Update-August 2021

Concordia Portland trial likely pushed to 2023

The trial in Hotchalk’s lawsuit against Concordia University Portland will likely move from this October to the spring of 2023, according to statements made by Hotchalk’s lawyers in a court hearing on August 27. Hotchalk’s lawyers said they need more time to depose members of the Concordia board of regents and administrators of the Lutheran Church–Missouri Synod, Concordia’s controlling parent organization and another defendant named in the suit, as well as resolve a “fairly major discovery dispute” with the Synod. Lawyers for the Synod filed a protective order covering several categories of documents later that afternoon, signaling that the sprawling court battle over Concordia Portland’s assets is likely to last for some months.

The protective order motion was filed hours after Judge Eric Dahlin ruled in the 90-minute hearing that he would likely find information about how the Lutheran Church Extension Fund, a third defendant in the suit, markets the 24-acre campus property relevant to Hotchalk’s claims that it was defrauded by Concordia in concert with the Synod and the Extension Fund. The Fund acquired Concordia’s campus for $3 million in a foreclosure sale earlier this summer, which Hotchalk claims constituted a fraudulent transfer. Judge Dahlin said he would allow Hotchalk access to redacted information about offers for the Concordia property, saying “ultimately, what we’re looking at is what’s the actual offer, what’s the dollar amount that’s being offered.” Lawyers for the Fund wanted to keep all information about offers private, arguing that its purchase of the property was not fraudulent because it was acquired through foreclosure and secured interests the Fund established through years of lending to Concordia.

Hotchalk managed Concordia’s online programs until the school shut down last year and is claiming $302 million in damages. It is owned in part by the German media conglomerate Bertelsmann, which spent $230 million to acquire a minority stake in Hotchalk in 2015. Since the sale of Concordia’s campus in June, Hotchalk’s lawyers have indicated they are looking beyond a claim to campus property and have their eyes on the assets of the Extension Fund, which exceed $2 billion. There is “evidence it has ample assets to pay,” said Hotchalk attorney Gabriel Weaver.

The vast majority of the Fund’s assets is in the form of loans receivable–money the Fund expects to get back from borrowers it lent to, primarily churches, schools, and other entities affiliated with the Lutheran Church–Missouri Synod. Over $1 billion is owed by LCMS congregations. In 2020, the Fund downgraded $225 million in congregational debt from its highest “Pass” category to “Special Mention”, which it assigns to “loans where the borrower exhibits trends that, if left uncorrected, may threaten their capacity to perform.” The Fund also carries $1.6 billion in notes payable–money it owes individual LCMS members who have invested in the Fund. The Fund is a 501(c)(3) organization, which means investments in the Fund are not FDIC-insured.

Another hearing in the lawsuit is scheduled for the middle of September.