IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON 

MERITAGE HOMEOWNERS' 

ASSOCIATION, 

Plaintiff, 

v. 

BANK OF NEW YORK MELLON, 

Defendant. 

BANK OF NEW YORI( MELLON, 

Third-Party Plaintiff, 

v. 

KURT FREITAG, 

EUGENE DIVISION 

Third-Party Defendant. 

Page I - OPINION AND ORDER 

Case No. 6:16-cv-00300-AA 

OPINION AND ORDER 

Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 1 of 11
AIKEN, Judge: 

This dispute centers on a planned community on the Oregon Coast, Meritage at Little 

Creek, in which defendant Bank of New York Mellon ("BNYM") owns a unit. Plaintiff 

Meritage Homeowners' Association ("Meritage") filed this action, alleging that defendant has 

failed to pay dues, assessments, fees, and interest associated with that unit. Defendant responded 

with counterclaims against Meritage and claims against third-party defendant Kurt Freitag 

("Freitag"), the developer and Declarant of Meritage at Little Creek, alleging that Meritage 

breached its duty to maintain common property and that Freitag breached his fiduciary duty to 

Meritage's members in his management of the homeowners' association ("HOA"). 

Before me now is BNYM's motion to appoint a receiver pursuant to Federal Rule of 

Civil Procedure 66. For the reasons set forth below, BNYM's motion is granted. 

BACKGROUND 

The facts in this case are familiar to the parties, and I will not repeat them at length here. 1 

BNYM has owned a unit in Meritage at Little Creek since August 2015. Beginning in January 

2016, Freitag, in his capacity as administrator of Meritage, began sending BNYM invoices for 

assessments, fines, quaiierly dues, and fees. BNYM paid quarterly dues but disputed amounts 

billed related to (I) expenses prior to the date it took title in August 2015 and (2) replacement of 

windows in the unit. In October 2017, Freitag asserted that BNYM owed Meritage more than 

one million dollars. 

1 For a thorough overview of the factual and procedural history of this case, see Meritage 

Homeowners' Ass'n v. Bank of New York Mellon, 2018 WL 2021347, *l-3 (D. Or. May 1, 

2018); Meritage Homeowners' Ass 'n v. Bank of New York Mellon, 2018 WL 1787183, * 1-4 (D. 

Or. Apr. 13, 2018); Meritage Homeowners' Ass'n v. Watt, 2017 WL 565165, *1-3 (D. Or. Nov. 

20, 2017); and Bank of New York Mellon v. Watt, 2015 WL 1879680, *1-3 (D. Or. Apr. 22, 

2015). 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 2 of 11
On April 13, 2018, I resolved the parties' cross-motions for partial summary judgment. 

As relevant here, I held that, under the terms of the HOA's governing documents and the Oregon 

Planned Community Act, Freitag should have turned over control of Meritage to its owners 

fourteen years ago, in June 2004. See Meritage Homeowners' Ass'n, 2018 WL 2021347 at *18-

21. On April 19, 2018, I entered a temporary restraining order directing Freitag to stop taking 

actions in the capacity of a person in charge of Meritage. That same day, Meritage's counsel 

moved for a stay of proceedings, explaining that, in view of my holding that Freitag lacked legal 

authority to act on behalf of Meritage, there was no one with authority to make decisions for 

Meritage and advise the fitm how to proceed. On May 1, 2108, I granted the motion for a stay 

and converted the temporary restraining order against Freitag into a preliminary injunction. The 

preliminary injunction generally directed Freitag to refrain from taking actions on behalf of 

Meritage but gave him narrow authority to carry on the day-to-day operations of the HOA until 

some other entity or group was in a position to take over administrative control. 

BNYM now moves for appointment of a receiver to manage Meritage. 

STANDARDS 

"Under federal law, appointing a 'receiver is an extraordinary equitable remedy,' which 

should be applied with caution." Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir. 

2009) (quoting Aviation Supply Corp. v. R.S.B.l Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 

1993)). In federal court, a motion to appoint a receiver is governed by Federal Rule of Civil 

Procedure 66. Factors to consider in determining whether receivership is appropriate include: 

(1) whether the party seeking the appointment has a valid claim; (2) whether there 

is fraudulent conduct or the probability of fraudulent conduct by [the party 

opposing appointment]; (3) whether the property is in imminent danger of being 

lost, concealed, injured, diminished in value, or squandered; (4) whether legal 

remedies are inadequate; (5) whether the harm to the [party seeking appointment] 

by denial of the appointment would outweigh injury to the party opposing 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 3 of 11
appointment; ( 6) the ... probable success [of the party seeking appointment] in 

the action and the possibility of irreparable injury to [its] interest in the property; 

and ... (7) whether the ... interests sought to be protected will in fact be wellserved by receivership. 

