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Commitments and contingencies
9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and contingencies Commitments and contingencies
Legal Proceedings
The Company is and may be subject to various claims and legal proceedings in the ordinary course of its business. Due to the inherent risks and uncertainties of the litigation process, we cannot predict the final outcome or timing of claims or legal proceedings. The Company records provisions for such claims when an outflow of resources is considered probable and a reliable estimate can be made. No such provisions have been recorded by the Company.
Shareholder Litigation relating to the October 23, 2023 Announcement of Rochester Hub Construction Pause
Three shareholder lawsuits were launched following the Company’s announcement on October 23, 2023 that it would be pausing construction on the Rochester Hub project, described below.
On November 8, 2023, a putative federal securities class action lawsuit was filed in the U.S. District Court for the Southern District of New York against the Company, and certain of its officers and directors, on behalf of a proposed class of purchasers of the Company’s common shares during the period from June 14, 2022 through October 23, 2023. On March 15, 2024, the lead plaintiff filed an amended complaint on behalf of a proposed class of purchasers of the Company’s common shares during the period from January 27, 2022 through November 13, 2023. See Hubiack v. Li-Cycle Holdings Corp., et al., 1:23-cv-09894 (S.D.N.Y.) (the “Hubiack Securities Action”). The amended complaint asserts claims under Sections 10(b) and 20(a) of the Exchange Act, and alleges that the defendants issued false and misleading statements regarding the Rochester Hub’s construction budget, costs and timeline, which were allegedly revealed beginning on October 23, 2023, when the Company announced that it would pause construction on the Rochester Hub project. The complaint seeks compensatory damages and an award of costs. On April 12, 2024, the defendants moved to dismiss the amended complaint in its entirety. On June 10, 2024, the court granted the motion to dismiss in full and with prejudice. On July 9, 2024, the lead plaintiff filed a notice of appeal. In view of the uncertainties inherent in litigation, we do not express a judgment as to the outcome of this litigation.
On November 27, 2023, a putative Ontario securities class action claim was filed in the Ontario Superior Court of Justice against the Company and its CEO. The claim was amended on February 8, 2024, again on May 6, 2024, and once more on August 26, 2024 as a result of the defendants' settled motion (described below). The claim is on behalf of a proposed class of purchasers of the Company’s common shares who acquired their shares during the period from February 27, 2023 through November 10, 2023. The claim, which is captioned as Wyshynski v. Li-Cycle Holdings Corp. et al., Court File No. CV-23-00710373-00CP, alleges common law secondary market misrepresentations. It also seeks an oppression remedy under s. 248 of the Ontario Business Corporations Act, based primarily on allegations of misconduct of senior management. The Wyshynski claim alleges that the Company’s public disclosures through the class period contained misrepresentations because they omitted material facts regarding the cost of the Rochester Hub project and the availability of financing. The Wyshynski claim alleges that the purported
misrepresentations were publicly corrected on (i) October 23, 2023, when the Company announced that it would pause construction on the Rochester Hub project; and (ii) November 13, 2023, with the release of the Company’s Q3 2023 earnings report. The putative class includes all Canadian resident beneficial owners who acquired Li-Cycle common shares during the class period and who held some or all of those common shares until after the release of at least one of the alleged corrective disclosures. The claim seeks compensatory damages and an award of costs, along with the appointment of a third party monitor. On April 5, 2024, the defendants moved to stay the action on the basis that New York is the more appropriate forum for the litigation. The defendants agreed to settle the motion on August 1, 2024, in exchange for certain concessions from the plaintiff which resulted in narrowing of the claims and the proposed class. The plaintiff agreed to abandon their claims under the Ontario Securities Act and constrain the class to only the Canadian resident beneficial owners of the Company's shares. In view of the uncertainties inherent in litigation, we do not express a judgment as to the outcome of this litigation.
On December 4, 2023, a putative shareholder derivative action was filed in the Supreme Court of the State of New York, Monroe County, purportedly on behalf of the Company (as nominal defendant) against certain of the Company’s current and/or former officers and directors. The action, which is captioned as Nieves v. Johnston, et. al., Index No. E2023014542 (N.Y. Sup. Ct.), principally concerns the same alleged misstatements or omissions at issue in the Hubiack Securities Action, and asserts common law claims for breach of fiduciary duty, waste, unjust enrichment, and gross mismanagement. The action seeks to recover unspecified compensatory damages on behalf of the Company, an award of costs and expenses and other relief. On February 29, 2024, the parties agreed to stay the action pending resolution of the Hubiack Securities Action. In view of the uncertainties inherent in litigation, we do not express a judgment as to the outcome of this litigation.
