ClearFlame Discrimination Case Continues

LINCOLN, Neb. (DTN) -- A federal discrimination lawsuit will continue against the now-defunct ClearFlame Engine Technologies, as a federal judge last week denied the company's motion to dismiss.

The company that developed a technology that allowed diesel engines to burn ethanol is in the process of liquidating and ceasing operations.

The U.S. District Court for the Northern District of Illinois rejected claims made by ClearFlame that a company it formed just for the purposes of liquidation, should not be liable in the lawsuit filed by former ClearFlame Engineer Michael Kalagian.

The court, however, said Kalagian would need to provide more evidence in the case to prove that liability.

"Ultimately, Kalagian's complaint is somewhat speculative as to successor liability," the court said in its ruling on July 25, 2025.

"He'll need to show more as the case proceeds. New ClearFlame's answer and discovery will help clarify the relationship between the two companies and whether the successor liability doctrine ultimately applies."

To liquidate its operations, ClearFlame formed ClearFlame Technologies ABC, LLC.

Kalagian has alleged the company committed age and disability discrimination after he was released in August 2023 as part of an overall reduction in force by a total of 23 employees. Kalagian also alleges ClearFlame then hired someone younger to fill his vacant position.

"As to the notice factor, Kalagian sued ClearFlame in November 2024," the court said in its ruling.

"New ClearFlame didn't succeed ClearFlame until February 2025. Drawing inferences in Kalagian's favor, the court reasonably presumes that new ClearFlame had notice of this suit. And as Kalagian notes, 'Where the successor has notice of a predecessor's liability, there is a presumption in favor of finding successor liability.' New ClearFlame doesn't deny it had notice, asserting only that Kalagian didn't adequately allege that notice in his complaint."

Kalagian alleges in the lawsuit that ClearFlame continues to operate its business under the new company name.

The company said in a court document, however, that it has "discontinued its business," that it is engaged in "liquidating the assets, terminating assignor's commercial operations and otherwise winding down assignor's affairs," and is "unable to pay its debts in full."

Instead of filing for bankruptcy, court documents show ClearFlame is pursuing an "assignment for the benefit of creditors" under Illinois law. That is an alternative to formal bankruptcy proceedings allowed in the state.

As a result, the company said it plans to liquidate its assets and distribute the proceeds to its creditors.

In October 2020, ClearFlame announced the technology delivered 500 horsepower and more than 2,500 foot-pounds of torque, "while eliminating the need for additional aftertreatment such as selective catalytic reduction or diesel particulate filter systems."

During the 2020 National Ethanol Conference, now-former CEO B.J. Johnson told ethanol industry representatives the technology has the potential to create a large market for ethanol. He said even an optimistic 20% market penetration into the $231 billion heavy-duty diesel market would create 15 billion gallons of demand for ethanol per year.

In October 2021, ClearFlame announced John Deere was among several companies investing $17 million in the startup company developing a heavy-duty truck engine able to run on straight ethanol.

The funding was expected to enable commercialization of the company's engine technology for the long-haul trucking, agriculture and power generation sectors. The financing was led by Breakthrough Energy Ventures with participation from John Deere, commodity trader Mercuria and Clean Energy Ventures.

In March 2023, ClearFlame announced it had secured $30 million in investments from two repeat investors -- Mercuria Energy Group and Breakthrough Energy Ventures. The companies originally were part of a 2021 $17 million investment round secured by ClearFlame.

Read more on DTN:

"Ethanol Diesel Developer Faces Bankruptcy, Discrimination Lawsuit as CEO Leaves," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

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