Lordstown Motors seeks approval of $40 million settlement with Karma

By Sarah Lizee

Olympia, Wash., Aug. 15 – Lordstown Motors Corp. is seeking approval of a $40 million settlement reached with Karma Automotive LLC, according to an 8-K filed Monday with the Securities and Exchange Commission.

On July 31, the U.S. Bankruptcy Court for the District of Delaware entered an order granting Karma relief from the automatic stay imposed by the Chapter 11 filing to allow a multi-week trial scheduled in September to go forward.

In 2020, Karma named the company, some of its current and former executive officers and some of its other current and former employees as defendants in a lawsuit for injunctive relief and monetary damages based on a variety of claims and theories asserting substantial losses by Karma or improper benefit to Lordstown Motors.

The lawsuit generally alleges misappropriation of trade secrets and intellectual property, conspiracy and breach of the parties’ non-disclosure agreement, among other things.

On Aug. 14, Lordstown and Karma entered into a settlement agreement and release memorializing an agreement to consensually resolve the claims asserted in the action.

The terms of the settlement include a $40 million settlement payment by Lordstown to Karma, of which $5 million is allocated to a royalty for use of the intellectual property of Karma.

The settlement agreement is subject to approval by the bankruptcy court by Aug. 28.

The Lordstown, Ohio-based electric vehicle maker filed Chapter 11 bankruptcy on June 27 under case number 23-10831.

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