Lawsuit against Lordstown Motors alleges fraud, conspiracy, racketeering.
As Lordstown Motors nears the September date when it says it will begin producing all-electric pickup trucks, the company continues to be the target of legal actions.
The latest comes from a California-based maker of luxury electric cars that has added new allegations to its civil lawsuit in federal court claiming its trade secrets were stolen by Lordstown Motors Corporation.
The amended complaint filed by Karma Automotive last week adds eighteen more counts of alleged violations including fraud, conspiracy, and racketeering.
Karma's original lawsuit, filed this past October in California, alleged that Lordstown Motors stole trade secrets about Karma’s infotainment system for use in the Endurance electric pickup trucks that LMC plans to manufacture at the former GM Assembly Plant in Lordstown.
In addition, Karma claims that CEO Steve Burns and other LMC executives poached Karma’s project managers and engineers, two of whom are named as defendants in the lawsuit.
According to Karma, using what it called a “Trojan Horse” strategy, LMC pretended to be working with Karma on an infotainment system, but instead “secretly poached and onboarded key Karma employees and started stealing Karma’s secrets”
Karma says LMC pulled out of the deal at the last minute so it could use Karma’s trade secret and confidential information to create its own “LMC Infotainment Group” in order to save itself $4.6 Million.
According to Karma, the project was projected to bring more than $3 billion in revenue to Karma by 2024.
The amended complaint filed last week claims LMC not only stole Karma’s source code and incorporated it into the Endurance infotainment system, but also claims that LMC's alleged theft of Karma’s trade secrets stretches back to December 2019.
"For example, LMC copied word for word one of Karma’s technical specifications for a vehicle power moding system—which for an electric vehicle is a critical system design that specifies power management mechanism of the entire vehicle. Defendants did this brazenly and lazily, slapping “Lordstown” on the front page of their technical specifications but then failing to remove references to Karma later in the document tables," according to Karma's amended complaint.
Karma also accuses LMC of copying and pasting entire sections of Karma’s development plans, software and
hardware development project plans and timelines, hardware development specifications for individual vehicle and infotainment system components, design documents for electric vehicle communication systems, electric vehicle network architecture diagrams, full and complete bills of materials identifying the components and pricing for components of electric vehicles, and "even secret plans for a new Karma vehicle."
The complaint also accuses LMC of stealing Karma’s production processes and tools, including, electric vehicle testing and validation documents, mobile device application product requirements, process improvement
methodologies, supplier information, and project budgets.
"Sometimes the copying was so obvious, Defendants forgot to fix the typos from the original Karma documents and even sometimes failed to remove the word “Karma” and the Karma design logo from the text of the document itself," according to Karma's complaint.
The complaint says LMC agreed to "facilitate a scheme, a conspiracy, to defraud Karma through a pattern of interstate racketeering activity, which included the operation and/or management of a RICO enterprise.
U.S. District Court Judge James Selna has given LMC until late June to respond to Karma's amended complaint.
21 News has reached out to LMC's public relations firm and was emailed the below response:
"We will respond appropriately in court, but we are confident that our dealings with Karma complied with all relevant laws and we remain focused on building the safest, most cost-effective, zero-emission work trucks ever made."
In response to Karma's original complaint, LMC called it a fictional tale of “corporate espionage” and “double agents.”
LMC said at the time that it could not implement any of Karma’s private information because Endurance uses different hardware. LMC says it chose not to purchase Karma’s system because the price was too high.
Lordstown Motors claims Karma’s former employees went to Lordstown Motors to pursue employment because Karma cut back its engineering and manufacturing programs.
Karma’s lawsuit also alleges computer fraud, misappropriation of trade secrets, breach of contract, and unfair competition.
The suit asks the court to award unspecified exemplary, compensatory, and punitive damages.
Lordstown Motors also faces a class-action civil lawsuit filed by investors in federal court alleging that company executives fraudulently inflated the value of the company’s stock.
The company also faces a Securities and Exchange Commission inquiry into claims made about pre-orders of the vehicles.
LMC CEO Steve Burns has said he is cooperating with the SEC investigation and will fight the lawsuit.
Last week, Goldman Sachs downgraded Lordstown Motors' RIDE stock from "buy" to "neutral", partly due to the Endurance's ability to complete less than 40 miles of the 280 mile long San Felipe Baja race before the battery pack was drained.
On Friday, RIDE shares closed at under $10, compared to the Feb. 11 high of more than $31.