Exhibit 10.1

 

UNITED STATES DISTRICT COURT FOR

EASTERN DISTRICT OF VIRGINIA

ALEXANDRIA DIVISION

 

  )   IN RE: LUMBER LIQUIDATORS ) MDL No. 1 :15-md-02627 (AJT/TRJ) CHINESE-
MANUFACTURED )   LAMINATE FLOORING) PRODUCTS )   MARKETING, SALES PRACTICES AND
) )   PRODUCTS LIABILITY LITIGATION )     )     )   IN RE: LUMBER LIQUIDATORS )
MDL No. 1:16-md-02743 (AJT/TRJ) CHINESE- MANUFACTURED )   LAMINATE FLOORING)
DURABILITY )   MARKETING AND SALES PRACTICES )   LITIGATION )     )  

 

CLASS ACTION SETTLEMENT AGREEMENT IN FORMALDEHYDE MDL AND DURABILITY MDL

 

This SETTLEMENT AGREEMENT is entered into, subject to final approval of the
Court and entry of final judgment of dismissal with prejudice, between the
following:

 

A.           Plaintiffs Lila Washington (dec.), Maria and Romualdo Ronquillo,
Joseph Michael Balero, Ryan and Kristin Brandt, Devin and Sara Clouden, Kevin
and Julie Parnella, and Shawn and Tanya Burke (collectively the “Formaldehyde
Plaintiffs”), individually and as representatives of the purported class
(“Formaldehyde Class”), in In Re: Lumber Liquidators Chinese-Manufactured
Laminate Flooring Products Marketing, Sales Practices and Products Liability
Litigation, MDL No. I :15-md-02627 (AJT) (the “Formaldehyde MDL”) pending in the
United States District Court for the Eastern District of Virginia (“Court”); and

 

B.            Plaintiffs Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling,
and Logan Perel (collectively the “Durability Plaintiffs”), individually and as
representatives of the purported class (“Durability Class”), in In Re: Lumber
Liquidators Chinese-Manufactured Laminate Flooring Durability Marketing and
Sales Practices Litigation, MDL No. 1:16-md-02743 (the “Durability MDL”) pending
before the Court; and

 

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C.           Defendant Lumber Liquidators, Inc. (“Lumber Liquidators” or
“Defendant”).

 

The Formaldehyde Plaintiffs, Durability Plaintiffs, and Defendant are, at times,
collectively referred to as the “Parties.” The Durability Plaintiffs and the
Formaldehyde Plaintiffs are collectively referred to as the “Plaintiffs.”

 

RECITALS

 

A.           WHEREAS, beginning on or about March 3, 2015, multiple purported
class action lawsuits were filed against Lumber Liquidators in various U.S.
federal district courts and state courts involving claims of formaldehyde
emissions from Chinese-manufactured laminate flooring in violation of the
Airborne Toxic Control Measure found in Chapter 17 of the California Code of
Regulations, sections 93120 et seq. issued by the California Air Resources Board
(“CARB”).

 

B.           WHEREAS, on June 12, 2015, the United States Judicial Panel on
Multidistrict Litigation (the “MDL Panel”) issued an order transferring and
consolidating the formaldehyde cases to the United States District Court for the
Eastern District of Virginia. The consolidated case is captioned In re: Lumber
Liquidators Chinese-Manufactured Flooring Products Marketing, Sales, Practices
and Products Liability Litigation, MDL No. 1:15-md-02627 (the “Formaldehyde
MDL”).

 

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C.           WHEREAS, pursuant to court order, Plaintiffs filed a First Amended
Representative Class Action Complaint in the Formaldehyde MDL on September 18,
2015. The complaint asserted twelve causes of action including: 1) Fraudulent
concealment, 2) Violation of the California Unlawful, Unfair, or Fraudulent
Business Acts and Practices Law, Cal. Bus. & Prof. Code s 17200 et seq., 3)
Violation of the California False Advertising Law, Cal. Bus. & Prof. Code §
17500 et seq., 4) Violation of the California Consumer Legal Remedies Act, Cal.
Code § 1750 et seq., 5) Violation of the Florida Deceptive and Unfair Trade
Practices Act, Fla. Stat. § 501.201 et seq., 6) Violation of New York Gen. Bus.
Law § 349 et seq., 7) Violation of the Texas Deceptive Trade Practices Act, Tex.
Bus. & Com. Code § 17.50 et seq., 8) Violation of the Illinois Consumer Fraud
and Deceptive Business Practices Act, 815 III. Comp. Stat. § 505/1 et seq., 9)
breach of implied warranty, 10) Violation of the Magnuson-Moss Warranty Act, 15
U.S.C. § 2301 et seq., 11) Negligent misrepresentation, and 12) Declaratory
relief.

 

D.           WHEREAS, Lumber Liquidators filed a motion for summary judgment as
to the Formaldehyde MDL Representative Complaint. On June 20, 2017, the Court
issued a revised Memorandum Opinion in the Formaldehyde MDL granting Lumber
Liquidators partial summary judgment as to (1) all claims filed by Laura
Washington; (2) claims filed by the Cloudens (New York plaintiffs), the Burkes
(Illinois plaintiffs), and Lila Washington (California plaintiff) for fraudulent
concealment (Count 1); (3) all claims for violations of the California False
Advertising Law (Count III); (4) all claims for violation of the California
Legal Remedies Act (Count IV); (5) all claims for violation of the Illinois
Consumer Fraud and Deceptive Business Practices Act (Count VIII); and 6) all
Plaintiffs’ demands for declaratory relief (Count XII). The court denied the
remainder of the motion, and the following claims remain: (1) claims filed by
Lila Washington, the Ronquillos, and Mr. Balero (California plaintiffs) and the
Brandts (Florida plaintiffs) and Parnellas (Texas plaintiffs) for fraudulent
concealment (Count 1); (2) claims filed by Lila Washington, the Ronquillos, and
Mr. Balero (California plaintiffs under the California Unlawful, Unfair, or
Fraudulent Business Acts and Practices Law (Count II); (3) the Brandts’ (Florida
plaintiffs) claims under the Florida Deceptive and Unfair Trade Practices Act
(Count V); (4) the Parnellas’ (Texas plaintiffs) claims under the Texas
Deceptive Trade Practices Act (Count VII); (5) the Cloudens’ (New York
plaintiffs) claims under New York General Business Law Section 349 (Count VI);
(6) all plaintiffs’ claims for breach of implied warranty and violations of the
Magnuson-Moss Warranty Act (County IX-X) and (7) the Brandts’ (Florida
plaintiffs) claims for negligent misrepresentation (Count XI).

