Lumber Liquidators 2015 Annual Report Download - page 34

Pursuant to court order, plaintiffs filed a Representative Class Action Complaint in the Virginia Court on
September 11, 2015. The complaint challenged the labeling of our flooring products and asserted claims under
California, New York, Illinois, Florida and Texas law for fraudulent concealment, violation of consumer
protection statutes, negligent misrepresentation and declaratory relief, as well as a claim for breach of implied
warranty under California law. Thereafter, on September 18, 2015, plaintiffs filed the First Amended
Representative Class Action Complaint (‘‘FARC’’) in which they added implied warranty claims under
New York, Illinois, Florida and Texas law, as well as a federal warranty claim. We filed a motion to dismiss
and answered the FARC. The Virginia Court granted the motion as to claims for negligent misrepresentation
filed on behalf of certain plaintiffs, deferred as to class action allegations, and otherwise denied the motion.
We also filed a motion to strike nationwide class allegations and a motion to strike all claims of personal
injury made in class action complaints, on which the Virginia court has not yet ruled. Discovery is now
proceeding in this matter.
In addition, on or about April 1, 2015, Sarah Steele (‘‘Steele’’) filed a purported class action lawsuit in
the Ontario, Canada Superior Court of Justice against us. In the complaint, Steele’s allegations include
(i) strict liability, (ii) breach of implied warranty of fitness for a particular purpose, (iii) breach of implied
warranty of merchantability, (iv) fraud by concealment, (v) civil negligence, (vi) negligent misrepresentation,
and (vii) breach of implied covenant of good faith and fair dealing. Steele did not quantify any alleged
damages in her complaint but, in addition to attorneys’ fees and costs, Steele seeks (i) compensatory damages,
(ii) punitive, exemplary and aggravated damages, and (iii) statutory remedies related to our breach of various
laws including the Sales of Goods Act, the Consumer Protection Act, the Competition Act, the Consumer
Packaging and Labelling Act and the Canada Consumer Product Safety Act.
We dispute the plaintiffs’ claims and intend to defend these matters vigorously. Given the uncertainty of
litigation, the preliminary stage of these cases 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 these actions.
In connection with the Products Liability Cases, on April 22, 2015, five of our general and umbrella
liability insurers brought an action in the United States District Court for the Eastern District of Virginia, (the
‘‘Virginia Action’’). Through the Virginia Action, these insurers sought a declaratory judgment that they were
not obligated to defend or indemnify us in connection with the lawsuits asserted against us arising out of its
sale of laminate flooring sourced from China. One insurer also asserted a claim seeking reformation of one
policy to include a ‘‘total pollution exclusion’’ endorsement, contending that it was omitted from that policy as
the result of a mutual mistake.
On April 27, 2015, we filed a similar but more comprehensive action against nine of our general,
umbrella and excess insurers (including the five Plaintiffs in the Virginia Action) in the Circuit Court for
Dane County, Wisconsin (where four of the insurers are domiciled) (the ‘‘Wisconsin Action’’). In the
Wisconsin Action, we asserted breach of contract claims against its general liability insurers, alleging that
these insurers had wrongfully failed to defend us in connection with the Chinese-manufactured laminate
flooring claims. We also asserted breach of contract and bad faith claims against two of its general liability
insurers, arising out of the manner in which those insurers computed retrospective premiums under their
policies in connection with the Chinese-manufactured laminate flooring lawsuits. Finally, we sought
declaratory relief from the court as to its rights and the insurers’ responsibilities under their policies.
We moved to dismiss the Virginia Action, contending that the federal court should abstain from deciding
the case in favor of the more comprehensive state-court Wisconsin Action. Thereafter, the four insurers who
were not plaintiffs in the Virginia Action have filed motions to intervene as plaintiffs in the Virginia Action, in
an effort to make the Virginia Action ‘‘as comprehensive’’ as the Wisconsin Action. We have opposed the
motions to intervene. By order dated September 4, 2015, the court largely denied our motion to dismiss,
allowing the Virginia Action to proceed. While the court dismissed the reformation claim without prejudice, as
pled with insufficient specificity, the court granted leave to amend, and an amended complaint was filed on
September 15, 2015. On October 2, 2015, we stipulated to entry of judgment on the reformation claim, and
moved to dismiss the remaining claims in favor of proceeding in Wisconsin. The defendant-insurers in the
Wisconsin Action have filed motions to dismiss or stay the Wisconsin Action in favor of the Virginia Action.
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