Company adds racketeering claim to LMC suit
LORDSTOWN — A West Coast maker of luxury electric cars that accused Lordstown Motors Corp. of corporate espionage in a lawsuit has amended its complaint, alleging a widespread conspiracy to raid the company of its confidential and proprietary information.
Irvine, Calif.-based Karma Automotive LLC accuses Lordstown Motors, some of its top executives and former employees of Karma now employed at Lordstown Motors of violating U.S. racketeering law.
Two counts in the 28-count lawsuit, Karma claims, violate the Racketeer Influenced and Corrupt Organizations (RICO) Act, according to the lawsuit filed in U.S. court in central California.
In its initial complaint filed Oct. 30 Karma alleged Lordstown Motors “brazenly stole” secrets about Karma’s infotainment system and plundered a specialized team of Karma employees who were designing it.
Lordstown Motors accomplished that by engaging in a “Trojan horse” strategy, where it pretended to be engaged in a five-month due diligence period that culminated in a fraudulent partnership letter with a promise to pay, but pulled out of the “fake deal” at the last minute to create LMC Infotainment Group using Karma’s stolen trade secrets and confidential information, the first lawsuit states.
The canceled project was projected to bring in more than $3 billion in revenue by 2024 for Karma.
The new lawsuit widens the allegations against Lordstown Motors and staff, accusing them of taking Karma’s “highly confidential and proprietary information regarding nearly every aspect of Karma’s vehicles.”
Lordstown Motors defended itself in court papers against the initial claims, calling them a “fictional tale” and “fantasy.”
Company spokesman Ryan Hallett said in regard to the latest allegations, “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.”
Lordstown Motors has until June 7 to file a formal response with the court.
The lawsuit names Lordstown Motors; Steve Burns, CEO; John LaFleur, chief operating officer; Darren Post, chief engineer; Rich Schmidt, president; and former Karma employees Roger J. Durre, George Huan, Bei Qin, Stephen Punak, Christopher Kim, Dan Zhihong Huang and Punak Engineering.
According to the lawsuit, Lordstown Motors copied “word for word” one of Karma’s technical specifications for a vehicle power moding system — a system needed for power management in an electric vehicle.
It claims the defendants “brazenly and lazily” slapped “Lordstown” on the cover page of the technical specs but did not remove references to Karma in the document tables.
Also, the suit claims defendants stole and then copied and pasted into their own company documents “entire sections” of Karma’s development plans and other information, “even secret plans for a new Karma vehicle.”
In addition, production process and tools were stolen from Karma, the lawsuit claims.
“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,” the lawsuit states.
Karma estimates the information is worth hundreds of millions of dollars at least, the suit states.