Corvallis Hospitality, LLC v. Wilmington Trust, National Association

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

CORVALLIS HOSPITALITY, LLC., an Case No. 6:22-cv-00024-MC

Oregon limited liability company,

Plaintiff,

OPINION AND ORDER

vs.

WILMINGTON TRUST, NATIONAL

ASSOCIATION, as Trustee for the Benefit

of the Holders of LCCM 2017-LC26

Mortgage Trust Commercial Mortgage

Pass-Through Certificates, Series 2017-

LC26; MIDLAND LOAN SERVICES,

INC., a Delaware Corporation; and

BEACON DEFAULT MANAGEMENT,

INC., a California Corporation,

Defendants.

_______________________________

MCSHANE, J.:

Defendants collectively move to dismiss and/or strike Plaintiff’s Amended Complaint

(ECF No. 32) on the grounds that it exceeds the scope of this Court’s previous leave to amend,

continues to assert claims predicated on the repealed statute HB 4204, and asserts claims that

otherwise fail as a matter of law. Defs.’ Mot. 2, ECF No. 34. For the following reasons,

Defendants’ Motion (ECF No. 34) is granted in part and denied in part.

BACKGROUND

Plaintiff is the owner and operator of the Hilton Garden Inn Corvallis, a hotel located on

the campus of Oregon State University. Pl.’s First Amend. Compl. ¶ 1 (“FAC”). On May 3,

2017, Plaintiff entered into a Loan Agreement with a private lender, Ladder Capital Finance,

LLC., evidenced by a promissory note, for the principal amount of $18,000,000.00. FAC ¶ 8.

The loan and note were secured by a Deed of Trust with First American Title Insurance

Company serving as trustee and Ladder Capital Finance, LLC as beneficiary. Id. at ¶ 9. After

several assignments, Defendant Wilmington Trust is now the beneficiary under the Deed of Trust

and asserts that it is also the owner of the Note as well as the secured party and assignee under

the Loan Documents. Id. Defendant Beacon is the successor trustee for the Trust, for purposes of

foreclosure, and Midland is the special servicer for the loan. Id. at ¶¶ 3, 4.

On June 30, 2020, Oregon Governor Kate Brown signed into law House Bill 4204, which

created a COVID-19 “emergency period” from March 8, 2020, to September 30, 2020. Id. at ¶

10; H.B. 4204, 80th Leg., 1st Spec. Sess. (Or. 2020). The purpose of HB 4204 was to

temporarily protect borrowers experiencing pandemic-related financial hardships from going into

default if they missed monthly payments on their loans. FAC ¶ 10. Section 1 of HB 4204

prohibited lenders from taking certain actions during the emergency period. These prohibitions

included holding the borrower in default for missed payments, imposing fines or late fees, or

initiating foreclosure actions against borrowers. HB 4204 § 1(3)(A). Instead, borrowers were

permitted to defer payments due during the emergency period, “to the scheduled or anticipated

date on which full performance of the obligation is due.” HB 4204 § 1(3)(a)(B). Section 1 also

provided a legal remedy for borrowers against lenders who violated any portion of Section 1 of

HB 4204 during the emergency period. HB 4204 § 1(8)(a). Governor Brown extended the

COVID-19 emergency period under HB 4204 to December 31, 2020, and the statute naturally

repealed 90 days later, on March 31, 2021. Exec. Order No. 20–37. On June 1, 2021, Governor

Brown signed House Bill 2009, formally repealing Section 1 of HB 4204, effective June 1, 2021.

H.B. 2009 § 2, 81st Leg., Reg. Sess. (Or. 2021).

Between May and October of 2020, while HB 4204 was in effect, Plaintiff faced

pandemic related financial hardships, like much of the hospitality industry, and failed to make

timely payments to the Trust. FAC ¶ 32. Plaintiff contacted Defendant Midland (special servicer)

“to discuss potential options for resolution . . . in compliance with then-effective HB 4204.” Id.

Before entering into any negotiations or discussions, Midland required Plaintiff to sign a Pre-

Negotiation Letter.1 Id. Plaintiff avers that Midland did not provide Plaintiff with this letter until

August of 2020, several months into the pandemic, even though Plaintiff had been trying to

discuss repayment options with Midland for several months. Id. Plaintiff further contends that

Midland and the Trust never made any earnest attempts to negotiate with Plaintiff or discuss

repayment options. Pl.’s Resp. Defs.’ Mot. 32–34, ECF No. 40.