Canada Life Assurance, 563 F.3d at 844 (alterations normalized). However, the Ninth Circuit 

has emphasized that there is not "precise formula" for dete1mining whether a receiver should be 

appointed. Id. at 845. The district court, exercising broad discretion, "may consider a host of 

relevant factors" and "no one factor is dispositive." Id. 

DISCUSSION 

I. Preliminary Matters 

Both BNYM and Freitag submitted written motions supported by evidence. Because 

there has been fair notice to all parties and because the record is sufficiently developed, Freitag's 

request for oral argument is denied and I will resolve the motion without further hearing. See 

Sterling Sav. Bank v. Citadel Dev. Co., 656 F. Supp. 2d 1248, 1259-60 (D. Or. 2009) (surveying 

case law and concluding that an evidentiary hearing is not required before appointing a receiver). 

As an initial matter, I note that much of Freitag's motion is devoted to the argument that 

he retains legal authority to run Meritage. I construe those arguments as a request for 

reconsideration. Before final judgment is entered, district courts have inherent power to modify 

their own orders. See City of L.A., Harbor Div. v. Santa Monica Baykeeper, 254 F.3d 882, 886 

(9th Cir. 2001); Fed. R. Civ. P. 54(b). Under the "law of the case" doctrine, however, comts 

generally decline to exercise that inherent authority to "refuse to reopen what has been decided" 

in a particular action. Leslie Salt Co. v. United States, 55 F.3d 1388, 1393 (9th Cir. 1995) 

(quoting Messenger v. Anderson, 225 U.S. 436, 444 (1912). As a result, "reconsideration [of 

interlocutory decisions] is an extraordinary remedy to be employed sparingly." See, e.g., Burger 

King Corp. v. Ashland Equities, 181 F. Supp. 2d 1366, 1370 (S.D. Fla. 2002). In general, courts 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 4 of 11
will "reconsider previously decided questions [only when] there has been an intervening change 

of controlling authority, new evidence has surfaced, or the previous disposition was clearly 

en-oneous and would work a manifest injustice." Leslie Salt, 55 F.3d at 1393. 

There has been no change in the controlling law here. There also is no newly discovered 

evidence; although Freitag submits evidence for the first time in supp01t of his opposition to 

appointment of a receiver, that evidence dates from 2003 and 2006. Freitag has not explained 

why he did not introduce the evidence in connection with his summary judgment briefing. 

Moreover, although Freitag's argument that the Declaration should be interpreted differently is 

not frivolous, it falls far short of showing that my prior decision was "clearly wrong" such that 

reconsideration is appropriate. Id. I therefore decline Freitag's request to reconsider my holding 

that he has, since June 2004, lacked legal authority to be in control of Meritage. 

II. Consideration of the Rule 66 Factors 

Next, I tum to the factors enumerated by the Ninth Circuit in Canada Life Assurance. 

Those factors overwhelmingly favor appointment of a receiver here. First, because I have 

already held that Freitag lacks legal authority to be in control of Meritage, I find that it is likely 

that BNYM has a valid claim. Second, I find that the property is in imminent danger of being 

concealed, diminished in value, or squandered in the absence of a receiver. Freitag has already 

made clear that he intends to call due a substantial loan and has made not-so-veiled threats 

regarding the institution of foreclosure proceedings on several units. Third, I find that legal 

remedies are inadequate; money damages are not sufficient to deal with the tangled mess the 

HOA now finds itself in. 

Fourth, I find that BNYM is at risk of substantial prejudice in the absence of a neutral 

receiver. BNYM is entitled to negotiate its alleged liabilities in this lawsuit with an individual or 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 5 of 11
entity possessing legal authority to run the HOA. By contrast, Freitag will not suffer substantial 

prejudice if a receiver is appointed. As a unit owner, he retains voting rights and a voice in the 

process of deciding what will happen to Meritage going forward. Finally, I find that the 

interests sought to be protected here-specifically, BNYM's interest in having a legally valid 

authority in control of the HOA while it proceeds in this lawsuit-will, in fact, be protected by 

the appointment of a neutral receiver. 

In this case, special considerations also favor appointment of a receiver. First, Meritage 

is presently without any individual or entity that can lawfully speak on its behalf. A receiver is 

therefore particularly justified here, even if only as a short-term temporary transition to a dulyelected Board of Directors. Moreover, I find that a receiver is the best method to protect the 

interests of all unit owners, not just BNYM. It is plain from the record that relations between 

Freitag and the remaining unit owners are fraught and tense. This lawsuit is the most recent in a 

series of bitter disputes. In Freitag's recent communications with unit owners, he attempts to use 

the trauma of those past legal disputes and the resultant fall-out to intimidate others into falling 

in line behind his plan. Freitag also possesses far more information about the HOA and its 

operations than any of the other unit owners. The combination of imbalance of information and 

contentious history creates a real risk of prejudice to unit owners who are not Freitag. A neutral 

receiver will go far to mitigate that risk. 

