Commission ("SEC"), whether civil, criminal, administrative or investigative, concerning the failure of Farmer Bros. Co. (the "Company") to register and otherwise comply with the Investment Company Act of 1940 ("ICA"), and based on the Company's public record of deliberately rejecting actions to comply with the ICA since August 2002, the Company's stockholders have determined pursuant to Delaware General Corporation Law ("DGCL") Section 145(d)(4) that the Company's current directors have NOT met the applicable standard of conduct for indemnification established in DGCL 145(a), requiring that a director must have acted "in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful."

SUPPORTING STATEMENT

This proposed resolution provides an opportunity to exercise our stockholder's right to determine whether the conduct of the Company's current directors met the standards required for a Delaware corporation to authorize what is called "permissive" indemnification pursuant to DGCL 145(d). Voting for this proposal would tell the Company we consider it unacceptable to use corporate fundsthe property of stockholders - to indemnify directors specifically in relation to SEC enforcement of ICA compliance.

(Our vote will not interfere with the legitimate indemnification rights of a director who succeeds in any defense or obtains a court order, and will have no bearing at all on a director's indemnification for anything other than the specified SEC enforcement of ICA compliance.)

It should be noted that the Company's management could decide to ignore our determination of director conduct if they rely upon provisions of a new "Indemnification Agreement" the directors approved for themselves, disclosed by the Company in a May 22, 2006 SEC filing. In that event, it is my understanding that a court or the SEC may have to decide whether various provisions of the new "Agreement" are allowed by the DGCL, ICA, and other laws.

My opinion, based on publicly available Company reports and SEC records, is that the directors have knowingly failed to cause the Company to comply with the ICA, and that they knew this action would deprive shareholders of the benefits of ICA registration - regulatory oversight, tax advantages, and separation of the investment funds from the operating business.

Among the facts I considered were the directors' adoption of a "poison pill" and other management entrenchment measures that the ICA does not allow, and the explicit acknowledgement by the Company's own lawyer in an August 26, 2002 letter that it would violate laws for an ICA-registered company to engage in the transactions that eventually transferred a 19% voting block of Company stock to an affiliated ESOP.

I urge all of the Company's shareholders, and those acting as their fiduciaries, to consider the available evidence and vote for this resolution.

[INQUIRY LETTER]

July 27, 2006

VIA FEDERAL EXPRESS

Farmer Bros. Co.
20333 South Normandie Avenue
Torrance, CA 90502

Re: Proposed Stockholder Resolution Submitted By Leonard Rosenthal

Gentlemen:

You have requested our opinion as to whether the stockholder proposal (the "Proposal") submitted to Farmer Bros. Co., a Delaware corporation (the "Company"), by Leonard Rosenthal (the "Proponent"), would, if adopted and implemented, contravene the provisions of the Delaware General Corporation Law (the "DGCL"), and whether the Proposal is a proper subject for action by the Company's stockholders under Delaware law.

In connection with your request for our opinion, you have furnished us with copies of the Proponent's letter to the Company, dated June 26, 2006, and the Proposal and supporting statement which accompanied such letter. We also have reviewed the Company's Certificate of Incorporation (the "Certificate of Incorporation"), the Company's Bylaws (the "Bylaws") and the form of indemnification agreement entered into by the directors, each in their current form, and such other documents as we deemed necessary. We have assumed the conformity to the original documents of all documents submitted to us as copies and the authenticity of the originals of such documents.

The Proponent has proposed a binding stockholder resolution to preclude indemnification of all of the Company's current directors with respect to certain types of claims that may arise in the future related to the Investment Company Act of 1940 (the "ICA"). The text of the proposed stockholder resolution is as follows:

PROPOSAL: INDEMNIFICATION OF DIRECTORS

RESOLVED, that in relation to any threatened, pending or completed action, suit or proceeding of the Securities and Exchange Commission ("SEC"), whether civil, criminal, administrative or investigative, concerning the failure of Farmer Bros. Co. (the "Company") to register and otherwise comply with the Investment Company Act of 1940 ("ICA"), and based on the Company's public record of deliberately rejecting actions to comply with the ICA since August 2002, the Company's stockholders have determined pursuant to Delaware General Corporation Law ("DGCL") Section 145(d)(4) that the Company's current directors have NOT met the applicable standard of conduct for indemnification established in DGCL 145(a), requiring that a director must have acted "in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful."

The Proposal was accompanied by a statement of the Proponent in support thereof (the "Supporting Statement"). A copy of the Proposal and the Supporting Statement are attached as Exhibit A.