On October 7, 2020, despite HB 4204’s COVID-19 emergency period still in effect,

Defendant Wilmington Trust notified Plaintiff that it was in default, imposed late fees and

interest on the default payments, and accelerated the full amount due on the loan. FAC ¶ 34.

Plaintiff’s counsel requested that the Trust/Midland review the HB 4204 policy, but Defendants

allegedly ignored this request. Id. at 35. Plaintiff began making payments to the Trust again in

October of 2020, and Plaintiff was under the impression that all payments it made applied to

monthly dues going forward and that any amount due for the missed 2020 payments would be

applied later at loan maturity, consistent with the provisions of HB 4204. Id. at ¶¶ 36, 37.

1 The Pre-Negotiation Letter offered by Defendants indicates that Plaintiff signed the letter on

April 8, 2020. Gibbons Decl. Ex. 1 at 1, ECF No. 35.

On March 31, 2021, the Trust sent Plaintiff a letter stating that Plaintiff continued to owe

default interest and late fees and demanded $1,118,422.22 as well as a “workout” fee of $205,

362.01. Id. at ¶40. On April 15, 2021, the Trust sent Plaintiff a “reservation of rights letter” that

indicated Plaintiff’s payments were received between October 2020 and April 2021, but that

these were considered partial payments because there was still an outstanding balance owed for

the missed 2020 payments. Id. at 42. Plaintiff avers that it resumed full loan payments in April of

2021, however, the Trust has not been applying these payments as regularly scheduled payments.

Id. at ¶¶ 41–42. Then on April 19, 2021, Defendant Beacon, acting on behalf of the Trust,

initiated nonjudicial foreclosure proceedings against Plaintiff by filing a Notice of Default and

Election to Sell. Id. at ¶¶ 43. Despite these actions, Plaintiff asserts that it continues to make full

and timely payments to the Trust, that payments are up to date, and that Defendants will not

provide Plaintiff with a loan transaction history to show how the Trust has applied Plaintiff’s

monthly payments. Id at ¶ 44.

On December 14, 2021, Plaintiff filed this action2 against Defendants in Benton County

Circuit Court, alleging the following claims: (I) violation of HB 4204, (II) violation of the

Oregon Trust Deed Act (“OTDA”), (III) breach of the covenant of good faith and fair dealing;

and (IV) seeking an injunction to prevent Defendants from foreclosing on the Deed of Trust.

Pl.’s Compl, ECF No. 1. Defendants timely removed this case to the District of Oregon and this

Court denied Plaintiff’s Motion to Remand to state court. See ECF Nos. 1, 7, 16. On June 22,

2022, Defendants moved for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c). Defs.’

2 On July 8, 2022, Wilmington Trust et al., filed their own civil action against William Lawson,

representative of Corvallis Hospitality LLC, in the U.S. District Court for the District of Oregon,

asserting a single claim for Breach of Guaranty, seeking damages in the amount of $20,358,000.

6:22-cv-00993-MK (now consolidated with this case).

Mot. J. Pleadings, ECF No. 18. This Court dismissed claims I and IV with prejudice, ruling that

any claims brought under HB 4204 failed as a matter of law, because Plaintiff filed this suit after

HB 4204 was repealed and the statute did not contain a savings clause. See Opinion and Order,

ECF No. 31. This Court also dismissed the remaining counts (II and III) without prejudice, and

gave Plaintiff leave to amend those claims based on grounds independent of HB 4204. Id.

On November 17, 2022, Plaintiff filed an Amended Complaint (ECF No. 32) and on

December 9, 2022, Defendants filed the present Motion to Dismiss and/or Strike Plaintiff’s

Amended Complaint (ECF No. 34.). The Court heard oral arguments on the Motion on April 19,

2021.

STANDARD

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a complaint must contain

sufficient factual matter that "state[s] a claim to relief that is plausible on its face." Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face when the factual

allegations allow the court to infer the defendant's liability based on the alleged conduct.

Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). When considering a motion to dismiss, the court

must accept all allegations of material fact as true and construe those facts in the light most

favorable to the non-movant. Burgert v. Lokelani Bernice Pauahi Bishop Trust, 200 F.3d 661,

663 (9th Cir. 2000). But the court is "not bound to accept as true a legal conclusion couched as a

factual allegation." Twombly, 550 U.S. at 555. If the complaint is dismissed, leave to amend

should be granted unless "the pleading could not possibly be cured by the allegation of other

facts." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).

DISCUSSION

Defendants argue that Plaintiff’s Amended Complaint should be dismissed in its entirety

because the asserted claims exceed the scope of this Court’s leave to amend, and each of

Plaintiff’s claims fail as a matter of law. Each argument will be discussed in turn.

I. Scope of Leave to Amend

In a previous Opinion and Order, this Court gave Plaintiff “leave to file an Amended

Complaint to show how Defendants violated the OTDA and covenant of good faith and fair

dealing on grounds independent of HB 4204.” Opinion and Order 12, ECF No. 31. In its

Amended Complaint, Plaintiff reasserts the OTDA and breach of good faith claims, and

additionally alleges (i) breach of contract, (ii) tortious interference with economic relations, (iii)

accounting, and (iv) declaratory judgment. See generally FAC.

Defendants construe the Order narrowly, arguing that Plaintiff does not have permission

to “fully reinvent the case” and that the new claims should be dismissed or stricken pursuant to

Rule 12(f).3 Defs.’ Mot. 6–7. In Response, Plaintiff argues that the additional claims are within

the scope of the Court’s order and this Court did not use any express language stating that

Plaintiff could only bring the OTDA and breach of good faith claims in the Amended complaint.

Id. at 7; See Claus v. Columbia State Bank, 3:16-cv-01509-AC, 2019 WL 5624754 at *14 (D.

Or. Oct. 30, 2019) (Finding new claims did not exceed scope of Court’s order because “the court

did not include express language limiting leave to amend to only the then-asserted claims.”).

This Court has discretion to grant leave to amend with extreme liberality, “when justice

so requires.” Fed. R. Civ. P. 15(a)(2). While this Court’s previous Order suggested that Plaintiff

reassert only its OTDA and breach of good faith claims, the Court recognizes that it significantly

3 Under Rule 12(f), “[t]he court may strike from a pleading an insufficient defense or any

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).

narrowed Plaintiff’s legal avenue for relief by removing the HB 4204 claim. The Court has no

issue with Plaintiff asserting a new legal theory based on the same set of operative facts and does

not find that Defendants will be unduly prejudiced.

Defendants also contend that the Amended Complaint exceeds the scope of the Court’s

Order because several claims are still predicated on violations of HB 4204. Defs.’ Mot. 8.

Although this Court previously held that Plaintiff cannot bring a cause of action under the

repealed statute and must assert claims independent of HB 4204, Defendants should not construe

this to mean that Plaintiff cannot mention HB 4204 anywhere in its Amended Complaint. The

core of the alleged facts in this case necessarily involve (i) HB 4204 having legal effect at the

time Plaintiff missed payments; (ii) Plaintiff’s reasonable expectations under the statute that

Defendants would not treat the missed payments as a default during the emergency period; and

(iii) Defendants’ apparent disregard of HB 4204’s mandate. Whether Plaintiff was in fact legally

entitled to HB 4204’s protections during the relevant time period is a question to be decided at a

future date. However, at the motion to dismiss phase, Plaintiff may allege facts relevant to HB

4204 to support its breach of contract and breach of good faith claims.

II. Breach of Contract

Defendants also contend that Plaintiff fails to allege sufficient facts to sustain a breach of

contract claim under both Oregon and New York4 law. Defs.’ Mot. 12. “To state a claim for

4 Plaintiff argues that the Loan Agreement is governed by New York, rather than Oregon law.

Pl.’s Resp. 17. Indeed, Section 11.3 of the Loan Agreement indicates that New York law governs

“the construction, validity and enforceability of all loan documents and all of the obligations

arising hereunder.” Welek Decl. Ex. A at 75, ECF No. 19. Under New York law, the elements

for a breach of contract claim are essentially the same as they are in Oregon; “[1] the existence of

a contract, [2] the plaintiff's performance pursuant to the contract, the defendant's breach of its

contractual obligations, and damages resulting from the breach.” Weatherguard Contractors

