Bankruptcy judge lets suit against former DesignLine leaders go forward

This file photo shows the former Charlotte headquarters for DesignLine, the defunct bus maker.
This file photo shows the former Charlotte headquarters for DesignLine, the defunct bus maker.

A U.S. bankruptcy court judge has denied a motion to dismiss a lawsuit that alleges former officials at defunct Charlotte bus maker DesignLine committed fraud against the company’s creditors and investors.

The bankruptcy trustee overseeing the liquidation of the company filed a wide-ranging suit in August 2015 against former company executives, alleging fraud, violations of racketeering statutes and breaches of fiduciary duty.

The suit brought by trustee Elaine Rudisill accused retired Air Force Gen. Buster Glosson, DesignLine’s former chairman, and his son, Brad Glosson, the company’s former CEO, of working to “pilfer assets” and “siphon monies” from the company, its creditors and its investors, according to the complaint.

The Glossons and others named in the suit have denied the allegations, and filed motions to dismiss all or parts of the claims in the suit.

U.S. bankruptcy judge Craig Whitley held a hearing on the case in February, and on July 15 he entered an order denying the motions, allowing the suit to move forward in federal bankruptcy court in Charlotte.

A group led by the Glossons bought DesignLine in 2006 and moved it to Charlotte from New Zealand, looking to capitalize on hybrid technology that promised lower emissions. DesignLine attracted high-profile investors such as former Gov. Jim Martin and businessman Cameron Harris. But over time, the company faced lawsuits and contract cancellations over late deliveries and performance problems, according to court documents.

DesignLine filed for bankruptcy protection in August 2013, and Rudisill has filed dozens of suits, including the one against the Glossons, that aim to recoup more money on behalf of the bankruptcy estate.

In his order, Whitley said, “The scope of these alleged nefarious actions is breathtaking as is the breadth of the action,” noting the complaint is 181 pages.

The arguments made by the defendants are “legion,” Whitley wrote, but in the end he said the court agreed with the arguments made by the trustee. The case now moves to the discovery phase, in which lawyers for the plaintiffs and defendants exchange evidence before a potential trial.

In his order, Whitley said he is not inclined to hear arguments on motions for summary judgment in the case “until the close of the discovery period,” which is set for Oct. 31.

Rudisill and an attorney for the trustee declined to comment. An attorney representing the Glossons and other defendants did not respond to a request for comment.

Rick Rothacker: 704-358-5170, @rickrothacker