Lumber Liquidators 2015 Annual Report Download - page 33

We dispute the claims of the Prop 65 Plaintiffs and intend to defend the matter vigorously. Our best
estimate of the probable loss that may result from this action is approximately $0.9 million, which we accrued
in the fourth quarter of 2015. We believe that there is at least a reasonable possibility that a loss may differ
from the amount accrued, but we are unable to estimate the amount at this time.
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 we sell is defective. On February 13, 2015, Gold filed an amended
complaint that added three additional plaintiffs (collectively with Gold, ‘‘Gold Plaintiffs’’). We moved to
dismiss the amended complaint. After holding a hearing and taking the motion under submission, the court
dismissed most of Gold Plaintiffs’ claims but allowed certain omission-based claims to proceed. Gold
Plaintiffs filed a Second Amended Complaint on December 16, 2015, and then a Third Amended Complaint
on January 20, 2016. In the Third Amended Complaint, Gold Plaintiffs allege that we have 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 a
class of individuals in the United States who purchased the Bamboo Product, as well as 7 state subclasses of
individuals who are residents of California, New York, Illinois, West Virginia, Minnesota, Pennsylvania, and
Florida, respectively, and purchased the Bamboo Product for personal, family, or household use. Gold
Plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs,
Gold Plaintiffs seek (i) a declaration that our actions violate the law and that we are financially responsible for
notifying all purported class members, (ii) injunctive relief requiring us to replace and/or repair all of the
Bamboo Product installed in structures owned by the purported class members, and (iii) a declaration that we
must disgorge, for the benefit of the purported classes, all or part of our profits received from the sale of the
allegedly defective Bamboo Product and/or to make full restitution to Gold Plaintiffs and the purported
class members.
We filed our answer to the Third Amended Complaint on February 3, 2016, and discovery in the matter
is now proceeding. We dispute the Gold Plaintiffs’ claims and intend to defend the matter vigorously. Given
the uncertainty of litigation, the preliminary stage of the case, 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.
Litigation Relating to Products Liability
Beginning on or about March 3, 2015, numerous purported class action cases were filed in various
U.S. federal district courts and state courts involving claims of excessive formaldehyde emissions from our
flooring products (collectively, the ‘‘Products Liability Cases’’). The plaintiffs in these various actions sought
recovery under a variety of theories, which although not identical are generally similar, including negligence,
breach of warranty, state consumer protection act violations, state unfair competition act violations, state
deceptive trade practices act violations, false advertising, fraudulent concealment, negligent misrepresentation,
failure to warn, unjust enrichment and similar claims. The purported classes consisted either or both of all
U.S. consumers or state consumers that purchased the subject products in certain time periods. The plaintiffs
also sought various forms of declaratory and injunctive relief and various damages, including restitution,
actual, compensatory, consequential, and, in certain cases, punitive damages, and interest, costs, and attorneys’
fees incurred by the plaintiffs and other purported class members in connection with the alleged claims, and
orders certifying the actions as class actions. Plaintiffs had not quantified damages sought from us in these
class actions.
On June 12, 2015, United States Judicial Panel on Multi District Litigation, (the ‘‘MDL Panel’’) issued
an order transferring and consolidating 10 of the related federal class actions to the United States District
Court for the Eastern District of Virginia (the ‘‘Virginia Court’’). In a series of subsequent conditional transfer
orders, the MDL Panel has transferred the other cases to the Virginia Court. We continue to seek to have any
newly filed cases transferred and consolidated in the Virginia Court and ultimately, we expect all federal class
actions involving formaldehyde allegations, including any newly filed cases, to be transferred and consolidated
in the Virginia Court. The consolidated case in the Virginia Court is captioned In re: Lumber Liquidators
Chinese-Manufactured Flooring Products Marketing, Sales, Practices and Products Liability Litigation.
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