COURT OF CHANCERY OF THE STATE OF DELAWARE L ORI W. W ILL V ICE C HANCELLOR L EONARD L. W ILLIAMS J USTICE C ENTER 500 N. K ING S TREET , S UITE 11400 W ILMINGTON , D ELAWARE 19801

- 3734 Date Submitted: February 28 , 202 2 Date Decided: March 7 , 202 2 Raymond J. DiCamillo , Esquire Kevin M. Gallagher , Esquire Alexander M. Krischik, Esquire Alena V. Smith, Esquire Richards, Layton & Finger P.A. 920 North King Street Wilmington, Delaware 19801 Gregory V. Varallo , Esquire Daniel E. Meyer, Esquire Bernstein Litowitz Berger & Grossmann LLP 500 Delaware Avenue, Suite 901 Wilmington, Delaware 19801

RE: In re Lordstown Motors Corp. Stockholders Litigation , CA. No. 2021

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- LWW Dear Counsel: The defendants have moved to stay this putative class action pending the
resolution of a federal securities class action. I decline to grant a stay. The McWane doctrine applies with less force in the context of representative litigation and is particularly inapt here

. A lthough the federal action is first

- filed and concerns and
the same business combination , the parties, claims, and remedy sought are different

. Perhaps more importantly , this case raises emerging issues of Delaware law.
E stablished doctrines of fiduciary duty law are, of course, far from novel. But this
court has had occasion to apply these principles in the context of special purposeC.A. No. 2021

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March 7, 2022 Page 2 of 13 acquisition compan ies and stockholder redemption right s just once

— in a decision rendered two months ago . Th is court’s essential role of provid ing guidance in developing area s of our law would be impaired if the court were to denude its jurisdiction because a federal securitie s action resting on similar facts was filed first.
I. RELEVANT BACKGROUND On October 23, 2020, Lordstown Motors Corp. (“Legacy LMC”) completed a business combination with special purpose acquisition company DiamondPeak Holding Corp. (“DiamondPeak,” and, after the combination, “ Lordstown ” ). 1
Disclosures issued in connection with the transaction indicated that Lordstown
would have a first

- mover advantage in the burgeoning electric truck market and that Lordstown had a large and growing backlog of truck orders. 2 On March 12, 2021, an analyst report was published that purported to identify problems faced by
Lordstown. 3 A drop in Lordstown’s stock price followed. 4 Litigation followed, to say the le as t

.

1 Verified Class Action Compl. (“Compl.”) ¶ ¶ 6, 13 (Dkt. 1).
2 See i d. ¶¶ 5

- 6.
3 Id. ¶¶ 102

- 03

. 4 See Defs.’ Mot. to Stay Ex. A (“Securities Compl.”) ¶¶ 20

- 29 (Dkt. 15).C.A. No. 2021

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March 7, 2022 Page 3 of 13 S tarting in March 2021, multiple federal securities class actions were filed in
the United States District Court for the Northern District of Ohio. 5 The cases were consolidated in June 2021 (the “ Securities Action”)

. 6 The defendants named in the
Securities Action complaint are Lordstown, the Lordstown subsidiary that is the
continuation of Legacy LMC , certain of Lordstown and Legacy LMC ’ s current and former officers, and Lordstown director David Hamamoto

. 7 Th e complaint asserts various violations of the Securities Act of 1933 and Securities Exchange Act of
1934

. 8 The claims are brought on behalf of a putative class of persons and entities who “(a) purchased or otherwise acquired [Lordstown’s] Class A Common
Stock

. . . publicly traded warrants . . . or any publicly traded option to purchase or sell [Lordstown’s] Class A Common Stock, from August 3, 2020, through July 2,
2021 . . . and/or (b) held [Lordstown’s] Class A Common Stock as of September 21,
2020.” 9

5 Defs.’ Mot. to Stay ¶ 10.
6 See In re Lordstown Motors Corp. Sec. Litig. , No. 4:21

- cv - 00616 (PAG) (N.D. Ohio).
7 Securities Compl

. ¶¶ 51

- 57

. Specifically, th at complaint names as defendants former Legacy LMC ( and later Lordstown) officers Caimin Flannery, Darren Post, and Rich Schmidt, and Lordstown officer Shane Brown

. Id. ; see Compl. ¶ 22

. 8 Securities Compl . ¶¶ 451

- 90.
9 Id. ¶ 442.C.A. No. 2021

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March 7, 2022 Page 4 of 13 Related derivative actions were also filed in the United States District Court for the District of Delaware, 10 the Northern District of Ohio, 11 and in this court. 12
The present action (the “Action”) was brought after two Lordstown (previously DiamondPeak) stockholders obtained documents pursuant to 8 Del. C. § 220