Corp. v. Bernard, 155 A.D.3d 921, 922 (N.Y. App. Div. 2017).

breach of contract under Oregon law, a plaintiff must allege the existence of a contract, its

relevant terms, plaintiff’s full performance and lack of breach, and defendant’s breach resulting

in damage to plaintiff.” Saxco Int'l, LLC v. Wright, No. 3:17-CV-0849-PK, 2017 WL 6888567,

at *2 (D. Or. Oct. 18, 2017) (quoting Arnett v. Bank of Am., N.A., 874 F. Supp. 2d 1021, 1029

(D. Or. 2012)). While there is no doubt of the existence of a contract between the parties,

Defendants argue that Plaintiff (i) fails to identify relevant provisions of the contract that

Defendants allegedly breached, (ii) cannot show that it fully performed its obligations under the

Loan Agreement, and (iii) fails to request specific damages. Defs.’ Mot. 13–14.

Under either Oregon or New York law, the Court finds that Plaintiff has plausibly alleged

a claim for breach of contract. First, Plaintiff avers throughout the Complaint that it has fully

performed its end of the bargain under the Loan Agreement. FAC ¶ 68, 76, 82 (“CH complied

with its contractual payment obligations[.]”). Specifically, Plaintiff alleges that the loan is in

good standing and that its payments to the trust have not been properly applied. FAC ¶ 44.

[W]hen Midland provided CH with a loan transaction history, CH learned that

directly after Defendants issued the Notice of Default and Election to Sell, the

Trust/Midland applied sums paid by CH to the May 2020 through January 2021

principal and interest payments to bring those payments current. Additionally,

Midland provided CH with a loan transaction history at the start of August 2021,

which confirms that the Trust/Midland applied sums sufficient to bring principal

and interest payments current through July 2021.

FAC ¶ 44 (emphasis added). Second, Plaintiff specifically alleges that Defendants have breached

the Loan Agreement by (i) unlawfully accelerating the loan when HB 4204 was in effect, (ii)

charging default interest, late fees, and special servicer fees that were not due (iii) failing to

properly apply payments, (iv) charging “workout fees that, as defined in the PSA, constitute

unenforceable liquidated damages and unlawful penalties to CH,” (v) exercising wrongful

foreclosure remedies, (vi) and refusing to provide an accounting of how the Trust has applied

Plaintiff’s payments. FAC ¶¶ 78–87 (emphasis added). Plaintiff also cites to specific provisions

of the loan documents which detail the circumstances under which Defendants may apply default

rates (Section 2.2.2.) and late payments fees (2.3.3). FAC ¶¶ 56, 57. The thrust of Plaintiff’s

argument is that because it was never in default as a matter of law, Defendants breached these

provisions by demanding unauthorized default and late fees.

Moreover, Section 11.12 of the Loan Agreement authorizes Plaintiff to “commenc[e] an

action seeking specific performance, injunctive relief or declaratory judgment” if Defendants act

“unreasonably.” Welek Decl. Ex. A at 79. Although Plaintiff did not specifically cite to this

provision, the Amended Complaint sufficiently alleges facts to show that Defendants acted

unreasonably. Plaintiff may assert a breach of contract claim under this provision.

Third, the Court finds that Plaintiff has sufficiently pleaded damages. In paragraph 48 of

the Amended Complaint, Plaintiff details the various default, servicing, and late payment fees

that Defendants allege are owed.5 FAC ¶ 48. At oral argument, Plaintiff’s counsel estimated that

Plaintiff has overpaid at least $750,000 in fees and interest that it does not owe to the Trust.

Moreover, because Defendants allegedly refuse to provide Plaintiff with an accounting of how

the monthly loan payments have been applied, Plaintiff avers that it is impossible to ascertain

exact damages until it receives a full loan accounting. Pl.’s Resp. 23. The Court is satisfied that

Plaintiff has plausibly sustained damages which will be further articulated throughout discovery.

III. Breach of the Covenant of Good Faith and Fair Dealing

5 As of December 21, 2021, Defendants allege that Plaintiff owes: “(a) the principal sum of

$16,763.168.51; (b) accrued interest in the amount of $389,836.80; (c) default interest in the

amount of $1,261,702.73; (d) late charges of $146,475.80; (e) taxes and insurance advances of

$254,983.04; (f) property protection advances of $114,588.15; (g) special servicing fees of

$60,777.96; (h) an estimated Yield Maintenance Premium of $2,816,993.86; and (i)

miscellaneous charges, ongoing interest, insurance premiums, foreclosure costs, receiver fees,

inspector fees, attorney fees, and costs of suit not yet determined.” FAC ¶ 48.