Members of our firm are admitted to the bar of the State of Delaware, and we do not express any opinion as to the laws of any jurisdiction other than the laws of the State of Delaware.

Analysis of Invalidity of Proposal Under Delaware Law

In our opinion, based upon and subject to the qualifications set forth in this letter, the Proposal contravenes Delaware law, and the Proposal is not a proper subject for action by the Company's stockholders. Therefore, the Proposal is invalid and improper under the laws of the State of Delaware.

1. The Proposal Would Contravene DGCL Section 145(d)

In our opinion, the Proposal contravenes DGCL Section 145(d) for at least two reasons: (a) it not only seeks to deny indemnification under DGCL Section 145(d) prior to the resolution of any Action (as defined below), it seeks to do so prior to the commencement of an Action that may result in a claim for indemnification, and (b) it seeks to exclude improperly other lawful methods of indemnification under DGCL Section 145(d).

(a) DGCL Section 145(d) provides, in part, as follows:

Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case [emphasis added] upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct [emphasis added] set forth in subsections (a) and (b) of this Section.

According to the Supporting Statement, "This proposed resolution provides an opportunity to exercise our stockholder's right to determine whether the conduct of the Company's current directors met the standards required for a Delaware corporation to authorize what is called 'permissive' indemnification pursuant to DGCL Section 145(d)." To our knowledge based on representations from the Company, and for purposes of this opinion, we assume that no threatened, pending or completed action, suit or proceeding of the Securities and Exchange Commission ("SEC"), whether civil, criminal, administrative or investigative, (collectively, "Actions") have been brought against any of the directors concerning the failure of the Company to register and otherwise comply with the ICA.

The reference in DGCL Section 145(d) to, "any indemnification under subsection (a) and (b) of this section (unless ordered by a Court) shall be made by the corporation only if authorized in the specific case [emphasis added], upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct [emphasis added] ...", clearly indicates that any determination regarding the propriety of indemnification under DGCL Section 145(d) must be made only after an action giving rise to a claim for indemnification is resolved. In our opinion, indemnification can clearly be neither granted or denied pursuant to DGCL Section 145(d) in advance of an actual claim where the actual circumstances can be considered.

DGCL Section 145 simply does not contemplate that the Company can make a "determination" by stockholder vote or otherwise before the resolution, much less the commencement, of an underlying action. As one leading commentator has unqualifiedly stated, "The right to indemnification is a post-judgment decision that must necessarily await the outcome of the litigation, given the limiting substantive conditions regarding indemnitee's conduct and motivation that must be met under the statute." D. Wolfe & M. Pittinger, CORPORATE AND COMMERCIAL PRACTICE IN THE DELAWARE COURT OF CHANCERY, Section 8-2 at 8-18.1 (2006).

Any reading of DGCL Section 145(d) that purports to permit a determination of indemnity rights before the disposition of an underlying Action is clearly contrary to the statute. DGCL Section 145 clearly recognizes the difference between whether deciding to pay corporate funds before and after the disposition of any underlying Action. In "advance of the final disposition" a directors expenses may be advanced by the corporation to the director pursuant to DGCL Section 145(e).1 Only after the disposition of an Action may the Company make the decision whether to indemnify the directors for the costs incurred in connection with the Action. See Advanced Mining Systems v. Fricke, 623 A.2d 82, 84 (Del. Ch. 1992) (decision to advance expenses to directors or officers prior to termination of a litigation proceeding is different than determination of whether director or officer is ultimately entitled to indemnification which is determined after the termination of such proceeding). Under DGCL Section 145(e), a corporation may advance expenses through the "final disposition" of the underlying action. Such an advancement is conditioned on an undertaking of such director to repay such amount "if it shall ultimately be determined [emphasis added] that such person is not entitled to be indemnified as authorized in this section." DGCL Section 145(e). The "ultimate determination" is the "determination" made pursuant to DGCL Section 145(d). Thus DGCL Section 145 clearly contemplates that the "determination" whether to indemnify directors will occur after the "final disposition" of the underlying action, at which time the corporation can also determine whether advanced expenses need to be repaid by directors pursuant to the required undertaking. See Dunlop v. Sunbeam Corp, 1999 Del. Ch. LEXIS 126, 17 (1999). (advances do not have to be returned until after both the completion of lawsuits and the determination that persons are not entitled to indemnification for such completed lawsuits)

The Proposal purports to make the "determination" required by DGCL Section 145(d) not only prior to the disposition of a pending Action, but also prior to the existence of any pending or threatened Action. Since there are no pending or threatened Actions against any of the directors related to the ICA and no claim for indemnification has been made, the Proposal, which purports to brought under DGCL Section 145(d), cannot be brought properly under such statute and, therefore, contravenes such statute.