. 13 Their class action complaints were filed in this court on December 8 and December 13, 2021 and have been consolidated

. 14 The plaintiffs’ claims are brought on behalf of a putative class of “all record and beneficial holders of [DiamondPeak] common stock who continuously held such stock between the [transaction’s] Record Date of September 21, 2020 and the closing of the de

- SPAC Acquisition on October 23, 2020.” 15 The plaintiffs’ Verified Class Action Complaint (the “Complaint) advances

one claim against Hamamoto and four other former members of the DiamondPeak
Board 16 and another claim against the “Controller Defendants”

— defined as

10 In re Lordstown Motors Corp. S’holder Deri v. Litig. , No. 21

- cv - 00604 (D. Del.).
11 Thai v. Burns , No. 4:21

- cv - 01267 (N.D. Ohio). That action has been stayed pending the resolution of the Securities Action. See Defs.’ Mot. to Stay ¶ 16.
12 Cormier v. Burns , C.A. No. 2021

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- LWW (Del. Ch.)

. 13 Compl. ¶¶ 1 5

- 16.
14 See Dkt. 1; Amin v. Hamamoto , C.A. No. 2021

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- LWW (Dkts. 1, 44).
15 Compl. ¶ 148.
16 Id . ¶¶ 21

- 26, 158

- 63. Those individuals are Mark Walsh, Andrew Richardson, Steven Hash, and Judith Hannaway

.C.A. No. 2021

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March 7, 2022 Page 5 of 13 Diamond Peak Sponsor LLC and two of the former directors

. 17 I previously
described those claims as follows:

The plaintiff [s] assert [] that the directors of DiamondPeak breached their fiduciary duties by failing to disclose certain information about [ Legacy LMC ’ s ] purchase orders and production timeline. The plaintiff [s] further allege [] that DiamondPeak’s controlling stockholders acted t o advance their own interests by pursuing the transaction with Legacy LMC to the detriment of minority stockholders. The putative class of then

- DiamondPeak stockholders were purportedly harmed by not exercising their redemption rights. 18 On January 10 and 18, 2022, the defendants filed one

- page motions to dismiss pursuant to Court of Chancery Rules 12(b)(6) and 23.1. 19 On January 19, 2022, t he defendants filed a Motion to Stay this Action pending the resolution of the Securities
Action. 20 I heard argument on the Motion to Stay on February 28 , 2022. 21
II. LEGAL ANALYSIS The defendants seek to stay this Action pending the resolution of the Securities Action, relying on McWane Cast Iron Pipe Corp. v. McDowell Wellman

17 Id. ¶¶ 28, 164

- 71.
18 In re Lordstown Motors Corp. S’holders Litig. , 2022 WL 601120 , at *2 (Del. Ch. Feb. 28, 2022).
19 Dkts. 11, 14.
20 Dkt. 20.
21 Dkt. 43.C.A. No. 2021

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March 7, 2022 Page 6 of 13 Engineering Corp. and its progeny. 22 Under the McWane doctrine, the court’s discretion to grant a stay should be freely exercised where “there is a prior action pending elsewhere, in a court capable of doing prompt and complete justice, involving the same parties and the same issu es.” 23 “ [ T ] hese concepts are impelled by considerations of comity and the necessities of an orderly and efficient administration of justice.” 24 The defendants contend that allowing the Action to proceed in parallel with
the Securities Action would tax the resources of th e court and the parties. They
further assert that the plaintiffs here seek to represent a subset of the stockholder class represented in the Securities Action and that the breach of fiduciary duty claims
in this Action are premised upon the same statemen ts alleged to be misleading in the
Securities Action. 25 In response, the plaintiffs note that the claims in this Action involve novel
issues of Delaware law that are not implicated in the Securities Action. They further argue that, regardless, none of the McWane factors support staying the Action. 26

22 263 A.2d 281 (Del. 1970).
23 Id. at 283.
24 Id.
25 See Defs

. ’ Mot. to Stay ¶¶ 1, 21

- 22.
26 See Pls.’ Opp’n to Def s. ’ Mot. to Stay (“Pls.’ Opp’n”) ¶¶ 7

- 10 (Dkt. 34).C.A. No. 2021

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March 7, 2022 Page 7 of 13 A McWane analysis is an imperfect method to guide my assessment of the defendants’ motion. 27 “[T]his court has proceeded cautiously when facing the question of whether to defer to a first

