Lumber Liquidators Securities Class Action Lawsuit

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Our law firm is preparing a class action lawsuit to recover losses suffered by individuals and entities who invested in Lumber Liquidators Holdings, Inc. The class action alleges that the company made false and/or misleading statements regarding formaldehyde contained in its Chinese-made laminate flooring, which resulted in disappointing financial losses for its investors.

Lumber Liquidators Stock Plunges After ‘60 Minutes’ Report

A report aired on ‘60 Minutes’ on March 1, 2015, revealed that Chinese-made laminate flooring sold by Lumber Liquidators contains toxic levels of formaldehyde that may be hazardous to human health. By the next day, the company’s stock had plunged by more than 25%.

That’s after the stock lost an additional 26% of its value on Feb. 25, when Lumber Liquidators CEO Robert M. Lynch warned investors about the upcoming ‘60 Minutes’ report that would portray the company “in an unfavorable light.”

Investigation Reveals Toxic Levels of Formaldehyde in Chinese Laminate Flooring

The ‘60 Minutes’ exposé cited independent lab tests that found some samples of laminate flooring sold by Lumber Liquidators which contained extremely high levels of formaldehyde, a known human carcinogen (cancer-causing substance). Some samples had 6 to 7 times the legal limit of formaldehyde allowed under California law, while others had 20 times the limit.

A doctor interviewed by CBS said that long-term exposure to formaldehyde at those levels “would increase the risk for chronic respiratory irritation, change in a person’s lung function, increased risk of asthma” and be particularly dangerous to children. The type of flooring tested for the report is suspected of being in “hundreds of thousands” of homes nationwide.

Lumber Liquidators Accused of Illegally Sourcing Wood

Even before the ‘60 Minutes’ report, Lumber Liquidators’ products have long been questioned by environmental groups. In 2013, a raid on its Toano, VA headquarters by federal investigators resulted in the company’s stock dropping by more than 10%.

The raid, which was carried out by officials at the Department of Homeland Security, Immigrations and Customs Enforcement, Fish and Wildlife Service, and Department of Justice, involved its importation of wood products. Authorities suspected the wood Lumber Liquidators said it imported from Russia came from elsewhere, According to CNN.

2013 Securities Class Action

In Nov. 2013, Lumber Liquidators’ stock price fell after a report published in Seeking Alpha found that the company’s Chinese-made laminate floors contained levels of formaldehyde that far exceeded California emission limits.

“The tested product, Mayflower 5/16” x 5” Bund Birch Engineered, emits a staggering three and half times over the government mandated maximum emission level. The product is clearly not CARB [California Air Resources Board] compliant yet Lumber Liquidators tagged CARB compliance on the box.”

As a result of these problems, a securities class action lawsuit (Kiken v. Lumber Liquidators Holdings, Inc., et al.) was filed against Lumber Liquidators in Virginia on Nov. 26, 2013. Within 2 weeks, the company’s stock tumbled 25% to less than $90 a share.

Class Action Allegations

The Virginia case against Lumber Liquidators focused on 2 key areas of alleged misconduct:

  1. the plaintiff alleged that Lumber Liquidators made false and/or misleading statements and/or failed to disclose that specific products sold by the company did not comply with applicable safety regulations pertaining to formaldehyde emissions from composite wood products.
  2. Lumber Liquidators violated the Lacey Act, which bans the import and trade of illegally sourced wood products. The company notes in a securities filing that the U.S. Justice Department is considering pursuing criminal charges against Lumber Liquidators under the Lacey Act.

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