(b) In the absence of a successful defense on the merits by the director, in which case indemnification is mandatory pursuant to DGCL Section 145(c), DGCL Section 145(d) authorizes indemnification when the director has met the applicable standard of conduct as determined by any of the following four methods:

(1) A majority vote of the directors who are not parties to such action, suit or proceeding, even though less than quorum; or

(2) By a committee of such directors designated by a majority vote of such directors, even though less than a quorum; or

(3) If there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or

(4) By the stockholders.

However, the Supporting Statement only refers to one of the four methods, stockholder approval (subparagraph (4) above). The Proposal seeks to preemptively deny the other three methods that are specifically authorized by the statute, and, neither the Proposal, nor the Supporting Statement, refers to the three alternative methods for granting indemnification described in DGCL Sections 145(d)(1), 145(d)(2) and 145(d)(3), namely by a majority vote of a disinterested directors, or committee thereof, even though less than a quorum, and if there are no such directors or such directors so direct, by independent legal counsel in a written opinion. Nothing in DGCL Section 145(d) suggests that failure to approve indemnification under one subsection would preclude indemnification under the other authorized means. Therefore, the Proposal improperly seeks to deny the ability of the Company to grant indemnification to the directors pursuant to DGCL Sections 145(d)(1), 145(d)(2) and 145(d)(3) with respect to any Actions related to the ICA should they arise in the future. Moreover, the Proposal purports to deny the stockholders of the Company the ability to grant indemnification pursuant to DGCL Section 145(d)(4), as warranted under the circumstances, at a later date, in the event a specific case arises related to the ICA. In our opinion, this denial of a statutory right to indemnification, in the absence of a resolved Action and a claim for indemnification, would also contravene DGCL Section 145(d) because there are no facts on which to base a determination of whether the applicable standards have been met.

2. The Proposal is Not a Proper Subject for Action by the Stockholders

In our opinion, the Proposal is not a proper subject of action by the stockholders for at least two reasons: (a) It seeks to deny the directors of the Company the ability to determine which of the four permissible methods for determining whether an indemnification claim is proper, as provided by statute, and (b) it conflicts with a provision in the Certificate of Incorporation that is intended to indemnify directors to the maximum extent permitted by law.

As described above DGCL Section 145(d)(1) and 145(d)(2) provides that non-party directors or a committee thereof, even though less than a quorum may determine the propriety of a director's claim for indemnification, and if there are no such directors, or if such directors so elect, the Company may seek to obtain the written opinion of legal counsel in accordance with DGCL Section 145(d)(3). DGCL Section 141(a) provides that the "business and affairs of every corporation ... shall be managed by or under the direction of a board of directors...." Determining which of the four permissible methods for determining whether an indemnification claim is proper, is within such power and duties of the directors to manage the affairs of the Company provided such directors comply with DGCL Section 145(d). The Proposal is not a proper action for the stockholders because, if implemented, it would improperly intrude on such power and duties of the directors as expressly contemplated by statute and the Company's Certificate of Incorporation.

Article Seventh of the Certificate of Incorporation states that "The Corporation shall indemnify its directors ... to the fullest extent permitted by law, as now or hereinafter in effect...." The Proposal is in conflict with the Company's Certificate of Incorporation because it purports to revoke or limit the Company's authority to indemnify directors with respect to any Actions related to the ICA to the fullest extent permitted by Delaware law. Indeed the proposal also seeks to do so on a retroactive and a prospective basis, which would deny the directors certain protection already afforded them in the Certificate of Incorporation. In our view the Proposal is in conflict with this provision in the Certificate of Incorporation, and since the Certificate of Incorporation may not be amended without the approval of both the Company's board of directors and stockholders in accordance with DGCL Section 242, the Proposal does not present a proper subject for action by the Company's stockholders.

* * *

Based upon and subject to the foregoing, it is our opinion that the stockholder resolution contemplated by the Proposal contravenes Delaware law and is not a proper subject for action by the Company's stockholders at the Annual Meeting and that a Delaware court, presented with the question of the resolution's validity, would so conclude.

This opinion is furnished to you solely for your benefit in connection with the Proposal and, except as set forth in the next sentence, is not to be used, circulated, quoted or otherwise referred to for any other purpose or relied upon by any other person without our express written permission. We hereby consent to your furnishing a copy of this opinion to the Staff of the SEC in connection with a no-action request with respect to the Proposal.

