YOUNGSTOWN, Ohio – Former executives of defunct electric-vehicle manufacturer Lordstown Motors Corp. who are being sued for alleged securities fraud want to tap into a company insurance plan to pay their legal expenses, according to court documents.
Steve Burns, former chairman and CEO; Darren Post, former director of engineering; Julio Rodriguez, former chief financial officer; and Caimin Flannery, former senior vice president of business development; filed a motion in U.S. Bankruptcy Court for the District of Delaware April 22 requesting relief from a stay in that case so they could obtain insurance policy advances toward their defense costs, court papers say.
The ex-officers face a class action lawsuit by former shareholders that was filed four years ago but refiled as an amended complaint in U.S. District Court for the Northern District of Ohio on February 14.
Initially, the complaint named the four ex-officers, former president Rich Schmidt, former chief production officer Shane Brown, Lordstown Motors Corp., Lordstown EV Corp., and former director David Hamamoto as defendants.
However, in 2023, Lordstown Motors filed bankruptcy and subsequently negotiated a partial settlement with the plaintiffs in which the company agreed to pay at least $3 million and up to $10 million. Hamamoto agreed to be interviewed by lead counsel in the lawsuit, and that interview has occurred, according to court documents.
Claims against the Lordstown Motors companies and Hamamoto were released as part of LMC’s bankruptcy plan when it emerged from protection in 2024 under a new name, Nu Ride Inc.
The amended complaint now names Burns, Post, Rodriguez, Flannery, Schmidt, and Brown as defendants.
According to court documents, the plaintiffs allege the former executives knowingly made false statements regarding the status of Lordstown Motors and its ability to manufacture its EV pickup truck, the Endurance.
The litigation has prompted Burns, Post, Rodriguez, and Flannery to appeal to the bankruptcy court to clear a path so the defendants can secure payments from a directors’ and officers’ liability insurance policy and several excess policies, according to court documents.
Schmidt and Brown have not filed documents seeking any insurance proceeds for their defense, court records show.
The former executives “have incurred, and continue to incur, fees and expenses in connection with the District Court action,” the bankruptcy court filing reads. “At all relevant times, the debtors maintained insurance policies covering various business risks” related to potential legal exposure of directors and officers, court records say. A portion of the policy defines costs and expenses covered as “reasonable and necessary legal fees incurred” because of any claim or investigation of the insured, court papers say.
Nu Ride, the reorganized debtor, filed a limited objection to the request April 29.
In its filing, Nu Ride explained that it is in separate litigation with the insurers, as it seeks compensation for coverage to offset the costs of other legal matters and noted that any order granting the former executives’ request contain language that absolves Nu Ride from any expenses and that the order would pertain to defense costs only.
A hearing on the matter is scheduled for 11:30 a.m. today.
THE SHAREHOLDERS’ COMPLAINT
The class action lawsuit is a consolidation of six complaints, the first of which was filed in U.S. District Court Northern District of Ohio in March 2021, records show.
The complaint was filed shortly after a short seller published a scathing report that alleged Lordstown Motors misled investors through public statements related to the preorders and production of its new all-electric pickup, The Endurance.
In 2019, General Motors sold its manufacturing plant in Lordstown to Lordstown Motors, an EV startup under the direction of Steve Burns. According to the complaint, Burns later that year began boasting of “well over several thousand pre-orders” of the Endurance.
The following year, the company merged with a special purpose acquisition company, or SPAC, and taken public. Once Lordstown Motors went public, Burns said the Endurance had 50,000 pre-orders, a number which he said had increased to 100,000 by early 2021, according to the complaint.
On March 12, 2021, Hindenburg Research published a lengthy analysis of Lordstown Motors, emphasizing the company’s order book consisted of “fake or entirely non-binding orders” and that the company did not have the financial resources necessary to manufacture the vehicle by its intended production date of September 2021.
Later that month, Burns revealed that the Securities and Exchange Commission had launched an inquiry over the company’s claims and its SPAC merger. The SEC matter was settled in 2024.
Lordstown Motors’ share price plummeted in the wake of the report and never recovered, costing investors millions of dollars and triggering a rash of shareholder and derivative lawsuits.
“This is a classic ‘fake it ‘till you make it’ fraud,” the amended complaint filed in Februray declared.
In June 2021, Burns and Rodriguez resigned after an internal investigation found that public misstatements were made about the Endurance. The other officers named in the complaint followed afterward.
New management at Lordstown Motors, however, could not turn the company around. In 2022, the company sold the Lordstown Plant to Foxconn, the Taiwanese tech giant that had agreed to a contract manufacturing deal to build the Endurance.
That deal unraveled, and Lordstown Motors declared bankruptcy in June 2023. That same day, the company filed a lawsuit against Foxconn for breach of contract. That litigation is still pending against Foxconn under Lordstown’s reorganized name, Nu Ride.
By that time, Burns had dumped all his shares in Lordstown Motors, amounting to more than $66 million. In a remarkable twist, the former chairman purchased the remaining assets of the company for $10.2 million out of bankruptcy last year and established a new EV company, LandX.
The 200-page amended complaint alleges that the defendants violated securities law and are therefore culpable to fraud. The complaint has requested a jury trial.
“Burns, Rodriguez, Flannery, Schmidt, Post, and Brown managed LTM (Lordstown Motors) and are responsible for the wrongful conduct alleged herein,” the amended complaint states.