 

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E.           WHEREAS, the court further ruled that plaintiffs in the more than
100 pending cases, most purporting to represent class actions, must come forward
to explain why their cases are factually or legally unique such that they should
not be bound by the summary judgment ruling. On July 31, 2017, Plaintiffs filed
a Report on Personal Injury and Objections to Application of the Summary
Judgment Ruling identifying 19 plaintiffs who objected to the application of the
summary judgment ruling to their claims.

 

F.           WHEREAS, Lumber Liquidators filed a motion to dismiss the
nationwide class allegations, on which the court has not yet ruled.

 

G.           WHEREAS, Lumber Liquidators filed a motion to dismiss all personal
injury claims asserted in class action complaints. Plaintiffs subsequently
agreed and the Court ordered that no Chinese formaldehyde class action pending
in the Formaldehyde MDL will seek damages for personal injury on a class-wide
basis. The order did not affect any claims for personal injury brought solely on
an individual basis.

 

H.           WHEREAS, approximately 26 fact depositions and 10 expert
depositions were completed in the Formaldehyde MDL.

 

I.            WHEREAS, on May 20, 2015, a purported class action titled Abad v.
Lumber Liquidators, Inc., was filed in the United States District Court for the
Central District of California and three amended complaints were subsequently
filed challenging certain representations about the durability and the abrasion
class ratings of Lumber Liquidators’ Chinese-manufactured laminate flooring. The
California court ordered that all non-California plaintiffs re-file and were to
be transferred to the district court located near their place of residence. The
non-California plaintiffs refiled their actions and were subsequently
transferred to the respective districts of each plaintiff. Additional plaintiffs
filed purported class actions in Mississippi, Florida, and Alabama.

 

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J.           WHEREAS, on October 3, 2016, the MDL Panel issued an order
transferring and consolidating the durability class actions to the United States
District Court for the Eastern District of Virginia. The consolidated case is
captioned In re: Lumber Liquidators Chinese- Manufactured Laminate Flooring
Durability Marketing and Sales Practices Litigation, MDL No. 1:16-md-02743 (the
“Durability MDL”).

 

K.          WHEREAS, pursuant to court order, the Durability Plaintiffs filed a
Representative Class Action Complaint on February 27, 2017, alleging ten causes
of action, including: 1) Breach of implied warranties, 2) Fraudulent
concealment, 3) Violation of the Magnuson-Moss Warranty Act, 25 U.S.C. § 2301 et
seq., 4) Violation of the California Unfair Competition Law, Cal. Bus. & Prof.
Code s 17200 et seq., 5) Violation of the California False Advertising Law, Cal.
Bus. & Prof. Code § 17500 et seq., 6) Violation of the California Consumers
Legal Remedies Act, Cal. Civ. Code § 1750 et seq., 7) Violation of the Alabama
Deceptive Trade Practices Act, Ala. Code § 8-12-1 et seq., 8) Violation of the
Nevada Deceptive Trade Practices Act, Nev. Rev. Stat. § 41,600 and § 598.0915 et
seq., 9) Violation of the New York General Business Law § 349, and 10) Violation
of the Virginia Consumer Protection Act, VA Code § 59.1-98 et seq.

 

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L.           WHEREAS, Lumber Liquidators filed a motion to dismiss the
Durability MDL Representative Complaint. On July 7, 2017, the Court partially
granted Lumber Liquidators’ motion and dismissed: (1) all Plaintiffs’ claims for
breach of implied warranty (Count 1); (2) Alabama Plaintiff Florez’s claim for
fraudulent concealment (Count ID; (3) Virginia Plaintiff Perel’s claim for
breach of written warranty under the Magnuson-Moss Warranty Act (Count III); (4)
California Plaintiff Moylen’s claim for damages under the California Legal
Remedies Act (Count VI); and (5) Alabama Plaintiff Florez’s claim under the
Alabama Deceptive Trade Practices Act. The Court denied the remainder of the
motion to dismiss, and the following claims remain: 1) all Plaintiffs’ claims
for fraudulent concealment other than that of Alabama Plaintiff Erin Florez
(Count II); 2) all Plaintiffs’ implied warranty claims and all Plaintiffs’
written warranty claims under the Magnuson-Moss Warranty Act other than
Plaintiff Perel (Count III); 3) California Plaintiff Moylen’s claim under the
California Unfair Competition Law (Count IV); 4) California Plaintiff Moylen’s
claim under the California False Advertising Law (Count V); 5) California
Plaintiff Moylen’s claim for injunctive relief under California Legal Remedies
Act (Count VI); 6) Nevada Plaintiff Hotaling’s claim under the New York General
Business Law (Count IX); and 8) Virginia Plaintiff Perel’s claim under the
Virginia Consumer Protection Act.

 

M.          WHEREAS, approximately 13 depositions in the Durability MDL were
completed before the discovery was stayed.

 

N.           WHEREAS, in accordance with the Court ordered schedules, Plaintiffs
have not yet moved for class certification in either the Formaldehyde MDL or the
Durability MDL, and no class has been certified against Lumber Liquidators.

 

O.           WHEREAS, the Formaldehyde Plaintiffs and Defendant held mediations
in December 2015 and July 2016, and had ongoing mediation negotiations that also
involved the Durability Plaintiffs in 2017. Beginning August 17, 2017, the
Parties participated in mediation before the Honorable Judge Leonie M. Brinkema
of the Eastern District of Virginia and entered into a Memorandum of
Understanding to settle all claims in the Formaldehyde MDL and Durability MDL on
October 23, 2017 (the “MOU”).

 

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P.           WHEREAS, Formaldehyde Plaintiffs, the Formaldehyde Class,
Durability Plaintiffs, the Durability Class, and Plaintiffs’ Co-Lead Counsel for
the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL
understand and acknowledge that Lumber Liquidators admits no fault or liability
and that it expressly denies any fault or liability in connection with these
claims and that Defendant has agreed to settle on the following terms set forth
in this Settlement Agreement only to avoid the expense, inconvenience and
uncertainty of further litigation.