The Court also finds that Plaintiff has plausibly alleged that Defendants’ actions violated

the covenant of good faith and fair dealing. “Under Oregon law, every contract contains an

implied duty of good faith and fair dealing.” Gregory Funding LLC v. Saksoft, Inc., No. 3:16–

cv–480–SI, 2016 WL 4480693 at *3 (D. Or. Aug. 24, 2016). “A party may violate the covenant

of good faith and fair dealing without breaching the express terms of the contract. The covenant,

however, cannot contradict an express contractual term, nor otherwise provide a remedy for an

unpleasantly motivated act that is expressly permitted by the contract.” Foraker v. USAA

Casualty Ins. Co., 345 F. Supp. 3d 1308, 1310 (D. Or. 2018) (quoting Zygar v. Johnson, 10 P.3d

326, 330 (Or. App. 2000)). To state a breach of implied duty of good faith claim, a plaintiff must

point to relevant contract terms, state “the parties' reasonable expectations under the contract,”

and state how the “[d]efendant's conduct was inconsistent with the parties' reasonable

expectations.” Cutler v. U.S. Bank Nat’l Ass’n, No. 3:18-cv-01045-YY, 2019 WL 157919, at *3

(D. Or. Jan. 9, 2019).

The Court finds it plausible that HB 4204 had the effect of modifying the parties’

reasonable expectations of their contractual relationship under the Loan Documents. HB 4204

mandated that during the emergency period lenders were prohibited from treating missed

payments as a default, imposing fines, or initiating foreclosure actions against borrowers. HB

4204 § 1(3)(A). In fact, Plaintiff alleges that during the emergency period, Wells Fargo, acting

on behalf of Defendants, “provided CH with a copy of HB 4204 informing CH that it should

contact its legal counsel with any questions regarding HB 4204.” FAC ¶ 33. These facts indicate

that Plaintiff reasonably believed that Defendants would honor Governor Brown’s mandate and

defer Plaintiff’s missed payments to the end of the payment plan, pursuant to HB 4204 §

1(3)(a)(B). Defendants’ alleged decision to simply ignore HB 4204 and accelerate the loan

payments was certainly inconsistent with the expectations of all borrowers during the emergency

period and likely amounts to a breach of good faith and fair dealing.

IV. OTDA Claim

Next Defendants argue that Plaintiff’s Oregon Trust Deed Act claim is still moot because

Defendants have cancelled the nonjudicial foreclosure sale scheduled for December of 2021.6

Defs.’ Mot. 6. Indeed, this Court previously ruled that the OTDA claim was moot on those

grounds. Opinion and Order 11, n.7, ECF No. 31, citing Blanton v. Fed. Home Loan Mortg.

Corp., No. 3:15-cv-00353-AC, 2016 WL 1158591, at *3 (D. Or. Feb. 29, 2016) (dismissing

plaintiff’s OTDA claim as moot because defendant cancelled nonjudicial foreclosure proceeding)

(Findings and Recommendation adopted, 2016 WL 1192663 (D. Or. Mar. 21 2016)). Plaintiff,

however, avers that there is still a “live controversy.” Pl.’s Resp. 12; See FAC ¶ 76 (“The fact

that the Defendants have seemingly abandoned their nonjudicial foreclosure is of no

consequence because CH suffered damage and continues to suffer damage based upon

Defendants’ violations.”). Plaintiff also contends it may still bring the OTDA claim because

Defendants have now brought a judicial foreclosure counterclaim. Pl.’s Resp. 14.

The OTDA was “enacted in 1959 to provide an alternative to the judicial foreclosure

process.” Bandrup v. ReconTrust Co., N.A., 303 P.3d 301, 305 (Or. 2013) (emphasis added). In

the event of a borrower’s default, “[t]he OTDA permits the trustee appointed under a trust deed

to advertise and sell the property to the highest bidder without judicial involvement,” as long as

certain conditions are met. Id. (emphasis added). The OTDA also “prescribes notice

6 On December 20, 2021, the circuit court ordered a temporary restraining order to prevent

Defendants from proceeding with the nonjudicial foreclosure. Pl.’s Compl, Ex. A, at 111.

