Lumber Liquidators 2015 Annual Report Download - page 81

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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)
additional deconstructive testing on certain finished products it obtained in March 2015, with certain of the
samples of the Company’s products exceeding the CARB limits for raw composite wood cores.
The Company has been fully cooperative with CARB as CARB continues to work on this matter by,
among other things, providing CARB with requested information related to the products CARB tested and
removing laminate flooring sourced from China from its stores in California. Based on discussions with
CARB, the Company’s best estimate of the probable loss that may result from this matter is approximately
$1,500, which the Company recorded in other current liabilities and selling, general and administrative
expenses in the fourth quarter of 2015. The Company believes that there is at least a reasonable possibility
that a loss greater than the amount accrued may be incurred, but the Company is unable to estimate the
amount at this time.
Securities Litigation Matter
On or about November 26, 2013, Gregg Kiken (‘‘Kiken’’) filed a securities class action lawsuit (the
‘‘Kiken Lawsuit’’), which was subsequently amended, in the United States District Court for the Eastern
District of Virginia against the Company, its founder, former Chief Executive Officer and President, former
Chief Financial Officer and former Chief Merchandising Officer (collectively, the ‘‘Kiken Defendants’’). 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 (the ‘‘Hallandale Lawsuit’’) in the
United States District Court for the Eastern District of Virginia against the Company, its former Chief
Executive Officer and President and its former Chief Financial Officer (collectively, the ‘‘Hallandale
Defendants,’’ and with the Kiken Defendants, the ‘‘Defendants’’). On March 23, 2015, the court consolidated
the Kiken Lawsuit with the Hallandale Lawsuit, appointed lead plaintiffs and lead counsel for the consolidated
action, and captioned the consolidated action as In re Lumber Liquidators Holdings, Inc. Securities Litigation.
The lead plaintiffs filed a consolidated amended complaint on April 22, 2015. The consolidated amended
complaint alleges that the Defendants made material false and/or misleading statements that caused losses to
investors. In particular, the lead plaintiffs allege that the Defendants made material misstatements or omissions
related to their compliance with the l Lacey Act, the chemical content of certain of their wood products, and
their supply chain and inventory position. The lead plaintiffs do not quantify any alleged damages in their
consolidated amended complaint but, in addition to attorneys’ fees and costs, they seek to recover damages on
behalf of themselves 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
Defendants moved to dismiss the consolidated amended complaint but, on December 21, 2015, the court
denied this motion. The Company disputes these claims and intends to defend the matter vigorously. Given
the uncertainty of litigation, the current status of the case, 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.
NW Bamboo Matter
On February 27, 2014, NW Bamboo Trim, Inc. (‘‘NWBT’’) filed suit in the Circuit Court of the City of
Richmond, Virginia against the Company and a supplier of bamboo trim products (the ‘‘Supplier’’). In its
complaint, NWBT alleges that (i) the Company breached a contract with NWBT by not purchasing certain
products from NWBT, (ii) the Company tortiously interfered with NWBT’s relationship with the Supplier, and
(iii) the Company and the Supplier conspired to harm NWBT’s business. The Company filed a motion seeking
to dismiss the claims, which was granted as it pertained to the breach of contract claim. The case then
proceeded on the two remaining causes of action.
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