Seattle, WAIt’s a difficult decision: You bought flooring from Lumber Liquidators and discovered it was made in China, which explains why your air test indicates it has high levels of formaldehyde. And you have toddlers crawling on the floor. Do you rip it out, dip into your savings and buy flooring from a reputable company, or do you join a Lumber Liquidators class-action lawsuit and wait for compensation?
A scathing 60 Minutes report in March 2015 revealed that Lumber Liquidators was working with Chinese mills that didn’t comply with the California Air Resources Board’s regulations on formaldehyde emissions, and shareholders filed a securities fraud suit against the company’s board. Three officers have since left, including the CEO and CFO and another was fired. This fast exit may work in shareholders’ favor and bolster a negligence claim.
John Coffee, a professor at Columbia Law School, said that “If they’re getting fired because they knew the company was importing noncompliant products - products that didn’t comply with California law - that would be a case in which you can say ‘Gee, that shows it was negligent’... The case against those fired officers would be somewhat stronger,” according to Law360.
Lumber Liquidators got caught when its record-high margins came under suspicion. They explained the profits were based on creative “sourcing initiatives,” when in fact they came from illegal wood harvesting in Russia, and they partnered with Chinese mills that made flooring products with dangerous levels of formaldehyde. The securities class action filed by the shareholders also claims that Lumber Liquidators and its executives “misled investors in financial reports and conference calls by attributing its increasing gross margins to improvements in its business partnerships.”
Sharon says she bought 1200 sq. ft. of laminate from Lumber Liquidators and her husband installed it. “There were particles and dust from this product - I want to call it formaldehyde flooring - all over our home for weeks,” she says. “I have two small children and a baby crawling all over these floors. I called Lumber Liquidators and they said that our flooring was from China and advised me to do the air test. We are so worried! Do we rip out our floors that cost thousands of dollars and have no floors until we can afford to do new flooring?”
Meanwhile, Sharon decided to file a Lumber Liquidators complaint with an attorney and is hopeful there will be some compensation forthcoming, at least to cover costs for a new floor.
There are currently more than 100 consumer class actions against Lumber Liquidators coordinated before U.S. District Judge Anthony Trenga in the Eastern District of Virginia. The shareholder lawsuits are separate from the consumer class actions. Since the securities class action was filed in November 2013, Lumber Liquidators fell to less than $20 a share, from a peak of $119.
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