On April 21, 2017, Judge Trenga in the United States District Court for the Eastern District of Virginia entered an order denying in part summary judgment in In re: Lumber Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices and Products Liability Litigation, which involves Lumber Liquidators’ alleged marketing and sales of Chinese-manufactured composite laminate wood flooring products (“Products”) that contained excessive levels of formaldehyde. The California Air Resources Board (“CARB”) lists formaldehyde as a toxic air contaminant with no safe level of exposure and has set comprehensive and strict formaldehyde emission standards. Under the CARB-approved Airborne Toxic Control Measure to Reduce Formaldehyde Emissions from Composite Wood Products (“ATCM”), Cal. Code Regs. tit. 17, § 93120, regular medium density fiberboard (“MDF”) and “thin” MDF products, which are at issue in the Lumber Liquidators case, should emit no more than 0.11 ppm and 0.13 ppm of formaldehyde, respectively. Cal. Code Regs. tit. 17, § 93120.2. While CARB standards are only applicable in California, Lumber Liquidators represented on a nationwide basis that its Products were CARB-compliant. It represented on its website that “NO formaldehyde” was in its hardwood floors. In re Lumber Liquidators Chinese-Manufactured Flooring Prods. Mktg., Sales Practices and Prods. Liab. Litig., MDL No. 1:15-md-2627 (AJT/TRJ), 2017 U.S. Dist. LEXIS 61362, at *42-43 (E.D. Va. Apr. 21, 2017) (“Lumber Liquidators”). In addition, even after CARB notified Lumber Liquidators that certain tested Products had failed CARB’s emission testing in October 2013 and a 60 Minutes segment on March 1, 2015 alleging that Lumber Liquidators’ Products contained dangerous levels of formaldehyde, the CEO of the company represented that Products were “100% safe” and complied “‘with applicable regulations . . . including California standards for formaldehyde emissions for composite wood products . . . .’” Id. at *43-44 (citations omitted). Lumber Liquidators ultimately removed its flooring Products from the market in May 2015.
Lumber Liquidators filed a motion for summary judgment motion on August 1, 2016 and it was heard by the Court on September 13, 2016. The Court found that “the evidence is sufficient for a fact finder to conclude that Lumber Liquidators knowingly misrepresented within a nationwide marketplace that its flooring had ‘NO formaldehyde’ and was CARB compliant,” which, under Plaintiff’s theory of the case, “allowed [Lumber Liquidators] to charge a higher price for its Product than the Plaintiffs would have otherwise had to pay.” Lumber Liquidators, 2017 U.S. Dist. LEXIS 61362, at *52. Plaintiffs are asserting a “price distortion” theory of injury, arguing that Lumber Liquidators would not have been able to sustain prices charged for its Products had it told the truth about them and Plaintiffs are entitled to the difference in value between the amount charged and what they actually received. Id. at *48. In addition, while the Court also found that, with the exception of two Florida Plaintiffs, reliance was not satisfied because none of the other Plaintiffs saw or heard Lumber Liquidators’ misrepresentations regarding formaldehyde or CARB-compliance before purchasing the Product, id. at *53-55, it held that Lumber Liquidators’ misrepresentations were material. Id. at *58 (“Even though a Plaintiff may not have actually relied on Defendant’s misrepresentation, he or she may still have attached significance to the formaldehyde levels in the Products and, in fact, Plaintiffs’ depositions indicate that most of them did.”) The Court distinctly analyzed issues of standing, reliance and materiality.
The Court also rejected Lumber Liquidators’ arguments that only CARB can determine if a product violates the ATCM and found that Plaintiffs’ testing evidence, if admissible, is “probative of whether, as a matter of fact, Lumber Liquidators’ Products contained more formaldehyde than Defendant publicly represented.” Lumber Liquidators, 2017 U.S. Dist. LEXIS 61362, at *62 (emphasis in the original); see also id. at *65-66. According to the Court, each Plaintiff had his or her flooring tested by third party certifiers and “each Plaintiff’s flooring exceeded the 0.11 ppm limit established by the ACTM, including some that were 300% of that limit . . . .” Id. at *66. The Court further determined that there is sufficient evidence to establish that Lumber Liquidators failed to comply with its obligations under the ATCM to take reasonable prudent precautions to ensure that its Products complied with ATCM emissions standards. Id. at *66-67.
Based in part on this analysis, the Court granted summary judgment as to Plaintiffs’ California, Texas and Illinois statutory consumer protection claims. However, it denied summary judgment as to certain Plaintiffs’ class claims under Florida and New York consumer protection statutes. In addition, the Court denied summary judgment as to: Florida, Texas and two of the California Plaintiffs’ fraudulent concealment claims; certain Florida Plaintiffs’ negligent misrepresentation claims; Plaintiffs’ breach of implied warranty claims; and Plaintiffs’ Magnuson-Moss Warranty Act claims.
This decision represents a significant victory for Plaintiffs and means that the Lumber Liquidators action will continue to move forward. Kershaw, Cook & Talley is counsel for plaintiffs in Flores v. Lumber Liquidators Holdings, Inc., et al. If you have any questions about the Lumber Liquidators litigation, or if you or someone you know have been harmed by a defective product, please call our office at 916-779-7000.
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