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Karma Automotive Sues DeLorean, Accuses Its Executives of Stealing Intellectual Property
Not long ago, DeLorean only had plans to electrify the DMC DeLorean, aka DMC-12 (its pre-production code). On February 14, the company tweeted about a new EV. We discovered that its new CEO was Joost de Vries, who used to work for Karma. DeLorean’s new chief marketing officer (CMO), Troy Beetz, also worked there. That led us to think Karma could be involved with the new product, which Beetz quickly denied. How did these Karma executives end up in DeLorean? A lawsuit from Karma Automotive may answer that.

Karma Automotive Sues DeLorean, Accuses Its Executives of Stealing Intellectual Property

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According to this lawsuit, DeLorean does not have only two former Karma employees. There are four: Alan (Qifang) Yuan and Neilo Harris worked with De Vries and Beetz in the California-based car company. Yuan is now DeLorean Motor Reimagined’s chief operating officer (COO), while Harris is the vice president of brand and creative.

Law360 broke the news on August 8, and the story has been circulating in DeLorean fan forums and Facebook groups ever since. Thanks to a copy of the lawsuit that you can see in this article, we learn Karma Automotive’s version of everything that happened.

According to that automaker, DeLorean Motor Company approached Karma in 2020 to create an electric version of the DMC DeLorean. That was something DeLorean said it would try to do in January 2021 without disclosing the partner it had chosen to get the job done.

The company explained at the time that it had tried to make a combustion-engined version of the famous car with the spare parts it bought from the original DeLorean Motor Company. It was just waiting for the “Low Volume Motor Vehicle Manufacturers Act” to be implemented by the National Highway Traffic Safety Administration (NHTSA). Still, the safety agency took years to do so. When it finally did, the chosen engine would have failed to comply with emission regulations.

In other words, the Texan company only disclosed the idea of building an electric DeLorean when it was already discussing this possibility with Karma. The famous stainless steel body would be installed over Karma’s electric platform, creating a modern version of the classic car – almost like a restomod.

In the lawsuit, Karma said the deal would drive both companies into the future. That is why the idea was called Project 88: it was a reference to the speed the DeLorean had to reach before traveling in time in the movie “Back to the Future.” Karma assigned the project to De Vries, Beetz, Yuan, and Harris.

The California-based automaker says in the lawsuit that these four executives apparently “grew dissatisfied with Karma’s efforts to make Project 88 more detailed and viable.” On December 22, 2020, Yuan wrote to De Vries that they should “start to negotiate on our own” because he didn’t think the project would live if they continued to “operate like this.” Karma accused them of wanting to “seize the business opportunity for themselves.”

These conversations continued until De Vries, Yuan, Beetz, and Harris founded Reimagined Automotive LLC on February 1, 2021, in Nevada. On February 25, 2021, the company applied to do business in California. Reimagined Automotive is being sued as well as DeLorean Motors Reimagined LLC, created on November 30, 2021, in Texas, by Reimagined Automotive and DeLorean Motor Company.

Karma mentions email messages to prove the executives were discussing the steps to take Project 88 while they were still its employees. According to the lawsuit, De Vries sent a slide deck from his Karma email on June 13, 2021, to Beetz’s and Yuan’s Reimagined Automotive email addresses. This PowerPoint file listed De Vries, Beetz, and Yuan as founders of Reimagined. The company’s registration page confirms they are the three officers listed for the entity. Karma must have the email files to corroborate what it says.

The lawsuit states that on August 3, 2021, Beetz sent another PowerPoint file to his Gmail address that “contained Karma’s Trade Secrets, including specifications for ‘Performance’ and ‘Attributes’ for the proposed joint venture with DMC, such as information about the battery, electronic differential slippery (or ‘EDS’), charging the battery (including charge time and range), body structure, front suspension, rear suspension, wheels, active systems, advanced driver assistance systems (or ‘ADAS’), and vehicle dimensions (wheelbase, width, front overhang, rear overhang, heel to ground, ground clearance, height, front wheel to heel, cowl height, and so forth).”

De Vries resigned from Karma on July 12, 2021, rescinded this resignation on July 16, 2021, and resigned again on August 29, 2021. Yuan, Harris, and Beetz continued to work for Karma until February 2022 and officially joined DeLorean Motors Reimagined soon after that.

Karma’s lawsuit presents 13 counts against the executives and the companies. It claims that the four executives breached their contractual obligations with the company and committed fraud, which led to damages. It also accuses them of stealing the business opportunity it would have with DeLorean Motor Company. On top of that, it says the former executives stole and are using its trade secrets.

De Vries sent a letter to DeLorean stakeholders calling the lawsuit a “baseless litigation.” That would be the case because the main arguments are related to a “low-volume replica of the classic DMC-12 automobile.” Calling that car a replica may be adequate if you think it was supposed to be electric. However, DMC used to call it a continuation series: it would have parts bought from the original carmaker and be produced by the company with the brand’s trademarks.

In the letter, the former Karma executive said that the project died because of “Karma’s inability to fund or produce deliverables necessary to even move forward talks with DMC.” He also stated that Alpha5 “has a very specific, unique DeLorean lineage that has no relation to Karma Automotive from a design, engineering, supply chain or manufacturing perspective.”

Karma does highlight Project 88 in the lawsuit. However, the petition shows it will focus on how DeLorean Motors Reimagined and its executives used the information to attract investors such as Anthony Anstead and Robert Olejar to the company. Although these people are named in the lawsuit, we have no idea if they have invested in DeLorean Motors Reimagined. De Vries and its partners are yet to disclose who is funding the Alpha5, which has an expensive Italdesign project.

Even if the “blueprints, specifications, and other design information for the Karma ‘skateboard’” do not make it into the Alpha5 as De Vries says they won’t, Karma may argue that its trade secrets helped DeLorean Motors Reimagined establish itself. De Vries said in the letter that they are limited in the information they can share right now. However, they are moving forward with the plans and do not anticipate any delays related to the lawsuit.

That’s pretty optimistic. Unless DeLorean Motors Reimagined already has financial reserves for the monetary blow a verdict against it could cause, the company could face the same fate as the original one if judges rule that Karma is right. Anticipating De Vries's arguments, his former employer said in the lawsuit that “Karma was fully able to take advantage of the business opportunity presented by Project 88” and that it had a “legitimate interest and expectancy” in the deal.

Curiously, DeLorean recently released information about something it calls “Alphas Club.” The company describes it as “a path to ownership of our iconic Alpha5.” When you click to learn more about that, you reach a page offering you a lifetime membership for $88, but there is no information on what that represents. That club and the Alpha5 official presentation in Pebble Beach on August 18 are sure to drive much less attention than the discussion this lawsuit promises to raise at the famous classic car event.

 Download attachment: Karma Automotive lawsuit against DeLorean Motor Reimagined and Reimagined Automotive (PDF)

 
 
 
 
 

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