Lumber Liquidators 2015 Annual Report Download - page 85

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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)
The Company 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. The Company has opposed
the motions to intervene. By order dated September 4, 2015, the court largely denied the Company’s 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, the Company 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. The defendants in the Wisconsin Action have also moved for protective
orders seeking to forestall their obligation to respond to discovery requests that the Company promulgated in
the Wisconsin Action.
On February 1, 2016, the Wisconsin court stayed the Wisconsin Action in favor of the proceedings in
Virginia. On February 5, 2016, the Company moved for reconsideration and that motion remains pending.
On February 9, 2016, the Virginia court denied its motion to dismiss. The Virginia court also granted the
remaining insurers’ motion to intervene, but stayed proceedings on their excess and umbrella insurance
policies pending resolution of the primary insurers’ claims.
Litigation Relating to Abrasion Claims
On May 20, 2015, a purported class action titled Abad v. Lumber Liquidators, Inc. was filed in the
United States District Court for the Central District of California and two amended complaints were
subsequently filed. In the Second Amended Complaint (‘‘SAC’’), the plaintiffs (collectively, the ‘‘Abrasion
Plaintiffs’’) seek to certify a national class composed of ‘‘All Persons in the United States who purchased
Defendant’s Dream Home brand laminate flooring products from Defendant for personal use in their homes,’’
or, in the alternative, 32 statewide classes from California, North Carolina, Texas, New Jersey, Florida,
Nevada, Connecticut, Iowa, Minnesota, Nebraska, Georgia, Maryland, Massachusetts, New York,
West Virginia, Kansas, Kentucky, Mississippi, Pennsylvania, South Carolina, Tennessee, Virginia, Washington,
Maine, Michigan, Missouri, Ohio, Oklahoma, Wisconsin, Indiana, Illinois and Louisiana. The SAC alleges
violations of each of these states’ consumer protections statutes and the federal Magnuson-Moss Warranty Act,
as well as breach of implied warranty and fraudulent concealment. The Abrasion Plaintiffs did not quantify
any alleged damages in the SAC but, in addition to attorneys’ fees and costs, seek an order certifying the
action as a class action, an order adopting the Abrasion Plaintiffs’ class definitions and finding that the
Abrasion Plaintiffs are their proper representatives, an order appointing their counsel as class counsel,
injunctive relief prohibiting the Company from continuing to advertise and/or sell laminate flooring products
with false abrasion class ratings, restitution of all monies it received from the Abrasion Plaintiffs and class
members, damages (actual, compensatory, and consequential) and punitive damages.
The Company filed a motion to dismiss the SAC and the Abrasion Plaintiffs filed a motion for leave to
file a corrected SAC. The Company’s motion was subsequently granted in part and denied in part. The court
also denied the Abrasion Plaintiffs’ motion for leave to file a corrected SAC. The Abrasion Plaintiffs have
until March 1, 2016, to file a Third Amended Complaint. The Company disputes the Abrasion Plaintiffs’
claims and intends to defend these matters vigorously. Given the uncertainty of litigation, the preliminary
stage of these cases, 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 these actions.
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