Defendants have since cancelled the nonjudicial foreclosure sale. Defs.’ Answer ¶ 78, ECF No.

5. On January 24, 2022, Defendants answered the initial Complaint and filed several

counterclaims including a judicial foreclosure action against Plaintiff. Id.

requirements that protect trust deed grantors from unauthorized nonjudicial foreclosures and

sales of property.” Id. at 306. In sum, the OTDA was enacted to (1) “provide lenders an efficient

remedy against a defaulting grantor” by circumventing the traditional judicial foreclosure

process, while also (2) providing stringent protections and legal remedies for borrowers in the

event of a wrongful nonjudicial foreclosure. Woods v. U.S. Bank N.A., 831 F.3d 1159, 1164 (9th

Cir. 2016). It does not follow however, that plaintiffs may bring an action under the OTDA to

contest a formal judicial foreclosure. The very nature of a judicial foreclosure provides the

judicial oversight inherently imbedded in the strict statutory scheme of the OTDA.

At oral argument, Plaintiff construed Judge Aiken’s opinion in Vettrus v. Bank of

America, N.A., as suggesting that an OTDA claim is appropriate even after the recission of a

nonjudicial foreclosure, if the lender also brings a judicial foreclosure action. No. 6:12–cv–

00074–AA, 2012 WL 5462914 (D. Or. Nov. 6, 2012). Not so. In Vettrus, Judge Aiken dismissed

the plaintiff’s OTDA claim, citing the “well established” notion that, “when a non-judicial

foreclosure sale is rescinded, any claims premised on the nonjudicial foreclosure are rendered

moot.” Id. at *4 (internal quotations omitted). Judge Aiken further noted that,

while [the defendants] have not yet initiated a judicial foreclosure action on the

Property, they clearly intend to do so . . . Plaintiff may then allege defendants'

wrongful actions in defending against their claim for foreclosure of a security

interest. Accordingly, plaintiff will not be deprived of the Property without proper

judicial oversight.

Id. (emphasis added). Nowhere in this opinion does the court suggest that an OTDA claim

should survive for purposes of defending against a judicial foreclosure action; the decision to

dismiss the OTDA claim suggests just the opposite.

Plaintiff has not provided any case law endorsing the use of an OTDA claim to contest a

judicial foreclosure proceeding. While Plaintiff is perfectly entitled to defend against

Defendants’ judicial foreclosure counterclaim, its OTDA claim fails as a matter of law, because

Defendants rescinded the nonjudicial foreclosure and no sale ever occurred. “Oregon does not

recognize a claim for a wrongfully attempted foreclosure.” Tabb v. One West Bank, FSB, No.

3:10–cv–855–ST, 2011 WL 4448752, at *8 (D. Or. Aug. 26, 2011); Vettrus, 2012 WL 5462914

at *4. This claim is dismissed with prejudice.

V. Tortious Interference with Economic Relations

Defendant next argues that Plaintiff failed to properly allege a claim for tortious

interference of economic relations. Defs.’ Mot. 16. To state a claim for tortious interference, a

plaintiff must plausibly allege six elements:

(1) the existence of a professional or business relationship (which could include,

e.g., a contract or a prospective economic advantage), (2) intentional

interference with that relationship, (3) by a third party, (4) accomplished

through improper means or for an improper purpose, (5) a causal effect between

the interference and damage to the economic relationship, and (6) damages.

Mannex Corp. v. Bruns, 279 P.3d 278, 281 (Or. App. 2012). Plaintiff alleges that Defendants

intentionally interfered with its business relations with OSU and the Hilton Franchisor. FAC ¶

100. OSU leases the property to Plaintiff where the Hilton Garden Inn is located, and Plaintiff

has a franchise agreement with the Hilton Franchisor. FAC ¶¶ 98–99. Plaintiff typically pays the

Trust for the ground lease each month, and the Trust makes payments directly to OSU; however,

Plaintiff has recently paid OSU directly while also including the lease amount in its monthly

payments to the Trust. Id.