 

NOW, THEREFORE, the Parties, in consideration of the foregoing, the terms and
conditions set forth below, and the good and valuable consideration set forth
herein, acknowledged by each of them to be satisfactory and adequate, and
intending to be legally bound, it is agreed by and among the Parties that the
Formaldehyde MDL and the Durability MDL are to be settled, and the Complaints
dismissed on the merits, with prejudice, subject to Court approval, and the
Parties mutually agree as follows:

 

1.             DEFINITIONS

 

In addition  to the terms defined above, capitalized terms shall have the
meanings set forth below:

 

a.“Approved Claim” means a Claim submitted by a Claimant that the Settlement
Administrator, determines to be timely, accurate, eligible, and in proper form
consistent with this Settlement Agreement.

 

b.“Approved Claimants” means those verified purchasers of Chinese-made laminate
flooring sold by Lumber Liquidators between January 1, 2009 and May 31, 2015,
who submitted Approved Claims. If a customer had an installer, contractor, or
other professional purchase the product on their behalf, the customer will be
deemed a purchaser and eligible for participation in the Settlement Class
provided:

 

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(1)They have evidence to support the purchase made on their behalf; and

 

(2)There is no double recovery by multiple Claimants related to the same
purchase as determined by the Claims Administrator.

 

c.“CARB1” refers to the standard employed by the California Air Resources Board
from at least January 1, 2009 to December 31, 2010 for levels of formaldehyde in
laminate flooring (.21 parts per million).

 

d.“CARB2” refers to the standard employed by the California Air Resources Board
from January 1, 2011 through May 31, 2015 for levels of formaldehyde in laminate
flooring (.11 parts per million).

 

e.“CARB2/Durability Settlement Class” means all purchasers of Chinese-made
laminate flooring from Lumber Liquidators between January 1, 2011 and May 31,
2015.

 

f.“CARB1 Settlement Class” means all purchasers of Chinese-made laminate
flooring from Lumber Liquidators between January 1, 2009 and December 31, 2010.

 

g.“Claim” means a request to participate in the Settlement Fund submitted by a
Class Member on a Claim Form to the Settlement Administrator in accordance with
the terms of the Settlement Agreement. Each Claim shall be based on the total
price of the Class Member’s purchase during the Class Period of the
Chinese-manufactured laminate flooring referenced in the Definition of the
Settlement Classes at ¶1.c. and 1.d. herein, before any taxes or other fees.

 

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h.“Claim Form” means the application provided by the Settlement Administrator to
Class Members to make a Claim pursuant to this Settlement Agreement. The
Settlement Administrator shall make the Claim Form available online and in
print. The Claim Form shall be developed by the Settlement Administrator and is
subject to review and approval by the Parties.

 

i.“Claim Deadline” means the date by which all Claim Forms must be postmarked or
received by the Settlement Administrator to be considered timely. The Claim
Deadline shall be 120 days after Preliminary Approval.

 

j.“Claimant” means a Class Member who has submitted a Claim by the Claim
Deadline.

 

k.“Class Counsel” means the Co-Lead Counsel for the Formaldehyde MDL and the Co-
Lead Counsel for the Durability MDL selected to represent the Settlement Classes
by the Court.

 

l.“Class Member” means all persons in the United States who purchased
Chinese-made laminate flooring from Lumber Liquidators between January 1, 2009
and May 31, 2015. Excluded from the Classes are (1) Defendant, (2) all present
and former affiliates and/or officers or directors of Defendant, (3) the Judge
of this Court, the Judge’s family and staff, (4) all individuals who have
already entered a Release and Settlement Agreement with Lumber Liquidators
related to their purchase of the Chinese-made laminate flooring product during
the Class Period, (5) contractors, persons, or other entities who purchased
Chinese-manufactured laminate flooring primarily for resale, (6) individuals
bringing Personal Injury Claims as defined below and identified in Exhibit A,
and (7) all persons who timely request to be excluded from the Settlement Class
or Settlement Classes in accordance with the provisions of the Notice.

 

m.“Class Representatives for the Formaldehyde MDL Representative Complaint”
means Plaintiffs Lila Washington, Maria and Romualdo Ronquillo, Joseph Michael
Balero, Ryan and Kristin Brandt, Devin and Sara Clouden, Kevin and Julie
Parnella, and Shawn and Tanya Burke.

 

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n.“Class Representatives for the Durability MDL Representative Complaint” means
Plaintiffs Erin Florez, Jim Moylen, Kelly Ryan, Karen Hotaling, and Logan Perel.

 

o.“Class Period” means January 1, 2009 through May 31, 2015. The
“CARB2/Durability Period” means January 1, 2011 through May 31, 2015. The “CARB1
Period” means January 1, 2009 through December 31, 2010.

 

p.“Complaints” means all lawsuits and claims transferred to the Formaldehyde MDL
and all lawsuits and claims transferred to the Durability MDL.

 

q.“Court” means the United States District Court for the Eastern District of
Virginia.

 

r.“Days” mean calendar days, excluding federal holidays.

 

s.“Defendant” means Lumber Liquidators, Inc.

 

t.“Durability Plaintiffs” shall have the meaning set forth in the introductory
paragraph of this Settlement Agreement.

 

u.“Effective Date” means the first date by which all of the following events
shall have occurred:

 

(1)          The Court has entered the Preliminary Approval Order.

 

(2)          The Court has entered the Final Approval Order and Judgment
approving the Settlement Agreement in all respects, dismissing the Formaldehyde
MDL and the Durability MDL, including all of the Complaints, with prejudice.

 

(3)          The time for appeal from the Final Approval Order and Judgment
shall have expired, or if any appeal of the Final Approval Order and Judgment as
to the Settlement Agreement is taken, that appeal shall have been finally
determined by the highest court, including any motions for reconsideration
and/or petitions for writ of certiorari, and which Final Approval Order and
Judgment is not subject to further adjudication or appeal.

 

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v.“Final Approval and Fairness Hearing” means the hearing at which the Court
will:

 

(1)          Determine whether to grant Final Approval of this Settlement
Agreement;

 

(2)          Consider any timely objections to this Settlement Agreement and all
responses thereto; and

 

(3)          Consider Class Counsel’s request for an award of attorneys’ fees,
costs and expenses.

 

w.“Final Approval Order and Judgment” shall mean the order finally approving
this Settlement Agreement and dismissal of the Formaldehyde MDL and Durability
MDL, including all of the Complaints, with prejudice.