Very truly yours,

/s/

-----FOOTNOTES-----

¹ Both the Certificate of Incorporation and Bylaws provide for advancement of expenses to directors.

[INQUIRY LETTER]

August 14, 2006

Ted Yu, Esquire
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Email: cfletters@sec.gov

Re: Farmer Bros. Co.

Dear Mr. Yu:

As the shareholder who presented the proposal ("Proposal") addressed by Skadden Arps Slate Meagher & Flom in their July 27, 2006 letter to the SEC on behalf of Farmer Bros. Co. ("Company"), I ask you to consider reasons why their arguments should be rejected. I also request your advice on SEC policy relating specifically to the Company's request for your concurrence to exclude the Proposal based on theories of state law which are untested.

Since the Company's attorneys have not cited any court decisions to support their key arguments, I am responding as a non-lawyer to address the issues simply based on common sense. If the Company's attorneys subsequently provide supporting court decisions, I will consider engaging counsel to respond further to any relevant legal issues.

Importance of the issues

The Proposal is intended to present the Company's shareholders with an opportunity to exercise a critical right of corporate governance - the oversight of director conduct. The Company's management wants to avoid this oversight, and seeks SEC support based on their attorneys' view of how state law might be applied. Whether the attorneys' arguments are considered persuasive or not, there is no indication that their view is shared by the Delaware court. The Company's attorneys, who are assumed to be familiar with the state court's established rules to consider the legality of shareholder proposals only if they are actually adopted, are therefore asking the SEC to decide an issue of state law.

As explained below, SEC acceptance of untested theories of state law as a basis for allowing the exclusion of shareholder proposals would deprive investors of the rights intended by state law, and ultimately cripple our system of corporate governance.

Company's untested "view" of Delaware law

All of the Company's arguments supporting exclusion of the Proposal under Rule 14a-8(i)(2) and Rule 14a-8(i)(6) are based essentially on two novel theories which the Company's attorneys present as "our view" of Delaware law. Since the Company's Bylaws follow the language of Delaware General Corporate Law ("DGCL") Section 145, and since corporate powers are in any event limited to what is permitted by the DGCL, I assume there is no real reason to consider anything other than the state law. As a practical matter, my Proposal cannot be considered inconsistent with any valid provision of the Company's Bylaws unless a Delaware court eventually validates the Company's "view" ofthe state law.

Although it may not be necessary for the SEC to consider a theory or "view" that has not yet been tested by the state court, I believe it is relevant that the Company's two key theories appear to differ significantly from conventional interpretations of the plainly written Delaware statute.

1. In offering their "view" that determinations can be made only after an actual claim is finally resolved, the Company's attorneys repeatedly use the word "case" and ignore the statute's clearly stated purpose - "to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative." [DGCL §145(a)] They also ignore the statute's careful definition of several alternative means of advance, permissive and otherwise conditional determinations which are subject to an ultimate determination of indemnification rights upon "final disposition of such action, suit or proceeding." [DGCL §145(e)]

2. The Company's second key "view" is that directors who are defending claims against themselves should be allowed to choose from any one of four alternative determinations of their conduct. There is clearly nothing in either the language or the logic of the statute to support the idea that Delaware's lawmakers intended to give directors this ability to prevent shareholder oversight, especially in the context of their possible breaches of duty.

It should be noted that the only two Delaware legal cases cited by the Company's attorneys, dealing with an element of their arguments on page 4 of the "opinion" letter addressed to the Company, actually seem to contradict rather than support their "view." Both of the cited cases demonstrate how Delaware state law provides for interim decisions about indemnification before a proceeding is final, subject to a possibly different ultimate determination after the proceeding is completed.

Facts to be considered

To suggest that there is no basis for directors to seek indemnification and therefore no basis for judging its justification, the Company's attorneys carefully phrased a statement on page 3 of their letter that "to the best of the Company's knowledge, no such Action is threatened, against the Directors related to the ICA." They do not, however, include among their various assertions of "false and misleading" statements on pages 8 to 9 any challenge at all to my Supporting Statement's report of the public record regarding SEC attention to ICA compliance issues. In particular, they do not dispute "the explicit acknowledgement by the Company's own lawyer in an August 26, 2002 letter [to the SEC] that it would violate laws for an ICA-registered company to engage in the transactions" which were subsequently executed. Under these circumstances, in the absence of SEC advice that it does not intend to address the Company's ICA compliance issues, there is certainly a basis for the responsible Directors to reasonably anticipate the need for defensive legal advice and request indemnification of "expenses (including attorneys' fees)" according to the provisions of DGCL 145.