In the Amended Complaint, Plaintiff asserts a long list of adverse actions that the Trust

and Midland have taken against Plaintiff, all of which have nothing to do with Plaintiff’s

relations with OSU and the Hilton Franchisor. Plaintiff asserts a single relevant allegation, that

the Trust and Midland “erroneously inform[ed] OSU and the Hilton Franchisor that CH owes

[default interest and fees] despite the fact that Midland acknowledged in writing that all

payments had been made from January 2021 and CH continues to make regular payments to the

Trust.” FAC ¶ 100. Even if Midland erroneously informed OSU and Hilton that Plaintiff has

defaulted on loan payments, Plaintiff fails to allege any resulting harm or adverse consequences

between Plaintiff’s relationship with OSU and Hilton. For instance, there are no allegations that

OSU has cancelled the lease, or penalized Plaintiff in anyway. Plaintiff has not sufficiently

alleged facts showing that the Trust and Midland made efforts to intentionally interfere with the

economic relations between Plaintiff and OSU and Hilton, or that any harm has occurred to those

relations. This claim is dismissed.

VI. Accounting and Declaratory Judgment

Defendants also takes issue with Plaintiff’s accounting and declaratory judgment

“claims” on the basis that these are equitable remedies. Defs.’ Mot. 18. The Court agrees that an

accounting is an equitable remedy,7 and one that is clearly warranted in this case. Plaintiff

contends that despite repeated requests, the Trust and Midland refuse to provide Plaintiff with

any monthly statements or loan history documents that would show (i) how the Trust has applied

Plaintiff’s payments and calculated the default interest and late fees, or (ii) whether the reserves,

insurance and ground lease payments have been properly made. FAC ¶ 104. The Court finds that

Plaintiff is entitled to this information to proceed with its claims.

Plaintiff also seeks a declaratory judgment from the Court that Defendants waived their

right to (i) accelerate the loan, (ii) demand late fees and default interest, (iii) and assert that

7 “An accounting is an equitable remedy, not a separate cause of action.” Motameni v. Adams,

No. 3:21-cv-01184-HZ, 2022 WL 3682940, at *8 (D. Or. Aug. 25, 2022); Flaherty v.

Bookhultz, 291 P.2d 221, 224 (Or. 1956) (“An accounting may be had as incidental to other

equitable relief.”).

Plaintiff is in default. FAC ¶ 111. Defendant avers that this remedy should be dismissed from the

Amended Complaint because Plaintiff cannot prevail on its underlying claims. Defs.’ Mot. 18.

The Court disagrees. As noted previously, Section 11.12 of the Loan Agreement entitles Plaintiff

to seek declaratory relief. See Welek Decl. Ex. A at 79 (“Any action or proceeding to determine

whether Lender has acted reasonably shall be determined by an action seeking declaratory

judgment.”). It remains to be seen whether Plaintiff will prevail on its claims and the Court will

exercise its discretion to grant declaratory relief after discovery is completed. Any decision

beforehand would be premature.

VII. Allegations Regarding Settlement Negotiations

Finally, Defendants move the Court to strike any allegations from the Amended

Complaint that discuss the parties “settlement negotiations” that took place during the emergency

period. Defs.’ Mot. 29. On April 8, 2020, Plaintiff allegedly signed a “Pre-Negotiation Letter”

before entering into discussions with Midland about the missed 2020 payments. The letter states

that,

neither party, shall be permitted to assert claims, causes of action, suits and defenses

which each may have against the other or Midland based on the conduct or process

of the Discussions themselves. The Discussions may not be admitted into evidence

or otherwise used in any adversarial proceeding.

Gibbons Decl. Ex. 1 at 1, ECF No. 35 (emphasis added). Defendants contend that despite signing

this document, Plaintiff’s Amended Complaint includes several allegations related to the

settlement discussions between Plaintiff and Midland. Defs.’ Mot. 19–20. Whether Plaintiff is

precluded from relying on these communications is an admissibility matter that will be

determined at a later date.

CONCLUSION

Defendants’ Motion to Dismiss (ECF No. 34) is GRANTED in part and DENIED in part.

Plaintiff’s OTDA and tortious interference with economic relations claims are dismissed. All

other claims remain. The Court will not require Plaintiff to file a Second Amended Complaint.

IT IS SO ORDERED.

Dated this 28th day of April, 2023.

______/s/ Michael McShane_____

Michael McShane

United States District Judge