Lumber Liquidators 2015 Annual Report Download - page 83

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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)
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 that added three additional plaintiffs (collectively with Gold, ‘‘Gold Plaintiffs’’). The
Company 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 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 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 the Company’s actions
violate the law and 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 allegedly defective
Bamboo Product and/or to make full restitution to Gold Plaintiffs and the purported class members.
The Company filed its answer to the Third Amended Complaint on February 3, 2016, and discovery in
the matter is now proceeding. 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, 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.
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 the
Company’s 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 the
Company 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. The Company continues to seek
to have any newly filed cases transferred and consolidated in the Virginia Court and ultimately, the Company
expects all federal class actions involving formaldehyde allegations, including any newly filed cases, to be
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