Logically, whenever the Company's directors have the right to request indemnification under DGCL 145, the Company's shareholders would have the right under the same statute to determine whether the directors' conduct met the required standard. Indeed, it must be up to the shareholdersnot the defending directorsto decide whether the information available to them is sufficient for a determination of the directors' conduct.

Intention to clearly present shareholder choice

To give the Company's shareholders an opportunity to exercise their right to judge the conduct of their directors, my Proposal and Supporting Statement are intended to clearly present the permissive alternative which is explicitly described in DGCL §145(d). My presentation is also intended to clearly explain that a shareholder vote adopting the Proposal would in no way interfere with DGCL 145's provisions for superseding determinations of indemnification rights, including an ultimate determination upon "final disposition." If the SEC Staff believes that my Proposal requires better explanation, I will of course be pleased to revise its presentation accordingly.

I will also be pleased to revise the Proposal's statement of what is to be decided by the shareholder vote, if the SEC believes that anyone other than the Company's attorneys may confuse the statement of the question with "an unsupported assertion of fact."

Question of SEC policy for resolution of state law issues

Regarding my request for advice on SEC policy, you will find with this letter a copy of the June 22, 2006 Delaware state court decision in the case of Lucian A. Bebchuk v. CA, Inc., in which the court addresses the issue of "ripeness" relating to the question of a shareholder proposal's validity. The case involves a company's intent to exclude a proposal from its proxy statement based on arguments supported by an opinion of respected attorneys, but not yet tested by the court, that the proposal would conflict with state law. Reviewing the court's established rules, the decision explains that under most circumstances the state court cannot consider unresolved issues concerning a proposal's validity until after the proposal has been adopted by shareholders. The court observes specifically, on page 14, that the "extraordinary idea that this court must immediately rule on the legality of any stockholder proposal" before it is presented for shareholder voting would "turn this court into a sort of administrative venue for 'shaping' the proxy materials," and that the resulting "conflation of federal regulation and state corporate law" would be unacceptable and "unsupported by our precedent."

It is clear from this recent decision that the Delaware court will not resolve issues concerning the validity of a shareholder proposal until after a proposal is adopted. Therefore, new theories such as those offered by the Company's attorneys as "our view" can be tested in the state court only if the SEC follows a policy of supporting a proposal's presentation to shareholders for voting unless an argued conflict is based on clearly established law. A policy allowing the exclusion of proposals based on legal theories which have not been tested in the state court would obstruct the resolution of corporate governance issues.

Specifically in relation to my Proposal, if the Company's attorneys are really willing to go before a Delaware court to test their novel "views" about the authority of defendant directors to control their own indemnification, they will have the opportunity to do so if and when shareholders have voted to make the issue relevant. But if the SEC allows the Company to exclude my Proposal from its proxy statement, there will never be any opportunity for me or anyone else to ask a Delaware court to consider the issues, and the SEC itself will have decided what "views" of the state law can be applied to the governance of corporations.

As an investor and finance professor, I view this as an important question of public policy. Will the SEC decide whether shareholders can exercise their voting rights based on a company's ability to find a lawyer willing to sell an accommodating "view" of state law? Or will the SEC rely upon a state court's definition of state law?

Please let me know by email (lrosenthal@bentley.edu) or telephone (781-891-2516) what additional information you may find useful.

Sincerely,

/s

Leonard Rosenthal, Ph.D.

cc: Joseph J. Giunta, Esquire (jgiunta@skadden.com)

[STAFF REPLY LETTER]

September 29, 2006

Response of the Office of Chief Counsel Division of Corporation Finance

Re: Farmer Bros. Co. Incoming letter dated July 27, 2006

The proposal relates to a shareholder resolution determining that the company's current directors have not met the applicable standard of conduct for indemnification established under state law in connection to any "threatened, pending or completed action, suit or proceeding of the Securities and Exchange Commission ('SEC'), whether civil, criminal, administrative or investigative" concerning the company's failure to "register and otherwise comply with the Investment Company Act of 1940..."

There appears to be some basis for your view that Farmer Bros. may exclude the proposal under rule 14a-8(i)(2). We note that, in the opinion of your counsel, implementation of the proposal would cause Farmer Bros. to violate state law. Accordingly, we will not recommend enforcement action to the Commission if Farmer Bros. omits the proposal from its proxy materials in reliance on rule 14a-8(i)(2). In reaching this position, we have not found it necessary to address the alternative bases for omission upon which Farmer Bros. relies.

Sincerely,

/s/

Ted Yu
Special Counsel