Lordstown Motors has agreed to pay Karma Automotive a $40 million settlement over allegations that it stole trade secrets and poached employees.
In 2021, Karma Automotive sued Lordstown Motors seeking as much as $900 million in damages for its alleged misconduct, including the theft of technology used in its infotainment systems. While Lordstown Motors declared Chapter 11 bankruptcy on June 27 this year, U.S. Judge Mary F. Walrath stated that the legal issue with Karma would need to be resolved before a bankruptcy court could accurately determine what assets Lordstown has. The lawsuit was scheduled for trial on September 12 in the U.S. District Court in Central California.
However, papers recently filed with the court have revealed that Lordstown has settled with Karma for $40 million. This includes a $5 million one-time royalty payment. The court papers said the two car manufacturers “engaged in robust, arm’s length negotiations in a good faith attempt to resolve their disputes,” Business Journal Daily reports.
“Although the Debtors believe that Karma’s asserted claims are without merit (and would be prepared to defend against them absent settlement),” Lordstown said, “the size of Karma’s asserted claims when coupled with the risks associated with all litigation creates significant uncertainty regarding the total size of the debtors’ claims pool and the recoveries that the debtors may be able to provide for stakeholders. Moreover, the costs associated with litigating a multi-week jury trial and post-trial motions practice and appeal would undoubtedly erode recoveries.”
Read: Karma To Produce B-On Electric Delivery Vehicles In California
Lordstown’s debtors have requested for the settlement to be approved by the bankruptcy court on or before August 28. The car manufacturer hopes that Judge Mary F. Walrath can shorten the objection and hearing process for the settlement with Karma so that it can move forward with the sale of its assets.
