Lumber Liquidators 2014 Annual Report Download - page 32

communications, the DOJ indicated that it is contemplating seeking criminal charges under the Lacey Act. We
expect to continue to communicate with the DOJ regarding its intentions and possible courses of action in this
matter. At this time, we do not have enough information to estimate a reasonably possible loss or range of
loss that may result from actions by the DOJ as a result of its investigation.
Kiken Matter
On or about November 26, 2013, Gregg Kiken (‘‘Kiken’’) filed a securities class action lawsuit, which
was subsequently amended, in the United States District Court for the Eastern District of Virginia against
us, our founder, our Chief Executive Officer and President, our Chief Financial Officer and our Chief
Merchandising Officer (collectively, the ‘‘Kiken Defendants’’). In the amended complaint, Kiken and an
additional plaintiff, Keith Foster (together with Kiken, the ‘‘Plaintiffs’’), allege that the Kiken Defendants
made material false and/or misleading statements and failed to disclose material adverse facts about our
business, operations and prospects. In particular, the Plaintiffs allege that the Kiken Defendants made material
misstatements or omissions related to our compliance with the federal Lacey Act and the chemical content of
certain of its wood products. In addition to attorneys’ fees and costs, the Plaintiffs seek to recover damages on
behalf of themselves and other persons who purchased or otherwise acquired our stock during the putative
class period at allegedly inflated prices and purportedly suffered financial harm as a result. We dispute the
Plaintiffs’ claims and intend to defend the matter vigorously. Given the uncertainty of litigation, the
preliminary stage of the case, insurance coverage issues and the legal standards that must be met for, among
other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or
range of loss that may result from this action.
TCPA Matter
On or about March 4, 2014, Richard Wade Architects, P.C. (‘‘RWA’’) filed a lawsuit in the United States
District Court for the Northern District of Illinois (the ‘‘RWA Lawsuit’’), which was subsequently amended,
alleging that we violated the Telephone Consumer Protection Act (‘‘TCPA’’), the Illinois Consumer Fraud Act
and the common law by sending an unsolicited facsimile advertisement to RWA. RWA seeks recourse on its
own behalf as well as other similarly situated parties that received unsolicited facsimile advertisements from
us. The TCPA provides for recovery of actual damages or five hundred dollars for each violation, whichever is
greater. If it is determined that a defendant acted willfully or knowingly in violating the TCPA, the amount of
the award may be increased by up to three times the amount provided above. Although we believe we have
valid defenses to the claims asserted, based upon the proceedings to date, at December 31, 2014, we have
accrued $300,000, including $25,000 in the fourth quarter of 2014, as our best estimate of the probable loss
that may result from this action.
Prop 65 Matter
On or about July 23, 2014, Global Community Monitor and Sunshine Park LLC (together, the ‘‘Prop 65
Plaintiffs’’) filed a lawsuit, which was subsequently amended, in the Superior Court of the State of California,
County of Alameda, against us. In the complaint, the Prop 65 Plaintiffs allege that we violated California’s
Safe Drinking Water and Toxic Enforcement Act of 1986, Health and Safety Code section 25249.5, et seq.
(‘‘Proposition 65’’). In particular, the Prop 65 Plaintiffs allege that we failed to warn consumers in California
that certain of our products (collectively, the ‘‘Products’’) emit formaldehyde in excess of the applicable safe
harbor limits. In addition to attorneys’ fees and costs, the Prop 65 Plaintiffs seek (i) equitable relief involving
the reformulation of the Products, additional warnings related to the Products, the issuance of notices to
certain of the purchasers of the Products (the ‘‘Customers’’) and the waiver of restocking fees for Customers
who return the Products and (ii) civil penalties in the amount of two thousand five hundred dollars per day for
each violation of Proposition 65. We dispute the claims of the Prop 65 Plaintiffs and intend to defend the
matter vigorously. Further, we have filed a counterclaim against the Prop 65 Plaintiffs for trade libel, unfair
business practices, intentional interference with a prospective business advantage, negligent interference with
economic relations, and declaratory relief. Given the uncertainty of litigation, the preliminary stage of the
case, and the legal standards that must be met for, among other things, success on the merits, we cannot
estimate the reasonably possible loss or range of loss that may result from this action.
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