Facts

Workhorse Group, Inc. is a technology company that engages primarily in the business of developing electronic delivery vehicles, originally owned by Navistar International, but in March 2015, AMP Holdings, Inc. took the company over. Duane Hughes was the Chief Executive Officer, President, and Director of Workhorse beginning in February 2019. Steve Schrader was the Chief Financial Officer beginning in December 2019. Robert Willison was the Chief Operations Officer of Workhorse beginning in February 2019. Gregory Ackerson was Workhorse's Corporate Controller beginning in March 2020.

In January 2015, the United States Postal Service announced a project to replace its delivery fleet with its Next Generation Delivery Vehicle (NGDV). Workhorse got involved in the bidding process with an engineering firm as its partner, which later dropped out. Despite this, Workhorse continued to pursue the bidding process, and its directors and officers referred to their pursuit of the contract, the process, and the company's capabilities in various statements and interviews. Workhorse was ultimately unsuccessful in securing the contract.

Sam Farrar, Timothy M. Weis, and Angelo Federico are individuals who purchased Workhorse Group's stock. In 2021, Farrar filed suit on behalf of himself and all others similarly situated against Workhorse and its officers and directors. Weis was subsequently named as the lead plaintiff in the case, and Federico was named as the additional plaintiff.

PLAINTIFFS' CONTENTIONS: Plaintiffs contended that the defendants violated the Securities Exchange Act by making materially false and misleading statements regarding the company's capabilities, backlog of purchase orders, and positioning regarding a contract with the United States Postal Service to manufacture its new vehicles. Specifically, plaintiffs contended that the defendants pursued and touted the NGDV contract, despite it being outside the company's capabilities. Plaintiffs further contended the statements defrauded investors into believing that Workhorse could win the contract, inflating the price of its stock. Plaintiffs contended that they purchased the stock at this artificially inflated price, and they were damaged when the stock price eventually declined due to the misrepresentations.

DEFENDANTS' CONTENTIONS: Defendants denied any wrongdoing or liability and all the plaintiffs' material allegations. Moreover, the defendants contended that they made no false or misleading statements; that any such statements did not affect the stock price to the extent claimed by the plaintiffs; and that they did not act with scienter.

Result

The parties reached an agreement wherein the defendant admitted no wrongdoing or liability but agreed to provide $15 million in cash and $20 million of Workhorse common stock to settle class members' claims.