The Sixth Circuit has upheld the dismissal of a suit claiming former executives of Lordstown Motors Corp. misled investors about the state of a partnership with Foxconn Technology Group, finding leaders' optimism about the ultimately failed deal wasn't intentionally false.

Shareholders, led by Andrew and Joshua Strickland, had asked the Sixth Circuit to revive their proposed class action alleging that executives of Lordstown, now known as Nu Ride Inc., hid problems the company was having with Taiwan-based Foxconn in the months before that company pulled out of the deal altogether. Lordstown filed for bankruptcy soon after its partnership with Foxconn fell apart.

But Lordstown executives who described the company's partnership with Foxconn in positive terms weren't deliberately misleading investors, given that Foxconn did invest financially in Lordstown and appeared committed to working with the company to jointly build electric vehicles, a majority of the three-judge panel said Tuesday.

"Although the partnership ultimately failed, that failure does not mean that the parties' entire relationship was fraudulent such that any time defendants spoke positively about the partnership, they engaged in misrepresentation," wrote U.S. District Judge Richard Allen Griffin. "And even if Foxconn intended to 'sabotage' Lordstown, defendants reasonably perceived Foxconn's actions (e.g., investments, negotiations, agreements) to indicate otherwise."

The investors had claimed that former Lordstown executives — including president and CEO Edward Hightower, Chief Financial Officer Adam Kroll and Daniel Ninivaggi, who also previously served as CEO of the company — failed to disclose signs of trouble with the company's partnership with Foxconn to produce electric vehicles. According to the investors, those signs included Foxconn not following through on its commitments to Lordstown, failing to show up to meetings and delaying critical decisions.

"Many of these allegations, however, concern soft information — matters of opinion — that defendants did not have a duty to disclose," Judge Griffin said.

The Sixth Circuit majority said the investors additionally failed to plead facts showing the executives knew or should have foreseen that Foxconn was allegedly acting in bad faith. Instead, it seemed that Lordstown executives were themselves misled by Foxconn, according to the judges.

"Viewed holistically, the complaint offers no inference that defendants knew or should have known that the partnership would fail; rather, the allegations indicate that Foxconn secretly sabotaged and unexpectedly ended the partnership," Judge Griffin wrote.

However, the panel disagreed about the significance of Lordstown's failure to disclose a letter it sent to Foxconn in October 2022 accusing the company of breaching the joint venture agreement to produce electric vehicles together.

The two companies then abandoned the joint venture and recast their partnership in an investment agreement that committed Foxconn to making stock purchases if Lordstown met certain milestones.

Judge Griffin said Lordstown didn't have a duty to disclose the breach because it was wrapped up in ongoing negotiations about the new investment agreement, which Lordstown did reveal once it was final.

"True, defendants did not disclose to the public that Lordstown believed, at the time, that Foxconn breached these agreements. But at that point, disclosure was not necessary — that letter precipitated negotiations with Foxconn that quickly resulted in a new agreement," Judge Griffin said.

U.S. District Judge Karen Nelson Moore said that it was misleading for Lordstown executives to not tell investors that the restructuring of the Foxconn partnership came about because of Foxconn's alleged failure to live up to its commitments in the joint venture.

"The plaintiffs have plausibly alleged that this omission would have been materially misleading to a reasonable investor," Judge Moore said in a dissent.

Months after inking the investment agreement, Lordstown disclosed in a May 1, 2023, 8-K form that Foxconn had ended the partnership. Lordstown filed for Chapter 11 bankruptcy protection in June 2023 and immediately filed an adversary complaint against Foxconn accusing the company of fraud.

Lordstown emerged from bankruptcy as Nu Ride in March 2024.

Last year, Lordstown's founder and former CEO Steve Burns settled allegations from the U.S. Securities and Exchange Commission that he misrepresented claims about presale orders.

Burns agreed to a $175,000 civil penalty and a two-year officer and director bar.

Lordstown also agreed to pay $25 million to settle SEC allegations that the company misled investors about the presale demand for the Endurance, its flagship electric pickup truck.

U.S. District Judges Richard Allen Griffin, Karen Nelson Moore and John B. Nalbandian sat on the panel for the Sixth Circuit.

The shareholders are represented by John C. Camillus of the Law Offices of John C. Camillus LLC, and James M. Wilson Jr. and Robert W. Killorin of Faruqi & Faruqi LLP.

Lordstown is represented by Bruce G. Vanyo, Jonathan A. Rotenberg, Sarah Eichenberger and Thomas Artaki of Katten Muchin Rosenman LLP, and Thomas D. Warren of Warren Terzian LLP.

The case is Bandol Lim et al. v. Edward Hightower et al., case number 24-3960, in the U.S. Court of Appeals for the Sixth Circuit.