A Montgomery County Circuit Court judge, intervening yesterday in a high-powered, two-year-old battle between brothers, has blocked an attempt by Washington area shopping center magnate Theodore N. Lerner to force Lawrence E. Lerner out of the family management corporation.
"Courts generally are not in the business of running corporations," said Circuit Judge William M. Cave in his preliminary injunction. However, he said, "the bottom line is that majority shareholders simply may not freeze out minority shareholders because of dissension, bitterness or acrimony . . . . "
In court papers and testimony, Theodore Lerner said the firm had to remove Lawrence Lerner as a stockholder because developers otherwise would be reluctant to hire the firm to manage their properties "if Lawrence Lerner was a disruptive factor in the management company," Cave said.
"It is difficult for this court to see how Lawrence's continuation as a minority shareholder will cause any future disruption," Cave said. "Lawrence will not be in direct contact with the individual employes, nor will he be acting on behalf of the corporation with the outside business community."
Cave said Lawrence Lerner's right to remain a stockholder was "a valuable personal right to the individual" that could not be taken away.
Neither brother could be reached for comment. Jacob A. Stein, attorney for Theodore Lerner, declined comment.
Baltimore lawyer Arnold Weiner, representing Lawrence, described his client as "very pleased" with the decision.
The acrimonious and long-running dispute between the two brothers began in 1983, when minority shareholder Lawrence Lerner alleged that fiscal irregularities in the corporation had defrauded him of millions of dollars from several ventures.
Theodore Lerner, a 70 percent shareholder, removed his brother from the corporation's board of directors in September 1983.
The longstanding private dispute spilled into the open in April when Lawrence Lerner, 52, filed suit against his 59-year-old brother, seeking $56 million in damages and dissolution of the family business.
Shortly after the suit was filed, Lawrence Lerner was fired from his position as an employe of the family corporation.
On May 17, in what Lawrence Lerner later termed an act of "blatant retaliation," the corporate board that consists of Theodore Lerner, his wife Annette and son Mark, approved a reverse stock split, which reduced Lawrence Lerner's stock to a fraction. The board also required the redemption of "fractional" shares by the firm.
Lawrence Lerner then sought a temporary restraining order to stop the board of directors from amending the articles of incorporation to carry out the reverse stock split. Lawrence Lerner had called the intended action a "squeeze out" that would have stripped him of his 26 percent ownership in the family firm.
"About the only fact" the two sides agree on "is that these actions were taken as a result of the acrimony that arose and has intensified between the brothers," wrote Judge Cave in his eight-page opinion.
Theodore Lerner has built thousands of apartments and offices in the metropolitan area and developed many of its major shopping centers, including White Flint, Wheaton Plaza, Landover Mall and Tysons Corner.
Lawrence Lerner, trained as a pharmacist, is assisting his sons in their own construction business, his lawyer, Weiner, said.
The judge rejected the arguments of Theodore Lerner's lawyers that Lawrence Lerner had to show that the public interest would be harmed by the proposed stock transaction. Cave called the public interest a "nonfactor" in the case.
Cave said he granted the preliminary injunction based on the likelihood that Lawrence Lerner would prevail on the merits if he seeks a permanent order and that to do otherwise would cause him irreparable financial injury.