 

x.“Formaldehyde Plaintiffs” shall have the meaning set forth in the introductory
paragraph of this Settlement Agreement.

 

y.“Long Form Notice” means the Notice of Proposed Settlement of the Formaldehyde
MDL and Durability MDL that will be published on the Settlement Administrator’s
website.

 

z.“Net Settlement Fund” means the Settlement Fund less (subject to Court
approval):

 

(1)          Service Awards;

 

(2)          Attorneys’ Fees not to exceed 33.33% of the Settlement Fund;

  

(3)          Plaintiffs’ Counsel’s actual costs and expenses related to the
Formaldehyde MDL and Durability MDL; and

 

(4)          Notice and Administrative Expenses.

 

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aa.“Notice” means, collectively, the communications by which purchasers of
Chinese-made laminate flooring from Lumber Liquidators between January 1, 2009
and May 31, 2015 are notified of this Settlement Agreement and the Court’s
Preliminary Approval of this Settlement Agreement as required by Fed. R. Civ. P.
23(e).

 

bb.“Notice Date” shall be fifteen days after entry of the Preliminary Approval
Order, or as soon as possible thereafter.

 

cc.“Notice Plan” means the notice program used by parties and the Settlement
Administrator to inform Class Members about the Settlement Agreement.

 

dd.“Party” and “Parties” shall have the meaning set forth in the introductory
paragraph of this Settlement Agreement.

 

ee.“Person(s)” shall mean any natural person, individual, corporation,
association, partnership, trust, or any other type of legal entity.

 

ff.“Personal Injury Claims” means those claims filed by plaintiffs in the MDL or
in state court as of the deadline for filing an objection or to opt out of the
Settlement, and who are not bound by this settlement. A current list of those
Claimants is attached at Exhibit A.

 

gg.“Plaintiffs” collectively shall mean the Formaldehyde Plaintiffs, the
Formaldehyde Class, the Durability Plaintiffs, and the Durability Class.

 

hh.“Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL” means the law firms of
Cohen Milstein Sellers & Toll PLLC; Cotchett, Pine & McCarthy, LLP; and Hagens
Berman Sobol Shapiro LLP.

 

ii.“Plaintiffs’ Co-Lead Counsel for the Durability MDL” means the law firms of
Robertson & Associates LLP; Whitfield Bryson & Mason LLP and Ahdoot & Wolfson,
PC.

 

jj.“Preliminary Approval” or “Preliminary Approval Order” means the Court’s
entry of an order of initial approval of this Settlement Agreement.

 

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kk.“Recitals” means the Recitals set forth above, which are incorporated by
reference and are explicitly made part of this Agreement.

 

ll.“Released Claims” shall have the meaning set forth in Section 15 of this
Settlement Agreement.

 

mm.“Released Parties” shall have the meaning set forth in Section 15 of this
Settlement Agreement.

 

nn.“Releasing Parties” shall have the meaning set forth in Section 15 of this
Settlement Agreement.

 

oo.“Request for Exclusion” means a request to opt-out or be excluded from the
Class, timely submitted in accordance with the terms and conditions of this
Settlement Agreement and the instructions provided in the Notice.

 

pp.“Service Awards” means cash awards paid to the Class Representatives for the
Formaldehyde MDL Representative Complaint and the Class Representatives for the
Durability MDL Representative Complaint as set forth below in Section 13.

 

qq.“Settlement Administrator” means the Angeion Group.

 

rr.“Settlement Agreement” or “Agreement” or “Settlement” refers to this
document, and supersedes any prior agreements or discussions.

 

ss.“Settlement Class” or “Settlement Classes” means the CARB2/Durability
Settlement Class and/or the CARB1 Settlement Class, which derive from the
Formaldehyde MDL and Durability MDL pending in the Eastern District of Virginia,
as identified herein.

 

tt.“Settlement Fund” means a total of $22 million dollars in cash and $14
million dollars in Store-credit Vouchers. The $22 million in cash shall be paid
by Defendant into the Escrow Fund, as set forth below in Paragraph 4.A. The
Store-credit Vouchers shall be provided by Defendant to the Settlement
Administrator.

 

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uu.“Settlement Fund Escrow Account” means an escrow account established by Class
Counsel and supervised by the Court to receive and maintain funds paid pursuant
to this Settlement Agreement for the benefit of the Settlement Class.

 

vv.“Store-credit Vouchers” or “Vouchers” means product vouchers distributed by
the Claims Administrator as part of this Settlement Agreement to certain Class
Members who so elect of the CARB2/Durability Settlement Class for their use to
purchase product from Lumber Liquidators.

 

2.NO ADMISSION OF WRONGDOING

 

A.           This Settlement Agreement is made to terminate any and all
controversies, real or potential, asserted or unasserted, and claims for
injuries or damages or any nature whatsoever, between Defendant and the
Plaintiffs. Neither the execution of this Settlement Agreement or compliance
with its terms shall constitute an admission of any fault or liability on the
part of the Defendant, or any of the Released Parties. Defendant does not admit
fault or liability of any sort and, in fact, Defendant expressly denies fault
and liability.

 

B.           Further, there has been no consideration or determination as to
whether any class pending as part of the Formaldehyde MDL No. 1:15-md-02627 or
the Durability MDL No. 1:16- md-02743 would be suitable for class treatment in
any form other than as the Settlement Classes agreed to in this Settlement
Agreement. These Settlement Classes are not a concession and shall not be used
as an admission that any class other than these Settlement Classes are
appropriate.

 

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3.COOPERATION BY PARTIES AND REASONABLE BEST EFFORTS TO EFFECTUATE SETTLEMENT

 

The Parties and their counsel agree to cooperate fully with each other to
promptly execute all documents and take all steps necessary to effectuate the
terms and conditions of this Settlement Agreement. The Parties shall recommend
approval of this Settlement Agreement by the Court. The Parties and their
counsel further agree to support the final approval of the Settlement Agreement
including against any appeal of the Final Approval Order and Judgment and
including any collateral attack on the Settlement Agreement or the Final
Approval Order and Judgment.

