Lordstown Motors Sued for $2.5 Million
LORDSTOWN, Ohio – A company based in Ann Arbor, Mich., says it’s owed more than $2.5 million from Lordstown Motors Corp., alleging the electric-truck startup breached a utility services agreement the parties signed in February.
DTE Lordstown LLC filed a complaint in Trumbull County Common Pleas Court Oct. 30, alleging that Lordstown Motors broke its contract when it failed to make payments on several invoices, forcing DTE to terminate the agreement in August. It is asking the court to award it $2,512,214.51 in damages, court papers say.
According to court documents, DTE said it is entitled to the outstanding balance of $181,613.42 and a contract termination fee of $2,330,601.09.
However, Lordstown Motors said in a statement that it believes that the company has paid DTE in full for all invoices up until DTE terminated its agreement.
“DTE terminated the agreement during the COVID pandemic based on past due payments, but Lordstown has since paid DTE Lordstown LLC in full for all of the operational costs due through the date DTE terminated the agreement and after operational control of the CUC facility was turned over to a new provider,” the statement said. “LMC believes it has made DTE Lordstown whole, and it is not entitled to the termination fee claimed due under the circumstances. Lordstown Motors looks forward to responding to and defending this matter in the Trumbull County courts.”
The complaint states that when Lordstown Motors Corp. acquired the former General Motors Lordstown plant in November 2019, it lacked the personnel or expertise to manage the facility’s wastewater treatment plant and utilities complex. In February, Lordstown Motors contracted DTE to provide these services pursuant to a six-year agreement, 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, the complaint said.
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, the lawsuit says.
The companies agreed to a “catch-up” plan in which Lordstown Motors would pay $40,000 per week to cure the delinquencies, court documents say. Although Lordstown Motors made an initial payment of $40,000 on April 30, 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, according to the complaint.
The parties discussed the arrearage 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, documents say. The company failed to make the payment, according to court papers.
As such, DTE “could no longer afford to finance LMC’s operations, and it was left with no choice but to terminate the agreement,” the lawsuit says.
DTE sent a notice of termination to Lordstown Motors on June 1, indicating that it would take effect Aug. 14, according to court documents.
Lordstown Motors said it attributed the delinquencies to delays in fundraising efforts as the startup electric vehicle manufacturer began to retool operations at the former GM plant, the complaint said.
According to the lawsuit, Lordstown Motors “has not disputed any of the invoices or accounts at issue in this case.”
The court filing shows that 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, court papers say.
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, the lawsuit claims.
An email seeking comment from Lordstown Motors’ public relations group was not returned.
Lordstown Motors acquired the former General Motors plant in November 2019 after GM announced it would shutter the plant permanently.
The company has plans to build its new all-electric pickup, The Endurance, at the plant beginning in the summer of 2021. In August, Lordstown Motors signed a merger agreement with DiamondPeak Holdings Corp. that would infuse $675 million into the fledgling company and take it public.
On Oct. 26, Lordstown Motors began trading on the Nasdaq under the ticker symbol “RIDE.”
According to Lordstown Motors CEO Steve Burns, Lordstown Motors expects to hire nearly 800 employees by next summer.
Copyright 2020 The Business Journal, Youngstown, Ohio.