Court orders Lordstown Motors to pay $2.5 million to Michigan company


LORDSTOWN, Ohio — A Trumbull County court ordered electric vehicle maker Lordstown Motors Corp. to pay more than $2.5 million to a utility company for breaching an agreement the parties signed nearly two years ago.

However, Lordstown Motors is likely to appeal the decision, according to documents filed with the Trumbull County Court of Common Pleas.

“The court finds that no genuine issue of material fact remains, and plaintiff DTE Lordstown is entitled to claims for judgment for breach of contract in the amount of $2,512,214.51 plus interest,” the court said. decision of Judge W. Wyatt McKay. “This is a final order subject to appeal and there is no cause for delay,” the court order notes.

Previous attempts at mediation failed and the court entered summary judgment against Lordstown Motors on January 12.

Lordstown Motors filed a response the next day asking the court to stay judgment pending an appeal to the Eleventh District Court of Appeals, documents show.

DTE Lordstown responded with a filing Monday, asking the court to dismiss Lordstown Motors’ claim. If a stay is granted, DTE says Lordstown Motors would have to post a $2.5 million bond to secure DTE’s interests, according to court documents.

To date, no appeal has been filed.

A spokeswoman representing Lordstown Motors said the company would not comment on the matter. Lawyers for DTE Lordstown also declined to comment, citing the potential for ongoing litigation.

DTE Lordstown LLC, based in Ann Arbor, Michigan, filed an initial lawsuit on October 30, 2020, alleging Lordstown Motors breached a utility contract when the EV startup failed to make payments on multiple bills, forcing DTE to terminate the agreement in August of the same year.

Court documents say Lordstown Motors is responsible for paying DTE Lordstown $181,613.42 for the services and an additional $2,330,609.09 in termination fees.

DTE Lordstown’s complaint says that when Lordstown Motors acquired the former General Motors Lordstown plant in November 2019, it lacked the staff or expertise to manage the facility’s sewage treatment and utility complex.

In February 2020, Lordstown Motors entered into a contract with DTE Lordstown, which would provide these services for six years, according to court documents.

The job involved taking measurements of equipment, making rounds, scheduling and supervising any contracted maintenance work, according to court documents.

Under the terms of the agreement, Lordstown Motors was to pay DTE’s monthly invoices within 30 days of receipt.

But Lordstown Motors “quickly fell behind on its payments,” racking up an outstanding balance of $904,192.09 — including $722,578.67 past due — as of June 15, 2020, the complaint says.

The companies agreed to a plan in which Lordstown Motors would pay $40,000 a week to remedy outstanding payments. Although Lordstown Motors made an initial payment of $40,000 on April 30, 2020, it did not make a payment the following week, the lawsuit says.

Another payment of $40,000 was made on May 14, but Lordstown Motors failed to make a payment the following week.

The parties discussed the arrangement on June 2, and Lordstown Motors claimed it was unaware of the missed weekly payments and agreed to make a payment of $10,000 the following day. The company has not made the payment, according to court documents.

DTE sent a notice of termination to Lordstown Motors on June 1, stating that it would take effect on August 14, triggering the hefty termination charge.

Court records show that in 2020, Lordstown Motors paid $642,578.67 on June 25 for partial payment of four overdue invoices. Lordstown Motors made another payment of $10,141.30 for a sixth bill on October 19.

On October 28, Lordstown Motors handed over a check for Invoice No. 5, but it conditioned payment on the DTE waiving all rights under the public service agreement, including termination fees, documents show. judicial.

Lordstown Motors said it attributed the backlog to delays in fundraising efforts as the start-up electric vehicle maker began to revamp operations at the former GM plant.

The latest move comes as Lordstown Motors moves forward with the sale of its manufacturing plant to Taiwanese tech giant Foxconn. In November, the parties announced a sale agreement in which Foxconn would buy the Lordstown plant for $230 million and another capital investment of $50 million. The transaction is expected to close in April.

Lordstown Motors expects commercial production of its all-electric pickup truck, The Endurance, in the third quarter of 2022. As part of the agreement, Foxconn would also act as a contract manufacturer for The Endurance and future Lordstown Motors products.

In August 2020, Lordstown Motors signed a merger agreement with blank check company DiamondPeak Holdings Corp. which went public with the electric vehicle maker in October.

Lordstown Motors began trading on the Nasdaq under the symbol “RIDE” on October 26.

The company’s share price has plunged since last March after a searing report from a short seller questioned the validity of pre-orders for the Endurance, accusing Lordstown executives of misleading the wrong investors.

An internal investigation revealed that some executives had made inaccurate statements regarding pre-orders. In June last year, Lordstown Motors founder and chairman Steve Burns resigned from the company, as did its chief financial officer, Julio Rodriguez.

The EV startup is also under investigation by the United States Securities and Exchange Commission and the United States Department of Justice.

Much of the Lordstown Motors leadership that was forged under Burns was replaced.

Over the past 52 weeks, RIDE has lost almost 90% of its value, closing Tuesday at $2.63 per share.

Lordstown Motors is also facing a host of investor lawsuits, claiming the company and its former management team under Burns misled investors over Endurance pre-orders.

The company is named in seven shareholder lawsuits in Ohio and four in Delaware, according to court records.

Lordstown Motors is also embroiled in a legal dispute in federal court with California-based Karma Automotive LLC. This company alleges that Lordstown Motors and its former executives poached employees and trade secrets from Karma.

Copyright 2022 The Business Journal, Youngstown, Ohio.


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