 

4.CONSIDERATION TO PLAINTIFFS

 

In exchange for the terms and conditions set forth herein, Defendant will
provide the following consideration:

 

A.           Settlement Fund. Defendant will pay $22 million dollars in cash and
$14 million dollars in Store-credit Vouchers for a total of $36 million to
establish a common fund for the benefit of the Settlement Class. The Settlement
Fund shall be paid in the following manner:

 

i.             Within five (5) days of the Court’s Preliminary Approval of the
Settlement Agreement, Lumber Liquidators will transfer $500,000.00 to the
Settlement Fund Escrow Account to be used to pay for Class Notice and the
Settlement Administrator’s fees.

 

ii.            Within thirty (30) days of the Court’s Final Approval Order and
Judgment, Lumber Liquidators will transfer $21,500,000.00 in cash to the
Settlement Fund Escrow Account. To the extent Lumber Liquidators elects to
sell/transfer stock to fund the cash obligation, Plaintiffs agree, at no risk,
cost or expense to them, to cooperate with Lumber Liquidators to ensure the
process is as expedient and efficient as possible. To the extent stock is used
to fund the Settlement Agreement, the stock qualifies for a Section (a)(10)
exemption of the Securities Act of 1933, as amended (the “Securities Act”). For
the avoidance of doubt, the Court must find and order in its Final Approval
Order and Judgment that any stock used to fund the Settlement Agreement is
exempt from registration under Section 3(a)(10) of the Securities Act.

 

 - 15 - 

 

 

iii.           Lumber Liquidators will work with Class Counsel and with the
Settlement Administrator to prepare $14,000,000.00 worth of Store-credit
Vouchers for distribution to eligible Claimants.

 

iv.           The payments described above constitute the entire payment due
from Defendant or any of the Released Parties under the Settlement Agreement.
The Parties agree and acknowledge that none of the Settlement Fund paid by
Defendant under the Settlement Agreement shall be deemed to be, in any way, a
penalty or a fine of any kind.

 

v.            A Settlement Fund Escrow Account shall be established and
administered by Class Counsel under the Court’s continuing supervision and
control. No disbursements of funds from the Settlement Fund Escrow Account will
occur without order of the Court.

 

vi.           The Settlement Fund Escrow Account is intended by the Parties to
be treated as a “qualified settlement fund” for federal income tax purposes
pursuant to Treasury Reg. 1.468B-1, and to that end, the Parties shall cooperate
with each other and shall not take a position in any filing or before any tax
authority that is inconsistent with such treatment.

 

vii.          Defendant shall have no responsibility or liability relating to
the administration, investment, or distribution of the Settlement Fund, which
shall be the sole responsibility of Class Counsel and the Settlement
Administrator.

 

B.           Distribution of the Net Settlement Fund. This is a common fund
settlement to be administered on a claims-made basis. In order to be entitled to
participate in the Settlement Fund, a member of the Classes, who has not
requested exclusion, must submit a valid Claim on or before the deadline
established by the Court. Any member of the Classes who does not submit a
timely, valid Claim shall not be entitled to share in the Settlement Fund, but
nonetheless shall be barred and enjoined from asserting any of the Released
Claims described herein.

 

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There shall be two separate classes of participants: the CARB2/Durability
Settlement Class and the CARB1 Settlement Class (sometimes jointly referred to
as “Class” or “Classes”).

 

i.             CARB2/Durability Settlement Class

 

a.            The CARB2/Durability Settlement Class will be limited to
purchasers of Chinese-made laminate flooring from Lumber Liquidators between
January 1, 2011 and May 31, 2015. Benefits will only be available for Approved
Claimants.

 

b.            All members of the CARB2/Durability Settlement Class will be
entitled to make a claim against the Settlement Fund. Claim Forms will be
submitted electronically or by mail and will be administered by the Settlement
Administrator.

 

c.            CARB2/Durability Settlement Class members who submit an Approved
Claim will have the option of choosing either a cash award or a Lumber
Liquidators’ Store-credit Voucher. Claimants will be limited to one recovery per
household, but if multiple purchases were made, the total purchase price of all
purchases will be used to calculate the award.

 

d.            For CARB2/Durability Settlement Class members electing cash, each
household will receive a cash award subject to participation and eligibility.
The cash Settlement Fund will be distributed as follows: For each Approved
Claim, the Approved Claimant receives back a percentage of what he or she paid
for the purchase of his or her laminate flooring. That percentage may increase
or be reduced by the Settlement Administrator so as to exhaust but not exceed
the Settlement Fund.

 

e.            The total amount of cash shall not exceed the Settlement Fund
described above.

 

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(i)            In the event that the cash fund is not exhausted after all
Approved Claims, attorneys’ fees, costs, Service Awards, and administration
costs have been paid, cash Approved Claimants will receive a proportional
additional cash payment.

 

(ii)           If after having paid all attorneys’ fees, costs, Service Awards,
and administrative costs, the cash Settlement Fund is reduced such that it
cannot pay Approved Claimants the anticipated amount, the cash payments will be
proportionally reduced across the Approved Claimants.

 

(iii)          If any amounts remain in the cash Settlement Fund (for example,
because of uncashed checks), Class Counsel may seek a cy pres award to benefit
the victims of 2017 hurricanes that struck the U.S. or its territories.

 

f.             For CARB2/Durability Settlement Class members electing
Store-credit Vouchers, Lumber Liquidators will provide Vouchers, good for 3
years from date of issuance, one per household, with the following exceptions
based on state escheat laws:

 

(i)            Store-credit Vouchers issued to Approved Claimants in the
following states shall have no expiration date: California, Connecticut,
Florida, Maine, Minnesota, Rhode Island, and Washington.

 

(ii)           Store-credit Vouchers issued to Approved Claimants in the
following states shall have the expiration dates identified below:

 

(a)          Illinois - 5 year expiration

 

(b)          Maryland - 4 year expiration

 

(c)          North Dakota - 6 year expiration.

 

At the time of making the election for Store-credit Vouchers, or within 20 days
thereafter, CARB2/Durability Settlement Class members may designate a family
member or nationally recognized charity to be the recipient of the Store-credit
Vouchers. The Settlement Administrator will determine whether a charity is a
nationally recognized charity for purposes of this Settlement. The term “family
member,” as defined by the SEC at 17 C.F.R. § 275.202(a)(11)(G)- 1, shall mean:

 

 - 18 - 

 

 

All lineal descendants (including by adoption, stepchildren, foster children,
and individuals that were a minor when another family member became a legal
guardian of that individual) of a common ancestor (who may be living or
deceased), and such lineal descendants’ spouses or spousal equivalents; provided
that the common ancestor is no more than 10 generations removed from the
youngest generation of family members.

