July 17, 2015 — Lumber Liquidators is facing a growing number of shareholder lawsuits after the stock price plummeted from $117 to $20 and three top executives left the company.
The National Law Journal reports that on June 26, shareholders filed a consolidated derivative lawsuit on behalf of the company against the board and five officers.
Those officers include three executives who were fired or abruptly quit — chief executive officer Robert Lynch, chief financial officer Daniel Terrell, and head of merchandising William Shegel.
The National Law Journal talked to John Coffee, a professor at Columbia Law School who said:
“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.”
Bloomberg reports that CEO Robert Lynch and Tom Sullivan, the founder of Lumber Liquidators, have also been sued for insider trading.
Approximately another 100 class action lawsuits were centralized in one federal court in Virginia (Multi-District Litigation No. 2627) in June 2015. Members accuse the company of selling Chinese-made laminate wood flooring with toxic levels of formaldehyde and intentionally mislabeling the products as compliant with laws limiting formaldehyde emissions.