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Judge dismisses fraud lawsuit against battery recycler Li-Cycle

An image of the Li-Cycle brand is etched on the side of the company offices at its Eastman Business Park facility.
Max Schulte
Li-Cycle's company offices at the Eastman Business Park facility in Greece.

Battery recycler Li-Cycle has prevailed in a federal lawsuit claiming it misled shareholders and federal regulators about the company’s financial woes.

The company also settled two other claims in the past week involving contractors. In one case, the Canadian firm secured ownership of its Eastman Business Park warehouse — thus improving its ability to obtain financing.

Li-Cycle's business is breaking down old lithium-ion batteries and scrap into base materials for new batteries. Its sprawling Greece plant was a darling of local politicians touting economic development efforts — until construction abruptly stopped last fall.

Company officials later revealed the project was massively over budget, paused other construction, laid off staffers and reconfigured its operations and future growth plans.

Shareholders sued in November, claiming Li-Cycle's public statements about the budget and timeline were littered with false and misleading statements from the start.

They relied on accounts from the company’s former human resources director and others who recounted internal conversations and events that pointed to problems more than a year before the shutdown. A federal judge dismissed the lawsuit this week, finding the former staffers' claims were vague or speculative, and that shareholders failed to show company leaders knowingly made false or misleading statements.

“While ... this lawsuit is not without some arguable suggestion of fraud, the allegations fail to meet the applicable requirements necessary to transform speculation into legally cognizable claims,” read the opinion and U.S. District Court Judge Jed Rakoff.

The shareholders have 30 days to file a notice of appeal. Their attorney did not immediately respond to a request for comment.

In a statement, Li-Cycle CRO Ajay Kochhar cast the resolution of legal matters as “positive steps for the company as we continue to focus on completing our comprehensive review of the Rochester Hub go-forward plan and working closely with the (Department of Energy) on key technical, financial, and legal workstreams to advance toward definitive financing documentation required for a loan for gross proceeds of up to $375 million.”

Company officials told investors Tuesday that they do plan to re-start construction but provided no timeline or definitive path forward.

Brian Sharp is WXXI's investigations and enterprise editor. He also reports on business and development in the area. He has been covering Rochester since 2005. His journalism career spans nearly three decades.