 

g.            Approved Claimants may use their Store-credit Vouchers to purchase
product and have the product shipped to a third party within the United States.
Except as described above, the Store-credit Vouchers will not otherwise be
transferrable, nor may they be sold or redeemed for cash.

 

h.            The total amount of Store-credit Vouchers will not exceed $14
million in the aggregate.

 

i.             The Store-credit Vouchers will be distributed as follows: For
each Approved Claim, the Approved Claimant receives a voucher that contains an
amount that is a percentage of the price he or she paid for the purchase of his
or her laminate flooring. That percentage may increase or be reduced by the
Settlement Administrator to exhaust but not exceed the portion of the Settlement
Fund designated for Store-credit Vouchers.

 

j.             Depending on the level of eligible participation, the values of
the Store- credit Vouchers may increase or decrease so that the full $14 million
in Store-credit Vouchers are distributed to electing, Approved Claimants from
the CARB2/Durability Settlement Class.

 

 - 19 - 

 

 

ii.            CARB1 Settlement Class

 

a.            The CARB1 Settlement Class will be limited to purchasers of
Chinese- made laminate flooring from Lumber Liquidators between January 1, 2009
and December 31, 2010. Benefits will only be available for Approved Claimants.
If a Class Member made a purchase during both the 2009-2010 CARB1 Settlement
Class period and the 2011-2015 CARB2/Durability Settlement Class period, he or
she will be entitled to receive both: (a) the $50 cash benefit described below
as a member of the CARB1 Settlement Class; and (b) either cash or a Store-credit
Voucher as a member of the CARB2/Durability Settlement Class based upon the
total purchase price of all purchases made between 2011-2015.

 

b.            Members of the CARB1 Settlement Class will be entitled to make a
claim against the Settlement Fund for $50; provided, however, that a maximum of
$1.0 million in cash will be set aside for the CARB1 Settlement Class.

 

c.            If the CARB1 Settlement Class Settlement Fund is oversubscribed
(i.e., if Approved Claims exceed $1.0 million, such that funds are insufficient
to pay Approved Claimants $50 each), then these cash payments will be
proportionally reduced across the Approved Claimants. If, on the other hand, the
$1.0 million cash fund set aside for CARB1 Settlement Class Members is not
exhausted by Approved Claims, the remaining cash will be added to the funds
available to pay Approved Claimants of the CARB2/Durability Settlement Class.

 

d.            Claim forms for CARB1 Settlement Class members will be submitted
electronically or by mail, and will be administered by the Settlement
Administrator.

 

e.            CARB1 Settlement Class members who are not also members of the
CARB2/Durability Settlement Class may only elect cash and may not elect
Store-credit Vouchers.

 

 - 20 - 

 

  

5.PRELIMINARY APPROVAL OF SETTLEMENT AND CONDITIONAL CERTIFICATION OF SETTLEMENT
CLASS

 

Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead
Counsel for the Durability MDL shall prepare the motion seeking preliminary
approval of the Settlement Class, and the Parties shall work in good faith to
support the motion. The Court shall be asked to approve the terms and conditions
of the Settlement Agreement, the notice to the Class, the method of notice, the
claim forms, and the procedure for submitting claims, and to appoint Class
Representatives for the CARB2/Durability Settlement Class and the CARB1
Settlement Class, and Class Counsel for both of these Settlement Classes, all as
part of preliminary approval.

 

6.SETTLEMENT ADMINISTRATOR

 

The Settlement Administrator shall be selected by Plaintiffs’ Co-Lead Counsel
for the Formaldehyde MDL and Plaintiffs’ Co-Lead Counsel for the Durability MDL
based on cost, experience and reputation of the proposed administrators. The
Settlement Administrator will work to:

 

A.           Provide Notice to potential Class Members;

 

B.           Maintain a Settlement website;

 

C.           Process Claim Forms;

 

D.           Preserve (on paper or transferred in to electronic format) all
Requests for Exclusion, Claim Forms, and any and all other written
communications from Class Members in response to the Notices for a period of one
(1) year following the Claim Deadline, or pursuant to further order of the
Court. All written communications received by the Settlement Administrator from
Class Members relating to the Settlement Agreement shall be available and
provided upon request to Class Counsel and Counsel for Defendant.

 

E.           Distribute the proceeds of the Settlement Fund in accordance with
the Settlement Agreement;

 

F.           Confirm the issuance of payment to the Approved Claimants;

 

 - 21 - 

 

 

G.           Provide any necessary certifications to the Court concerning the
administration and processing of the claims; and

 

H.           Respond to inquiries from Class Counsel, Counsel for Lumber
Liquidators, the Court, and Class Members.

 

7.NOTICE OF SETTLEMENT AND ADMINISTRATION OF CLAIMS

 

A.           Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and
Plaintiffs’ Co-Lead Counsel for the Durability MDL shall work with the
Settlement Administrator to prepare the Notice program. It is the Parties’
intent that Class Members receive constitutionally adequate notice of the
Settlement. Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’
Co-Lead Counsel for the Durability MDL shall submit to the Court for approval
the Notice Plan. The Notice Plan will provide the best notice practicable under
the circumstances of the foregoing actions, conform to all aspects of Federal
Rule of Civil Procedure 23, satisfy the Due Process Clause of the United States
Constitution, and comply with the terms and conditions of the Agreement.
Plaintiffs’ Co-Lead Counsel for the Formaldehyde MDL and Plaintiffs’ Co-Lead
Counsel for the Durability MDL also shall work with the Settlement Administrator
and/or other class notice specialists, as necessary, to prepare drafts of the
proposed Class Notice. Lumber Liquidators shall have the right to review and
approve the proposed Class Notice, including the content of the Settlement
website. If any objections to the proposed Class Notice cannot be resolved by
the Parties, they shall be submitted to the Court for resolution.

 

B.           Class Member Information

 

Defendant shall provide Class Counsel and the Settlement Administrator with
information in its possession reflecting the name, e-mail address, telephone
number, physical mailing address, and total value of Chinese-made laminate
flooring purchased (collectively, “Class Member Information”) of each reasonably
identifiable person or entity who falls within the definition of the Classes by
the time this Agreement is executed. Defendant warrants and represents that the
Class Member Information provided to Class Counsel accurately reflects the
information retained by Defendant in the ordinary course of business.