Subrogation Liability Claim
On or around January 2, 2024, the Company received a notice of a subrogation liability claim by an insurance company on behalf of one of the other tenants of the New York Spoke’s warehouse. The claim relates to a small fire which occurred at the building on December 23, 2023, involving lithium-ion batteries being stored at the warehouse. The claimant has not provided details of potential damages and the Company’s general liability insurer is providing coverage for this claim, including defense of the claim.
Commercial Claim – Pike Conductor DEV 1, LLC
On January 17, 2024, Pike Conductor DEV 1, LLC (“Pike”) sent the Company a purported notice of default claiming that the Company failed to pay certain amounts in connection with leasing a warehouse and administrative building related to the Rochester Hub, and failed to clear certain liens levied on the property.
On January 26, 2024, the Company filed a lawsuit in New York State Court in Monroe County, seeking an order requiring Pike to amend and restate the agreement as a ground lease and to pay damages of at least $39.0 million - $53.0 million. The Company also sought an order barring Pike from seeking to, among other things, terminate the agreement or evict the Company from the property while the lawsuit is pending. Under the agreement between the parties, Pike agreed to construct the property and lease it to the Company. The Company agreed to finance up to $58.6 million of Pike’s construction costs, including $14.5 million in tenant’s improvements. Based on the agreement between the parties, if, by November 1, 2023, Pike had not repaid the pre-financing costs, less the tenant improvements, then the parties would restate the agreement as a ground lease and the Company would own the Warehouse. To date, the Company has funded approximately $53.5 million of the construction costs.
Following certain court-ordered settlement conferences, the parties reached a settlement. The parties entered into an Amended and Restated Ground Sublease Agreement date May 31, 2024 that provides for, among other things, the resolution of the lawsuit. Following the delivery of certain releases and satisfactions of mechanic’s liens, the parties filed a Stipulation of Discontinuance on June 24, 2024.
Dispute with MasTec, its Subcontractors and other Contractors Regarding Rochester Hub Construction Contract
On April 9, 2024, Mastec Industrial Corp. (“MasTec”) commenced (i) arbitration proceedings against the Company’s subsidiary, Li-Cycle North America Hub, Inc., under the terms of the construction contract for the Rochester Hub project, and (ii) a foreclosure action in the Supreme Court, County of Monroe, New York. The arbitration proceedings are being conducted with the American Arbitration Association and seek recovery of $48.7 million allegedly due under the construction contract for the Rochester Hub project, plus interest, fees, costs and expenses. The Company is defending its interests and has made certain counter-claims against MasTec. Amounts owed, if any, are expected to be determined in the arbitration, and Li-Cycle intends to file a motion for a stay of the foreclosure action pending determination of the arbitration. Additionally, on July 22, 2024, MasTec North America Inc. (an affiliate of MasTec) commenced a separate foreclosure action on behalf of several subcontractors from whom it has taken assignments. Li-Cycle will seek to consolidate this foreclosure action into the already pending MasTec foreclosure action. For reporting purposes, the amount claimed in the arbitration proceedings has been reflected in the Company’s accounts payable.
Contractual Obligations and Commitments
The following table summarizes Li-Cycle’s contractual obligations and other commitments for cash expenditures as of September 30, 2024, and the years in which these obligations are due:
$ millions, undiscountedPayment due by period
Contractual ObligationsTotalLess than1 - 3 years3 - 5 yearsMore than
1 year5 years
Accounts payable and accrued liabilities$132.6$129.3$3.3$$
Lease liabilities221.813.613.436.6158.2
Restoration provisions1.60.20.31.1
Convertible debt principal375.0100.0275.0
Convertible debt interest234.163.7170.4
Total as of September 30, 2024$965.1 $143.1 $180.4 $482.3 $159.3 
As of September 30, 2024, $5.9 million in committed purchase orders or agreements for equipment and services existed, compared to $8.3 million as of December 31, 2023.