Lordstown Motors Endurance

Court Orders Lordstown Motors to Pay $2.5M to Michigan Company; Appeal Likely

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

However, it’s likely Lordstown Motors will appeal the decision, according to documents filed with the Trumbull County Common Pleas Court.

“The court finds no genuine issues of material fact remain, and plaintiff DTE Lordstown is entitled to judgment claims for breach of contract in the amount of $2,512,214.51 plus interest,” the ruling by Judge W. Wyatt McKay says. “This is a final appealable order and there is no just cause for delay,” the court order notes.

Earlier attempts at mediation failed, and the court filed a summary judgment against Lordstown Motors on Jan. 12. 

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

DTE Lordstown responded with a filing on Monday, asking the court to deny Lordstown Motors’ request. Should a stay be granted, DTE says Lordstown Motors should post a bond of $2.5 million to secure DTE’s interests, according to court documents.

As of this posting, no appeal has been filed.

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

DTE Lordstown LLC, based in Ann Arbor, Mich., filed an initial complaint on Oct. 30, 2020, alleging that Lordstown Motors breached a utility services-contract when the EV startup failed to make payments on several invoices, forcing DTE to terminate the agreement in August of that year. 

Court papers say that Lordstown Motors is responsible for paying DTE Lordstown $181,613.42 for services and another $2,330,609.09 in termination fees.

DTE Lordstown’s complaint states when Lordstown Motors acquired the former General Motors Lordstown plant in November 2019, it lacked the personnel or expertise to manage the facility’s wastewater treatment operation and utilities complex.

In February 2020, Lordstown Motors entered into a contract with DTE Lordstown, which would provide these services for a six-year term, according to court papers. 

The work involved taking equipment readings, making rounds, scheduling and overseeing any contract maintenance work, court documents say.

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

But Lordstown Motors “quickly fell behind on its payments,” accruing an unpaid balance of $904,192.09 — $722,578.67 of which was past due — by June 15, 2020, the complaint states.

The companies agreed to a plan in which Lordstown Motors would pay $40,000 per week to cure the delinquencies. Although Lordstown Motors made an initial payment of $40,000 on April 30, 2020 it failed to make a payment the following week, the lawsuit states. 

Another $40,000 payment was made on May 14, but Lordstown Motors did not make a payment by 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 $10,000 payment the following day.  The company failed to make the payment, according to court papers.

DTE sent a notice of termination to Lordstown Motors on June 1, indicating that it would take effect Aug. 14, triggering the hefty termination fee.

Court filings show that in 2020 Lordstown Motors paid $642,578.67 on June 25 toward a partial payment of four past due invoices. Lordstown Motors tendered another payment of $10,141.30 toward a sixth invoice on Oct. 19. 

On Oct. 28, Lordstown Motors tendered a check for invoice No. 5, but it conditioned the payment on DTE forgoing all rights under the utility agreement, including the termination fee, according to court documents.

Lordstown Motors said it attributed the delinquencies to delays in fundraising efforts as the startup EV manufacturer began to retool operations at the former GM plant. 

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

Lordstown Motors plans commercial production of its all-electric pickup, The Endurance, in the third quarter of 2022. As part of the deal, 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. that took the EV manufacturer public that October. 

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

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

An internal inquiry found that some executives made misstatements regarding pre-orders.  In June of 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 the subject of investigations from the U.S. Securities and Exchange Commission and the U.S. Department of Justice.

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

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

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

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.  That company alleges Lordstown Motors and its former executives poached employees and trade secrets from Karma.  

Copyright 2022 The Business Journal, Youngstown, Ohio.