 

 - 22 - 

 

 

C.           Internet Website

 

Prior to the Notice Date, the Settlement Administrator shall establish an
Internet website, www.laminatesettlement.com that will inform Settlement Class
members of the terms of this Settlement, their rights, dates and deadlines and
related information. The website shall include, in .pdf format and available for
download, the following: (i) the Long Form Notice; (ii) the Claim Form; (iii)
the Preliminary Approval Order; (iv) this Agreement (including all of its
Exhibits), (v) the operative Complaints filed in the Formaldehyde and Durability
MDLs; and (vi) any other materials agreed upon by the Parties and/or required by
the Court. The Internet website shall provide Settlement Class Members with the
ability to complete and submit the Claim Form electronically. The Internet
website shall also make the Claim Form available for download. Banner ads on the
Internet shall direct Class Members to the Settlement website at
www.laminatesettlement.com.

 

D.           Toll-Free Telephone Number

 

Commencing by the Notice Date, the Settlement Administrator shall establish a
toll-free telephone number, through which Settlement Class members may obtain
information about the Formaldehyde MDL and the Durability MDL, the Settlement,
and request a mailed copy of the Long Form Notice and/or the Claim Form,
pursuant to the terms and conditions of this Settlement. The Long Form Notice
and Claim Form will be mailed to all persons who request one via the toll-free
phone number maintained by the Settlement Administrator.

 

 - 23 - 

 

 

E.           Direct Notice – United States Mail

 

By the Notice Date, the Settlement Administrator will send the notice (“Postcard
Notice”) by United States Postal Service (“USPS”) first class mail to all
Settlement Class Members for whom a physical mailing address can be identified
from the Class Member Information. Each Postcard Notice will include a claim
number and will have a detachable claim form with business reply mail postage
included. The Settlement Administrator shall send one of three versions of the
Postcard Notice attached to the Settlement Administrator’s Declaration at
Exhibit B to this Agreement: one for CARB2/Durability Settlement Class Members,
one for CARB1 Settlement Class Members, and one for those who qualify for both
the CARB2/Durability and CARB1 Settlement Classes.

 

Prior to the initial mailing of the Postcard Notice, postal mailing addresses
will be checked against the National Change of Address (“NCOA”) database
maintained by the USPS. Postcard Notices that are returned as undeliverable by
the USPS and have a forwarding address will be re-mailed to that forwarding
address, and Postcard Notices that are returned as undeliverable by the USPS
without a forwarding address will be subject to address verification (“skip
tracing”), utilizing a wide variety of data sources, including public records,
real estate records, electronic directory assistance listings, etc. to locate
updated addresses. Postcard notices will then be re-mailed to updated addresses
located through skip tracing.

 

F.           Direct Notice – E-mail Notice

 

By the Notice Date, the Settlement Administrator shall e-mail each Settlement
Class Member included in the Class Member Information provided by Defendant
(“Email Notice”). The content of the Email Notice shall substantially conform to
the information provided in the Claim Form and will contain a link that the
Settlement Class members can click to take them directly to the claim filing
page on the settlement agreement website where they can enter their
individualized claim number and confirmation code.

 

 - 24 - 

 

 

G.           Publication

 

By the Notice Date, and subject to the requirements of this Agreement and the
Preliminary Approval Order, the Settlement Administrator will provide Notice to
the Settlement Class as follows: Publishing the publication notice and digital
notice pursuant to the Preliminary Approval Order and as set forth in the Notice
Plan described in the Declaration of the Settlement Administrator attached
hereto as Exhibit B; Publishing, on or before the Notice Date, the Long Form
Notice on the settlement website (www.laminatesettlement.com), as specified in
the Preliminary Approval Order and as set forth in the Notice Plan described in
the Declaration of the Settlement Administrator attached hereto as Exhibit B;
and Providing the Internet address, in the Long Form Notice and the Summary
Notice, to the settlement website (www.laminatesettlement.com).

 

H.           Notice to Appropriate Federal and State Officials

 

Not later than 10 days after for the Court enters the Preliminary Approval
Order, the Settlement Administrator shall comply with 28 U.S.C. § 1715.

 

I.           Confirmation

 

The Settlement Administrator is directed to file with the Court and serve upon
Class Counsel a declaration confirming the dissemination of the Notice to the
Class has taken place in accordance with this Order no later than fifteen (15)
days before the Final Approval and Fairness Hearing.

 

 - 25 - 

 

 

8.REQUESTS FOR EXCLUSION

 

A.           Members of CARB2/Durability Settlement Class and the CARB1
Settlement Class who wish to exclude themselves from their respective Class(es)
must submit a written Request for Exclusion. To be effective, such a request
must include the Class Member’s name, mailing address, e-mail address, the
signature of the Class Member, identify their individual counsel (if any), and
substantially the following statement: “I want to opt out of the Class(es)
certified in the Lumber Liquidators Chinese-laminate flooring litigation.”
Requests for Exclusion must be submitted via First Class U.S. Mail paid by the
Class Member and sent to the Settlement Administrator at the address provided in
the Notice. Requests for Exclusion shall be served not later than thirty (30)
days prior to the Final Approval and Fairness Hearing. Personal Injury Claims
already filed in the MDL or State Court and listed in Exhibit A are already
excluded from the Settlement.

 

B.           The Settlement Administrator shall promptly log each Request for
Exclusion that is received, and shall provide copies of the log and all such
Requests for Exclusion to Class Counsel and Counsel for Defendant on a monthly
basis and the final list no later than fifteen (15) days before the Final
Approval and Fairness Hearing.

 

C.           Any Class Member who does not properly and timely mail a Request
for Exclusion shall be automatically included in the Settlement Class and shall
be bound by all the terms and provisions of the Settlement Agreement, and any
Court order related to the Settlement, whether or not such Class Member received
actual notice or shall have objected to the Settlement, and whether or not such
Class Member makes a Claim upon or participates in the Settlement.

 

D.           If the number of Requests for Exclusion exceeds a percentage of the
total size of the CARB2/Durability Settlement Class and the CARB1 Settlement
Class combined, as agreed upon by the Parties hereto, Defendant has the option
to terminate this Settlement Agreement. The confidential opt-out number shall be
memorialized in a separate Supplemental Agreement and communicated
confidentially to the Court.

