Lumber Liquidators 2014 Annual Report Download - page 72

Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements
(amounts in thousands, except share data and per share amounts)
Note 10. Commitments and Contingencies − (continued)
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, the Company cannot estimate the reasonably possible loss or
range of loss that may result from this action.
Hallandale Matter
On or about September 17, 2014, the City of Hallandale Beach Police Officers’ and Firefighters’
Personnel Retirement Trust (‘‘Hallandale’’) filed a securities class action lawsuit in the United States District
Court for the Eastern District of Virginia against the Company, its Chief Executive Officer and President and
its Chief Financial Officer (collectively, the ‘‘Hallandale Defendants’’). In the complaint, Hallandale alleges
that the Hallandale Defendants made material false and/or misleading statements that caused losses to
investors. In particular, Hallandale alleges that the Hallandale Defendants made material misstatements or
omissions regarding the Company’s supply chain and inventory position. In addition to attorneys’ fees and
costs, Hallandale seeks to recover damages on behalf of itself and other persons who purchased or otherwise
acquired the Company’s stock during the putative class period at allegedly inflated prices and purportedly
suffered financial harm as a result. The Company disputes Hallandale’s claims and intends 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, the Company cannot estimate the reasonably possible loss or range of loss that may result from
this action.
Gold Matter
On or about December 8, 2014, Dana Gold (‘‘Gold’’) filed a purported class action lawsuit in the
United States District Court for the Northern District of California alleging that the Morning Star bamboo
flooring (the ‘‘Bamboo Product’’) that the Company sells is defective. On February 13, 2015, Gold filed an
amended complaint, which added three additional plaintiffs (collectively with Gold, ‘‘Gold Plaintiffs’’). Gold
Plaintiffs allege that the Company has engaged in unfair business practices and unfair competition by falsely
representing the quality and characteristics of the Bamboo Product and by concealing the Bamboo Product’s
defective nature. Gold Plaintiffs seek the certification of two separate classes: (i) individuals in the
United States who own homes or other structures where the Bamboo Product has been installed or where
Bamboo Product has been removed and replaced; and (ii) the same description but for owners of California
homes or structures only. In addition to attorneys’ fees and costs, Gold Plaintiffs seek (i) a declaration that the
Company is financially responsible for notifying all purported class members, (ii) injunctive relief requiring
the Company to replace and/or repair all of the Bamboo Product installed in structures owned by the
purported class members, and (iii) a declaration that the Company must disgorge, for the benefit of the
purported classes, all or part of its profits received from the sale of the defective Bamboo Product and/or to
make full restitution to Gold Plaintiffs and the purported class members. The Company disputes the Gold
Plaintiffs’ claims and intends 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, the Company cannot estimate the reasonably
possible loss or range of loss that may result from this action.
Balero Matter
On or about December 11, 2014, Joseph Michael Balero, Michael Ballerini and Lisa Miller (collectively,
the ‘‘Balero Plaintiffs’’) filed a purported class action lawsuit in the Superior Court of the State of California
for the County of Alameda alleging that the Company engaged in unlawful and fraudulent business practices
by selling certain products in California that do not comply with California’s Airborne Toxic Control Measure
to Reduce Formaldehyde Emissions from Composite Wood Products (the ‘‘CARB Standards’’) and by falsely
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