Home May 2020 Longtime partner sues Concordia for $302 million

Longtime partner sues Concordia for $302 million

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PORTLAND — What the Oregonian described as an “acrimonious legal battle” has resulted from the recent and unexpected closure of Concordia University here.

As reported by the newspaper, California-based technology firm HotChalk — which partnered with the university for more than a decade with online education — is suing both Concordia and its parent denomination for $302 million in damages.

HotChalk claims it was defrauded, alleging that the university transferred several valuable assets to the Lutheran Church Missouri Synod just days before announcing in February it would close after the spring semester because of a financial crisis.  But the closure of the university immediately put HotChalk in a financial crisis of its own, and it laid off half its employees.

The closure stunned thousands of Concordia students, faculty, staff and supporters and also sparked frustration and anger for many; HotChalk, which in 2018 entered into a new 20-year deal with the university, was informed of the closure only 25 minutes before the public announcement.  The university was in deep financial trouble by last fall, but never told its students.

HotChalk further alleges that intolerance by the synod prompted the shutdown and amounted to intentional interference in HotChalks’ contract with Concordia. A report by the Oregonian shortly after the announcement raised questions about whether conflicts between the university and the socially conservative synod on sexual orientation issues was a major factor in the closure.

According to HotChalk, it was. The company alleges Concordia missed several of the large weekly payments it owed, but that HotChalk agreed last fall to back off on its collection efforts while the university went to the Lutheran synod for a bailout.  Synod leaders agreed and the organization’s financial arm, the Lutheran Church Extension Fund, agreed to give Concordia a $4 million line of credit.  But according to the Oregonian, minutes of that meeting indicated the synod was concerned with Con-cordia’s support of a gay alliance on campus and would not provide any more emergency funding until Concordia’s stance on gay issues became more in line with the synod’s conservative beliefs.

With no more help from the synod, the university’s board of trustees felt they had no choice but to shut Concordia down.

But at the same time, claims HotChalk, the synod recorded new property deeds giving the synod a security interest in Concordia’s land in northeast Portland and in Boise, Idaho, where Concordia’s law school has been based.  HotChalk claims it was a fraudulent transfer done secretly to benefit the synod to the tune of about $30 million at the expense of other creditors.

HotChalk claims Concordia could have survived if it had done some major cost-cutting.  In its lawsuit, the company states that it pleaded with Concordia to cut its sports program and other extra-curricular programs.