Update-February 2022

Oregon judge reverses lis pendens decision

A lis pendens notice is still attached to the former Concordia University campus property in Northeast Portland after an Oregon judge denied a motion to strike that notice, restoring an obstacle the property’s new owner thought it had cleared at an oral hearing in December. 

Judge Eric Dahlin, who sounded inclined to grant the motion striking the lis pendens in December, wrote in his denial order that he received new information in subsequent email conversations with attorneys for Hotchalk, Inc., and the Lutheran Church Extension Fund (LCEF), and decided Hotchalk’s lis pendens notice was lawful. He played down the significance of his ruling – at one point reminding the parties that “this ruling, of course, does not prevent the underlying property from being sold” – but also said that Hotchalk’s existing claims on the property superseded the entire lis pendens argument. 

“Had I granted the Petition [striking the lis pendens],” he said, “it may not have made a difference, as a practical matter, as long as the fraudulent transfer claims are still alive in the case.”

Deploying a metaphor the parties used in December to discuss potentially unwinding the transfer of Concordia’s property to the LCEF, Judge Dahlin wrote, “while I understand there may be practical complications related to ‘unscrambling the egg’ if Hotchalk prevails on the fraudulent transfer claims, that was a risk the Fund took when it decided to scramble the egg in the first place.” The prospect of “unscrambling the egg,” and the case Hotchalk is building around Concordia Portland’s closure, will almost certainly discourage potential buyers for the time being.

Left unresolved in the $302 million lawsuit is a protective order motion covering over 2,000 internal church communications and documents which the Lutheran Church – Missouri Synod (LCMS) argues are protected from discovery under the First Amendment. In December, Judge Dahlin ordered the LCMS to provide him with a list of those documents by the end of the year. The LCMS missed that deadline, so he issued another order for the documents on January 3. According to reporting by Oregon Public Broadcasting, the LCMS complied with that order and will discuss the documents with Judge Dahlin at a sealed hearing next month.

There were signs back in December that Judge Dahlin would allow the lis pendens to remain in place. At one point in the hearing, he told parties’ counsel, “Frankly, it almost seems like we’re putting the cart before the horse here today, because it seems like I need to rule on [the protective order] issue first… I think that would make things different in this case.”