An Oregon nursery where a new plant pathogen was discovered last year may be dissolved by a court-appointed receiver following a dispute among its co-owners.

The court-appointed receiver recently took control of the Rio Verde Holdings nursery near Cornelius, Ore., after a federal judge agreed it was warranted in a lawsuit between the co-owners.

Neither the state nor federal government have disclosed exactly where phytophthora austrocedri, a fungus-like disease related to sudden oak death, was found for the first time in the U.S. in 2024. However, one of the nursery’s owners has claimed in court documents that a government-ordered plant quarantine for the pathogen heavily contributed to the company’s financial problems.

Rio Verde Holdings was formed in 2018 after the co-owners bought the nursery property in rural Washington County during a liquidation auction for $6.5 million, with each having an equal stake in the operation.

Earlier this year, however, co-owner Matt Edmundson, a nursery operator from Colorado, filed a lawsuit seeking a court-appointed receiver to dissolve the company.

In the complaint, Edmundson accused the other co-owner, O&S Holdings of Missouri, of “gross mismanagement” and “a complex fraudulent scheme” to misappropriate the nursery’s assets.

The lawsuit alleges that O&S Holdings, which is owned by Tory Schwope and Jerald O’Brien, “hijacked” the nursery’s management contrary to an operating agreement under which the company was formed.

According to the complaint, O&S Holdings “wrote fraudulent checks,” bought unapproved items and “maxxed out” a line of credit while shutting out Edmundson from inventory, payroll and data systems.

The plaintiff also claims that O&S Holdings caused the nursery to default on loans that had been personally guaranteed by Edmundson and provided him with “incorrect financial reports, faulty inventory information and falsified documents,” among other allegations.

O&S Holdings opposed the motion for a court-appointed receiver, rebutting each of the accusations made by Edmundson and arguing that receivership would be premature because the nursery wasn’t subject to foreclosure proceedings or even a formal default on its debt.

Tory Schwope, co-owner of O&S holdings, filed a court declaration stating that he’d been “very close friends, business partners and allies” with Edmundson for more than two decades before falling out over the nursery’s management.

Upon buying the nursery property, Schwope said they “inherited a severely struggling operation” with “few buyers for the inventory,” as the nursery stock was “disorganized and of inconsistent quality,” according to the declaration.

Around 2021, though, the nursery’s fortunes began experiencing a “turn around” during which it solved problems with processing and shipping while generating about $10 million in annual revenues, the declaration said.

Even so, Schwope said the nursery continued to have “challenges with herbicide applications, watering, water quality, supply chain management and potting efficiency” that prevented the operation from generating profits.

Still, the company was “extremely optimistic” about its prospects last year until a new pathogen related to sudden oak death, phytophthora austrocedri, was discovered for the first time in the United States in its nursery stock, he said.

More than half the company’s inventory was quarantined by state agriculture regulators as a result, slashing the nursery’s budgeted revenues nearly in half and reducing its expected profits by about 97%, Schwope said.

“But for the unexpected finding in May of last year and the state of Oregon’s subsequent response, 2024 was on track to be a profitable year,” according to the defendant.

Later that year, Edmundson repeatedly demanded access to the nursery’s data, but those requests were denied, prompting him to attempt to fire a management company owned by Schwope that helped run the company, the defendant said.

The access was denied because the software systems are “tightly controlled” to ensure accuracy and prevent manipulation, without even Schwope himself being able to log into those systems, he said.

Schwope said he refused to terminate the management company, which would have required shutting down the software systems, since this would “cripple the company” by destroying its ability to “capture and organize data” at a financially precarious time.

The nursery had gone into debt during its early troubled years, but it had a “strategic plan to generate enough free cash flow not only to service the debt, but to reduce it,” according to the defendant.

Though O&S holdings claimed there was an “almost complete lack of admissible evidence” to support the receivership, a federal judge has disagreed and appointed Gene Buccola of High Plateau Asset Management as the receiver to run the company.

U.S. District Judge Karin Immergut agreed with Schwope that “the record is not sufficiently developed to determine whether defendants engaged in fraudulent conduct,” but ruled that other factors decisively support a receivership.

Due to the possibility of fraud and the danger of property being “diminished in value or squandered,” it’s an appropriate step until either party is “found to be the bad actor,” she said. “There is ongoing misconduct by someone, which weighs in favor of a court-appointed neutral receiver to oversee the business until the court can determine who is at fault.”