Lordstown Motors stalls on the road to a quick bankruptcy sale

Nu Ride

27/07/2023 19:49

By Dietrich Knauth
       NEW YORK, July 27 (Reuters) - Bankrupt Lordstown Motors
 RIDEQ.PK  must face trial over a rival carmaker's claim that
Lordstown vehicles include stolen technology, a U.S. judge ruled
Thursday, dealing a blow to the company's hopes for a quick
bankruptcy sale. 
    The automaker, named after the Ohio town where it is based,
filed for bankruptcy in June and had asked U.S. Bankruptcy Judge
Mary Walrath in Wilmington, Delaware, to approve bidding
procedures that would allow the company to sell its assets by
September. 
    Walrath instead said a sale should not be expedited while a
California court is weighing a lawsuit by a rival carmaker that
raises questions about some of the assets Lordstown seeks to
sell.
    California-based Karma Automotive sued Lordstown in 2020 for
 allegedly poaching its employees and stealing technology used
in vehicle infotainment systems. That case had been scheduled
for trial in September before being placed on hold by
Lordstown's bankruptcy.
    "The critical issue in this case is whether the debtors own
the property that they want to sell," Walrath said at a court
hearing. "The California court ... should decide those issues."
    Lordstown and Karma did not immediately respond to a request
for comment. 
    Walrath said Lordstown was not at risk of running out of
cash before a sale or a California verdict, because it entered
bankruptcy with over $130 million in cash and it owed only about
$20 million to its top creditors.
    The September deadline "appears to be designed solely to get
this done before a Karma decision can be made in the California
litigation," Walrath said.
    Walrath allowed Karma to proceed to trial on its claims
against Lordstown, overruling bankruptcy protections that
typically pause lawsuits against bankrupt companies. Because the
lawsuit has been proceeding for three years, the California
court is in a better position to rule on "exactly what Karma may
or may not own," she said.
    The judge said she intends to revisit Lordstown's proposed
sale process in early August, taking a short delay to see
whether it receives any initial bids by a July 31 deadline.
    In addition to the Karma dispute, Lordstown is also engaged
in litigation against several other parties, including its
former partner Foxconn and several investor groups. 

 (Reporting by Dietrich Knauth
Editing by Bill Berkrot)
 ((Dietrich.Knauth@thomsonreuters.com;))