The outcome of the trial will play a crucial role in determining the assets that Lordstown can sell during its Chapter 11 bankruptcy proceedings. This decision will ultimately impact the startup’s ability to survive the bankruptcy process, emphasized Judge Walrath.
Judge Walrath stated, “This trial will determine the ownership of assets by the debtor.”
This ruling poses a significant setback for Lordstown, as the company had filed for bankruptcy with the intention of quickly selling its assets. Karma had filed a lawsuit in 2020, alleging that Lordstown had unlawfully poached key employees and misappropriated trade secrets to expedite the development of its electric vehicle, the Endurance. Karma is seeking damages amounting to $913.2 million, along with additional fees, costs, and penalties.
Lordstown has vehemently denied these allegations and asserted that it independently invested millions of dollars in the design and technology behind the Endurance. It also claimed to have utilized alternative sources not connected to Karma. The bankrupt electric vehicle startup argued that the lawsuit filed by Karma should be put on hold to enable the company to proceed with the Chapter 11 sale, which typically provides a temporary respite from costly legal battles.
Lordstown further argued that allowing the trial to proceed could hinder its ability to sell its business as a going concern. However, Judge Walrath highlighted that the trial’s outcome, particularly the determination of asset ownership, could significantly influence the interest and bids received by Lordstown for its assets.
Judge Walrath expects a verdict to be delivered in September. Jefferies, the financial services firm involved in the proceedings, has not yet responded to requests for comment on Judge Walrath’s concerns regarding the sales process.
This bankruptcy case is under the jurisdiction of the U.S. Bankruptcy Court for the District of Delaware and is identified as Lordstown Motors Corp., 23-10831.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
