A Quebec court has cleared the way for investor lawsuits to proceed against the former leadership of lion Electric,the electric school bus manufacturer that filed for creditor protection in late 2024 following a steep decline in value. The ruling,delivered Monday by Quebec Superior Court Justice Michel Pinsonnault,rejects attempts to shield former executives – including founder Marc Bédard – from potential legal claims related to the company’s financial collapse and alleged misleading of shareholders. The decision sets the stage for possibly costly litigation, with two of the class-action suits filed in the United States.
A Quebec court has allowed investor lawsuits against the former leadership of Lion Electric and its founder, Marc Bédard, to proceed, stemming from the electric school bus manufacturer’s financial collapse. The ruling means former executives will not receive immunity from potential legal claims.
Background:
- May 2021: Lion Electric goes public on the Toronto and New York stock exchanges.
- July 2024: Lion refocuses its strategy, discontinuing truck assembly in the United States.
- November 2024: The company announces it is nearing depletion of its cash reserves.
- December 2024: Lion seeks creditor protection.
- May 2024: A group of Quebec investors acquires Lion for $6 million.
Despite the change in ownership in May, a key aspect of the deal reached under the Companies’ Creditors Arrangement Act (CCAA) remained unresolved. The issue centered on releases that would have shielded former Lion directors and officers from potentially costly lawsuits.
On Monday, Quebec Superior Court Justice Michel Pinsonnault ruled against granting those releases to Mr. Bédard and his former colleagues. This decision allows three class-action lawsuits to move forward, though the claims within those suits have yet to be proven in court. Two of the cases are filed in the United States.
Serious Allegations
The Quebec lawsuit, filed in February, alleges that former shareholders were misled regarding the company’s practices prior to its financial difficulties. The case, led by the New York law firm Scott+Scott, relies on testimony from four former Lion managers, who remain unnamed.
These former managers describe deceptive practices, particularly concerning reported sales figures. “Without ruling on the merits of the claim […] the court agrees that, on the face of it, the allegations made in the claim regarding the directors and officers are sufficiently serious to justify the conclusion that the claim does not appear to be frivolous, far from it,” the judge stated.
Read more: “Former officials denounce deceptive practices”
The lawsuit names Mr. Bédard and the members of Lion’s board of directors who were in place before the company sought creditor protection on December 18, 2024.
“The court has determined that the claims […] are legitimate and serious and that it is not up to this court to rule on the merits of these cases,” Judge Pinsonnault wrote in his decision. The judge’s role was limited to ruling on the releases, given the allegations presented in the class actions.
As of press time, it was not clear whether representatives of the former Lion leadership intend to appeal the judge’s decision.
Costly Downfall
The province of Quebec has lost $143 million in the collapse of the manufacturer.
The company’s new owners, a group of Quebec investors including Vincent Chiara, president and founder of real estate developer Groupe Mach, acquired the business for just $6 million.
As reported by La Presse in July, this price was a significant drop from Lion’s market value in early June 2021, shortly after its initial public offering on Wall Street and the Toronto Stock Exchange, when its market capitalization briefly approached $4.7 billion. The dramatic decline underscores the risks inherent in the rapidly evolving electric vehicle market.
The new owners plan to focus exclusively on electric school buses. In September, the Quebec government grounded 1,200 of the company’s electric buses following a fire on one of the vehicles, causing several weeks of disruption.
The disruptions lasted for several weeks.
More information
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- 1350 people
- Lion Electric’s workforce before the start of layoffs in the fall of 2023.
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