- filed representative action and has given much less weight to first

- filed status than is required in the non

- representative action
context.” 28 In the represen tative litigation setting, the court’s “paramount interest” is to ensure that “stockholders receive ‘fair and consistent enforcement of their rights under the law governing the corporation.’” 29 Here, the fundamental question is whether this court’s inter est in resolving corporate governance issues under Delaware law prevails over considerations of comity and practicality. This Action concerns allegations that the defendants breached their fiduciary duties of loyalty and impaired the exercise of stock holders’ redemption rights in the context of a de

- SPAC transaction. Th ose claim s raise “novel issues” akin to those that this court was presented with in a matter of first

27 Biondi v. Scrush y , 820 A.2d 1148, 115 0 (Del. Ch. 2003 ) (explaining that “the McWane doctrine does not apply with full force” in representative actions).
28 Id. a t 115 9 ; Donald J. Wolfe & Michael A. Pittenger, Corporate and Commercial Practice in the Delaware Court of Chancery § 5.01 (2021) (observing that “the Court of Chancery tends to afford decidedly less deference” to the McWane factors when considering competing stockholder representative suits).
29 Brand in v. Deason , 941 A.2d 1020, 1024 (Del. Ch. 2007) (quoting In re Topps Co. S ’ holders Litig ., 924 A.2d 951, 953 (Del. Ch. 2007)).C.A. No. 2021

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March 7, 2022 Page 8 of 13 impression earlier this year. 30 The Court of Chancery has “long been cha ry” about deferring to a first

- filed action pending elsewhere “when a case involves important questions of our law in an emerging area.” 31
None of the remaining factors appropriately considered under McWane outweigh that vital interest. The parties in t his Action and the Securities Action differ significantly. Although these actions have facts in common, the issues presented are distinct. And t he claims brought here are not a simple repackaging of
securities claims with a Delaware law label. To start, the Securities Action names only o ne of the Action’s defendants. The defendants point to the overlap in defendants here and in the related derivative
actions (though t hey do not seek a stay in deference to those cases) to support their position that this Action should not move forward

. 32 But

— insofar as the d erivative

a ctions are even relevant to whether a stay in deference to the Securities Action is appropriate

—

those cases seek to recover on behalf of Lordstown while this action

30 See In re MultiPlan Corp. S’holders Litig. , --- A.3d

--- , 2022 WL 24060 , at *1 (Del. Ch. Jan. 3, 2022) (stating that, until that decision, “Delaware courts ha[d] not previously had an opportunity to consider the application of our law in the SPAC context”).
31 In re Topps , 924 A.2d at 960; see Brandin , 941 A.2d at 102 4

- 2 5 (finding that the presence of novel , complicated, and unsettled issues of Delaware law “strongly favor[ed]” denial of a motion to stay); Ryan v. Gifford , 918 A.2d 341, 349

- 50 (Del. Ch. 2007) ( noting that Delaware courts have subst antial interests in resolving cases “where the law is novel” ).
32 See Defs.’ Mot. to Stay ¶¶ 28

- 31.C.A. No. 2021

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March 7, 2022 Page 9 of 13 is brought on behalf of a putative class of former DiamondPeak stockholders. It is not apparent to me why this court would stand down from hearing class action claims
in deference to deriva tive actions that might themselves defer to prior

- filed securities
claims.
The putative class in the Securities Action is also not equivalent to the class the plaintiffs seek to represent in this Action

. The class proposed in the Securities
Action includes stockholders who “purchased” Lordstown publicly traded warrants, units, or option s to purchase or sell Class A shares from August 3, 2020 through July 2, 2021 “and/or . . . held” Class A shares as of September 21, 2020. 33 This Action , by contrast , is brought on behalf of a putative class of stockholder s who “continuously held” Lordstown common stock “between the Record Date of September 21, 2020 and the closing of the de

- SPAC Acquisition on October 23,
2020. ” 34 Members of the stockholder clas s in this Action also fall within the Securities Action class (which is not unusual in parallel actions )

. But, as the plaintiffs point out, any recovery for the earlier investors included in the Securities

33 Securities Compl. ¶ 442

. 34 Compl. ¶ 148.C.A. No. 2021

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March 7, 2022 Page 10 of 13 Action class

