I don't know, I think Walther's is absolutely justified. Here's the facts as I see them:
1. Walthers has grown quite a bit in the last 50 years. You're dealing with a corporate mentality now, instead of the mom-and-pop operation that they once were.
2. The club was larger, but has shrank down to two members, both men in their 70s. This implies a degree of stagnation.
3. One of these members has "a strong personality" which may have contributed not only to the drop in membership, but also with relations with Walthers.
4. Walthers may well have needed the extra space. Hey, it's completely possible.
I think Walthers realized that they were essentially babysitting two old men, and the layout that had been built and maintained by a number of people over the years had devolved into little more than a dust collecting waste of space. There are indeed several model railroad clubs in the Milwaukee area - a few years ago, Model Railroader voted Milwaukee the #1 model railroading city in the USA, to no-one's surprise - and Walthers probably thought that these two remaining members might be better served by joining another club so that they could regain the use of the area the layout was displacing.
Just my $0.02.
"What was it the engines said?
Pilots touching, head to head,
half a world behind each back?
'They should have made this double track'"