Advertisement

Court Clears Way for Brown to Get Control of Stater

Times Staff Writer

A Delaware court ruled Friday in favor of Stater Bros.’ former president, Jack H. Brown, clearing the way for him to regain control of the Colton-based supermarket company from executives who had ousted him in February and engaged him in a four-month power struggle.

In a 28-page opinion, Vice Chancellor Carolyn Berger of the Delaware Chancery Court directed “the prompt and orderly transfer of control” from Chairman Bernard R. Garrett to Brown.

Stater Bros. offered a subdued response late Friday.

“Our attorneys are studying the opinion,” spokesman Phillip I. Myers said. “The court has not entered an order yet. (It) has requested the Brown people to file motions in terms of an orderly transition. We won’t have any specific comment until the final order is given.”

Advertisement

By contrast, Brown sounded triumphant in a telephone interview. “This is obviously a very important moment,” he said. “Anyone who ever said Friday the 13th was unlucky had better talk to me.” He added that the ruling made a fine present for his 46th birthday, which is today.

Expects an Appeal

Todd E. Gordinier, an attorney for Brown, said Brown and his supporters plan to file Monday with the Delaware court notice of when their group intends to assume control. The court would then issue a final order. Gordinier said he “would be surprised” if the Garrett group did not appeal that order.

At issue in the Delaware case was the ownership of 400,000 shares held by La Cadena Investments, a San Bernardino group controlled by Brown that owns 44% of Stater Bros. Brown’s group also had the backing of Craig Corp. of Compton, which holds a 6.5% stake.

Advertisement

The 400,000 shares represented the margin of victory for Brown’s slate of directors candidates at the company’s April 28 annual meeting.

Shareholders cast 2.2 million votes for each of the Brown group’s three nominees and 1.8 million for each of the Garrett group’s nominees. Elected to the board were Laurence Carr, Martin Matich and John Wallace.

However, in a suit challenging the results, the Garrett side argued that Brown’s pact with Craig Corp. violated a 1985 stockholders agreement, triggering an option for a trust owned by Garrett’s children, Mitchel and Lisa, to buy the disputed shares.

During the annual meeting, Mitchel Garrett said the trust was voting those shares in addition to its own for management’s nominees--representing a total of 51.4% of Stater’s stock.

Advertisement

Chancellor Berger found that the agreement with Craig had not triggered such a right and that, therefore, La Cadena was entitled to vote those shares for its own slate.

The Delaware action does not affect a suit in Los Angeles County Superior Court in which Garrett alleges that Brown manipulated the 94-store chain’s profit figures just before it made an initial public offering of stock last November.

The suit alleges that Brown intended to reduce the price level of the stock, allowing him to buy large numbers of shares at depressed prices--in “serious violation” of federal securities laws. Brown has strongly denied the allegations.

Gordinier said Friday that he and an attorney for Garrett have agreed to delay a motion for dismissal of that suit until the issue of control is finally decided in Delaware.

Advertisement

Meanwhile, Brown spent the afternoon chatting with employees, attorneys and reporters. Asked how he planned to celebrate the Delaware opinion, Brown said: “I’ll probably spend a quiet evening at home if I can--the first one in 127 days.”


Advertisement
Advertisement