Oregon law also underscores the appropriateness of receivership. Under the Planned 

Community Act, receivership is the remedy if an HOA fails to elect a board of directors or fill 

vacancies on the board of directors sufficient to constitute a quorum in accordance with the 

HOA's bylaws. Or. Rev. Stat. § 94.642(1); Or. Rev. Stat. § 94.616(6)(b). To be clear, I am not 

resolving BNYM's motion on the basis of Oregon law; we are in federal court and federal 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 6 of 11
procedural law governs. However, I consider the Oregon Legislature's identification of 

receivership as the appropriate solution to the problem presented here to be a further reason that 

appointment of a receiver is appropriate.2 

III. Structure of Receivership 

Having decided that appointment of a receiver is appropriate, I turn to the parties' dispute 

about the structure of receivership. The first point of contention is who will pay the costs of 

receivership. Freitag suggests that I order BNYM to bear the full costs. That request is denied. 

It is well-established that costs of a receiver are generally paid by the entity placed into 

receivership. See Netsphere, Inc. v. Baron, 703 F.3d 296, 311 (5th Cir. 2012) ("When a 

receivership is proper, the general rule is that receivership fees and expenses 'are a charge upon 

the property administered."' (quoting Gaskill v. Gordon, 27 F.3d 248, 251) (7th Cir. 1994)); cf 

Or. Rev. Stat. § 94.642(4) ("If a receiver is appointed, the salary of the receiver, court costs, 

attorney fees and all other expenses of the receivership shall be common expenses of the 

association."). I note, too, that despite BNYM's motion for a receiver and Freitag's opposition 

of that motion, the receiver will not be in place to serve BNYM' s interests. See Atlantic Trust 

Co. v. Chapman, 208 U.S. 360, 371 (1908) (noting that a receiver is "an indifferent person 

2 Freitag argues that I should require BNYM to file any receivership action regarding the 

HOA in state court. That is quite an about-face from his position in April, when he and Meritage 

filed a motion for a temporary restraining order and preliminary injunction to prevent BNYM 

from taking precisely that course of action. In any event, BNYM is not required to file in state 

court, because receivership is appropriate under Rule 66. Freitag also argues that BNYM has not 

provided the forty-five day advance notice to other unit owners required under the Oregon 

Planned Community Act. That argument fails for two reasons. First, as noted, I am not 

resolving this motion under Oregon law. And second, on February 23, 2018-more than fortyfive days before filing the motion to appoint a receiver-BNYM gave notice of its intent to 

pursue a receivership action in state court. Herbert Deel. if 4, May I, 2018. That notice apprised 

Meritage's members ofBNYM's intent to move for appointment of a receiver. 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 7 of 11
between the parties" appointed "for the benefit of all parties who may establish rights in the 

cause"). 

Second, Freitag raises concerns about the cost of a receiver. Those concerns have merit; 

receivership can be expensive. But here, the power to eliminate receivership costs will rest in the 

hands of Meritage's unit owners. One of the receiver's primary tasks will be to assist the HOA 

in electing a board of directors to manage Meritage's affairs. If the owners are interested in 

making that happen quickly, the receiver will assist them in doing so. Once power has been 

responsibly transferred to a duly constituted board of directors, there will be no more need for a 

receiver, and receivership costs will end. Because the owners will have in their hands the power 

to end the receivership, I decline Freitag's request for a firm end date to the receivership should 

attempts to convene a board of directors fail. As for Freitag's request that he be reinstated in the 

event no board of directors is elected by July 3, 2018, I deny that request as unsupported by any 

legal authority. For similar reasons, I decline BNYM's request to require the receiver to stay on 

for at least three months after a board of directors is elected. The length of the receiver's tenure 

after a board is duly constituted is a matter to be determined by that board in the first instance, 

subject to approval of this Court. 

Finally, I reach one area of agreement. BNYM proposed four individuals to be appointed 

as receiver for Meritage. One of those individuals was Rohn M. Robe1ts, of Arnold Gallagher 

PC. Freitag opposes appointment of a receiver but states that, if a receiver is appointed, it should 

be Mr. Roberts "because he has the experience, skill, and integrity to manage the Association 

with impartiality." Def. Third-Party Kurt Freitag's Opp. Mot. Appt. Receiver Meritage HOA at 

2 (doc. 151 ). I agree that Mr. Roberts is well-suited to the task of receivership here. 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 8 of 11
CONCLUSION 

For the foregoing reasons, IT IS HEREBY ORDERED that: 

1. BNYM's motion for appointment of a receiver for The Meritage Homeowners' 

Association (doc. 133) is GRANTED. 