— who are the focus of this A ction

— could be affected by the breadth of that class period. 35
The issues in the actions coincide insofar as the disclosures in DiamondPeak’s proxy statement require examination. They are otherwise fundamentally different.
The crux of the Securities Action rests on whether Lords town ’s stock price was “artificial ly inflated” by false and misleading disclosures. 36 The plaintiffs’ Complaint, by contrast, alleges that the defendants harmed the putative class members by impairing the informed exercise of their redemption rights to the
defend ants ’ benefit

. 37 The se are quintessential Delaware concerns

— not, as the defendants argue, a rebranding of securities claims about material misstatements as fiduciary duty claims. That reality renders the cases relied upon by the defendants inapposite. In Derdiger v. Tallman , a lead plaintiff in a consolidated federal securities action was appointed to “p ursue all available causes of action against all possible defendants

35 The plaintiffs also contend that the proposed Securities Action class is under

- inclusive of the class here because it would not include investors who purchased shares before August 3, 2020. The Securities Action class, however , also includes investors who “held” Class A shares as of the September 21, 2020 record date

— which is the beginning of the plaintiffs’ proposed class. Compare Securities Compl. ¶ 442 , with Compl. ¶ 148.
36 E.g. , Securities Compl. ¶¶ 114, 246, 432.
37 Compl. ¶¶ 161

- 63, 168

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March 7, 2022 Page 11 of 13 under all available legal theories

. ” 38 A class action complaint was subsequently filed in the Court of Chancery, “seeking redress for . . . allegedly false statements made
in connection with [a] merger.” 39 The court deferred to the federal action because the cases “share[d] the same core facts, legal claims, and alleged damages.” 40
In Schnell v. Porta System s Corp. , a federal securities complaint alleged “that the defendants engaged in a conspiracy to conceal adverse material information, to defraud purchasers, and to maintain an artificially high market price” for a company’s stock

. 41 A class action complaint filed in Delaware three weeks later likewise alleged that the defendants “b re ached their fiduciary duties owed to the shareholders in that they made material misrepresentations and failed to correct those material misrepresentations with subsequent disclosures ” and that those actions “amounted to fraud.” 42 In staying the Delaware a ction, the court explained that “while the claims in the two courts may be stated in different ways, they [were] actually the same claims.” 43

38 773 A.2d 1005 , 1010 (Del. Ch. 2000) (emphasis in original)

. 39 Id. at 1009.
40 Id. at 1016.
41 1994 WL 148276, at *4 (Del. Ch. Apr. 12, 1994).
42 Id.
43 Id.C.A. No. 2021

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March 7, 2022 Page 12 of 13 In this instance , the distinction between the federal claims pleaded in the
Securities Action and the plaintiffs’ Delaware law fiduciary duty claims is not an “artificial” one. 44 Without considering the viability of the plaintiffs’ claims, even a superficial review of the Complaint makes plain that the plaintiffs are pursuing more
than a na rrow disclosure claim. 45 The claims advance d “invoke [] both the duty of loyalty and disclosure duties implicating director loyalty.” 46 They are not “redundant or duplicative of” 47 the first

- filed securities claims. 48
The gap between the claims here and those in the Securities Action widens when the potential remedies are considered. The defendants argue that any monetary damages that could be awarded in this Action would be addressed by the relief sought in the Securities Action. But the bas e s for measuring the relief (if any) would be entirely different. The Securities Action seeks to recover damages for losses allegedly caused by the decline in Lordstown’s stock price from a class period high

44 Derdiger , 773 A.2d at 1016

- 17 (describing the “forceful[] rejection” of an alleged distinction between state and federal “misdisclosure claims” in Schnell v. Porta Systems Corp. )

. 45 E .g. , Compl. ¶¶ 97, 123

- 25 ; see MultiPlan , 2022 WL 24060, at *8

. 46 MultiPlan , 2022 WL 24060, at *8.
47 Derdiger , 773 A.2d at 1018.
48 It bears mentioning that the defendants have also moved to stay the Cormier action. Cormier , C .A. No. 2021

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- filed derivative action. See id.C.A. No. 2021

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March 7, 2022 Page 13 of 13 of $31.57

. 49 T he plaintiffs’ attempted recovery in this Action, by contrast, could turn on the $10 redemption price (plus interest) re lative to the value the class received in
the de

- SPAC transaction

. 50
III. CONCLUSION Delaware has a substantial interest in addressing th e issues presented by this case. And there is limited overlap

— in terms of the parties, issues, and potential
remedies

—

between this Action and the Securities Action. The defendants’ Motion to Stay is denied. Sincerely yours , /s/ Lori W. Will Lori W. Will Vice Chancellor

49 See Securities Compl. ¶ 434.
50 See Compl. ¶ 147.