NEW YORK - A class action lawsuit filed against Lumber Liquidators Inc. claims the hardwood flooring company failed to disclose to investors the allegations of CARB formaldehyde and Lacey Act violations, resulting in inflated stock purchase prices.
Bernstein Liebhard LLP filed the securities class action lawsuit in U.S. District Court for the Eastern District of Virginia on Dec. 17. Brought on behalf of investors who purchased stock between Feb. 22, 2012 and Nov. 21, 2013, the suit alleges Lumber Liquidators' (NYSE: LL) did not disclose that some branded flooring imported from China and sold in California was more than three times the maximum legal limit for formaldehyde emissions, despite being labeled as CARB compliant. "On this news, Lumber Liquidators shares declined, over the course of two trading sessions, by $9.40 per share or nearly 11%, to close at $76.63 per share on June 21, 2013," the statement says.
Also alleged in the complaint is that Lumber Liquidators imported illegally harvested lumber from Russia, a violation of the Lacey Act and which enabled the company to "maintain its unbelievably high margins and thus inflate its revenues."
"On September 26, 2013, agents from the Department of Homeland Security, the U.S Fish and Wildlife Service, and the Department of Justice executed sealed search warrants at Lumber Liquidators' corporate offices in Toano and Richmond, Virginia, related to the importation of certain wood products." Shares fell more than 5% on September 27, to close at $107.13, and continued falling, to $99.29 per share in November, the statement by the law firm claims.
"As a result of the foregoing violations, the company faces the risk of large fines, penalties, forfeitures, judgments and/or settlements in connection with government regulatory actions and/or consumer class actions; and as a result of the foregoing, the company's statements were materially false and misleading at all relevant times."
This marks the latest lawsuit to hit the multi-channel retailer of hardwood flooring and accessories. A similar suit against Lumber Liquidators also was filed by Holzer Holzer & Fistel earlier this month.
Lumber Liquidators projects end of year net sales in the range of $994 million to $1.0 billion, up from a previous range of $985 million to $995 million. The company forecasts net sales between $1.15 billion and $1.20 billion in 2014.
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