2. I appoint ROHN M. ROBERTS of Arnold Gallagher, PC, 800 Willamette 

Street, Ste. 800, Eugene, OR, 97440 as receiver to perfmm the duties and 

responsibilities as set forth in this order. 

3. Mr. Roberts shall be compensated by Meritage HOA at a reasonable hourly rate 

for reasonable hours expended in performing the duties and responsibilities of 

receiver under this order. Mr. Roberts shall submit monthly statements of hours 

expended and rates requested, with a description of activities performed, to this 

Comt for approval. 

4. Mr. Roberts shall possess all of the powers and duties of a duly constituted 

board of directors under the Oregon Planned Community Act, Meritage at Little 

Creek's governing Declaration, and Meritage HOA's bylaws. Nothing in this 

order, including the specific enumeration of duties below, shall be construed to 

limit Mr. Roberts's authority under those laws and governing documents. 

5. Mr. Roberts shall have the following duties: 

A. To facilitate, as expeditiously as practicable, the election of a board of 

directors consistent with the requirements of Meritage HOA's bylaws; 

B. To conduct a complete accounting ofMeritage's assets and liabilities; 

C. To manage the day-to-day affairs of Meritage HOA, including but not 

limited to: 

i. The assessment and collection of quarterly dues and other 

assessments and fees; 

ii. The management of rental properties owned by Meritage HOA, 

including by collecting rents, negotiating new rental agreements, 

making repairs, and responding to tenant requests. Every effort is 

to be made to ensure that there is no substantial change in or 

interference with the experience of the tenants at Meritage at Little 

Creek as a result of this lawsuit. 

iii. The payment of bills; 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 9 of 11
1v. The maintenance of common property at Meritage at Little 

Creek; 

D. To retain counsel to represent Meritage HOA in this action and in other 

legal matters, to advise counsel on substantive decision in connection with 

such litigation, and to authorize the reasonable payment of attorney's fees 

as necessary and in the best interests of Meritage HOA. 

E. To form contracts on behalf of Meritage HOA in connection with the 

duties enumerated in this order, including without limitation the hiring, if 

deemed necessary and appropriate, of a property manager or an 

accountant. 

F. To propose a schedule for keeping this Court apprised of the activities 

of the receivership with respect to the election of a board of directors, the 

accounting of Meritage's assets and liabilities, and other matters the 

receiver believes necessary to bring to the Court's attention. A proposed 

schedule for submission of written updates is due July 1, 2018. 

G. To inform the Court promptly if at any point he believes that a 

receivership is no longer in the best interests of Meritage HOA. 

6. Kurt Freitag shall immediately and continuously cooperate with Mr. Roberts in order 

to facilitate Mr. Robetts's fulfilment of his duties under this order. Mr. Freitag shall 

surrender control of all accounts and assets of Meritage HOA to the control of Mr. 

Roberts. Mr. Freitag shall disclose to Mr. Robe1ts all information he has relating to 

assets and liabilities of the HOA. 

7. Through June 30, 2018 or an earlier date identified by Mr. Roberts, I hereby extend 

Mr. Freitag's limited authority to make the day-to-day management decisions approved 

in my May 1, 2018, preliminary injunction order. He shall communicate with Mr. 

Robetts during that time period about any and all actions taken on behalf of Meritage 

HOA. The provisions in the preliminary injunction setting out the temporary process for 

approving expenses in the ordinary course ofMeritage's business are dissolved as of the 

date of this order. Between the date of this order and June 30, 2018 or the earlier date 

identified by Mr. Robetts, Mr. Freitag shall: 

A. In connection with bills in the normal course of Meritage's business, 

electronically send a copy of any bill to Mr. Roberts, who shall have authority to 

approve or disapprove payment. 

B. In connection with receipt of rents from tenants, electronically send a copy of 

any rent check or other record of rental payment to Mr. Roberts promptly after 

depositing rents. 

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Case 6:16-cv-00300-AA Document 157 Filed 05/25/18 Page 10 of 11
C. Promptly notify Mr. Roberts of any expenses associated with ordinary repairs 

and issues of tenancy and await Mr. Robetts's approval before making payment. 

8. Beginning July I, 2018 or on an earlier date identified by Mr. Roberts, Mr. Freitag 

shall be without authority to conduct any activity on behalf of Meritage HOA including 

any actions taken to manage the day-to-day operations of the HOA. Mr. Freitag will, 

however, retain the obligation to cooperate with Mr. Robetts in order to facilitate the 

smooth transition of Meritage into receivership. 

IT IS SO ORDERED. 

Dated this .JS°~fMay 2018. 

Ann Aiken 

United States District Judge 

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