 

 - 26 - 

 

 

E.           The Class Representatives, Plaintiffs’ Co-Lead Counsel for the
Formaldehyde MDL, and Plaintiffs’ Co-Lead Counsel for the Durability MDL
covenant and agree to take no actions, directly or indirectly, designed or
intended to influence any putative member of the Settlement Classes to opt out
of the Settlement Agreement, or to assist others in doing so. The Parties
acknowledge, however, that if and when Class Counsel answer Class Member
questions pertaining to their respective matters, the Parties’ Settlement, or
the Settlement Agreement or related matters, answering these questions shall not
constitute taking action to influence any putative member of the Classes to opt
out of the Settlement or to assist others in doing so.

 

9.OBJECTIONS

 

A.           Class Members who do not request exclusion from the Class may
object to the Settlement Agreement. Class Members who choose to object to the
Settlement must file written notices of intent to object with the Court and
serve copies of any such objection on counsel for the Parties, identified in
Section 27 unless filed via the Court’s ECF system, such that copies will be
transmitted electronically to these counsel. Any Class Member may appear at the
Final Approval and Fairness Hearing, in person or by counsel, and be heard to
the extent permitted under applicable law and allowed by the Court. The right to
object to the Settlement must be exercised individually by an individual Class
Member and, except in the case of a deceased, minor, or incapacitated Person or
where represented by counsel, not by the act of another Person acting or
purporting to act in a representative capacity.

 

To be effective, an objection to the Settlement that is filed with the Court
must:

 

i.             Contain a caption that includes the case name and the case number
as follows: In Re: Lumber Liquidators Chinese-Manufactured Flooring Products
Marketing, Sales Practices and Products Liability Litigation, MDL No.
1:15-md-02627; or In Re Lumber Liquidators Chinese- Manufactured Laminate
Flooring Durability Marketing and Sales Practices Litigation, MDL No.
1:16-md-2743; or both;

 

 - 27 - 

 

 

ii.           Provide the name, mailing address, email address, telephone number
and signature of the Class Member filing the intent to object, and identify his
or her individual counsel, if any;

 

iii.           Provide a valid proof of membership in one of the Settlement
Classes, or both;

 

iv.          File a written letter or brief detailing the specific basis for
each objection, including any legal and factual support the objector wishes to
bring to the Court’s attention and any evidence the objector wishes to introduce
in support of the objection with the United States District Court for the
Eastern District of Virginia not later than thirty (30) days prior to the Final
Approval and Fairness Hearing;

 

v.           Be served contemporaneously on Plaintiffs’ Co-Lead Counsel for the
Formaldehyde MDL, Plaintiffs’ Co-Lead Counsel for the Durability MDL, and
Counsel for Defendant (unless filed via the Court’s ECF system, such that copies
will be transmitted electronically to these counsel);

 

vi.          Contain the number of class action settlements objected to by the
Class Member in the last three years;

 

vii.         State whether the objecting Class Member intends to appear at the
Final Approval and Fairness Hearing, either in person or through counsel.

 

B.           Any Class Member who does not file a timely and adequate notice of
intent to object in accordance with this Settlement Agreement waives the right
to object or to be heard at the Final Approval and Fairness Hearing, unless the
Court permits otherwise, and shall be forever barred from making any objection
to the Settlement. To the extent any Class Member objects to the Settlement, and
such objection is overruled in whole or in part, such Class Member will be
forever bound by the Final Approval Order and Judgment of the Court.

 

 - 28 - 

 

 

C.           The filing of an objection allows Plaintiffs’ Co-Lead Counsel for
the Formaldehyde MDL, Plaintiffs’ Co-Lead Counsel for the Durability MDL, or
Counsel for Defendant to request the Court to notice such objecting Class Member
for and take his or her deposition consistent with the Federal Rules of Civil
Procedure at an agreed-upon location, and to seek any documentary evidence or
other tangible things that are relevant to the objection. Failure by an
objecting Class Member to make himself or herself available for a deposition or
to comply with expedited discovery requests may result in the Court striking the
Class Member’s objection and otherwise denying that Class Member the opportunity
to make an objection or be further heard. The Parties reserve the right to ask
the Court to tax the costs of any such discovery to the objecting Class Member
or the objecting Class Member’s separate counsel should the Court determine that
the objection is frivolous or is made for an improper purpose.

 

D.           If the objection is made through an attorney, the written objection
must also include: (1) the identity and number of the Class Members represented
by objector’s counsel; and (2) the number of such represented Class Members who
have opted out of the Settlement Class.

 

10.REPORT BY SETTLEMENT ADMINISTRATOR

 

A.           No later than fifteen (15) days before the Final Approval and
Fairness Hearing, the Settlement Administrator shall provide to Class Counsel
and Counsel for Defendant the following information:

 

i.             The number of Notices mailed or sent to Class Members;

 

 

ii.            The number of Class Members who have submitted Approved Claims
for the CARB2/Durability Settlement Class and the CARB1 Settlement Class;

 

 - 29 - 

 

 

iii.           The number of Class Members who have submitted Requests for
Exclusion from the Settlement Classes and the names of such persons;

 

iv.           Any information about any objections to the Settlement that the
Settlement Administrator has not previously forwarded; and

 

v.            Any other tracking information reasonably requested by Class
Counsel or Counsel for Defendant.

 

B.           A report stating the total number of class members who have
submitted timely and valid Requests for Exclusions and the names of such class
members shall be filed by Class Counsel not later than ten (10) days before the
Final Approval and Fairness Hearing.

 

11.FINAL APPROVAL

 

A.           If the Court preliminarily approves the Settlement, Class Counsel,
with the cooperation of counsel for Defendant, shall submit a motion for final
approval of the Settlement Agreement by the Court at a date set by the Court,
but no later than forty-five (45) days before the Final Approval and Fairness
Hearing. The parties may submit supplemental memoranda in support of the motions
for final settlement approval or the awarding of costs and fees at a date set by
the Court, but no later than ten (10) days before the Final Approval and
Fairness Hearing.

 

B.           The Notice to the Class shall contain a date, time and location for
the Final Approval and Fairness Hearing to be conducted by the Court. The
Parties shall jointly request the Court to set a hearing on Final Approval of
the Settlement Agreement approximately hundred

(100) days from the date the Court enters an order granting preliminary approval
of the Settlement Agreement.

 

C.           The Parties shall request the Court upon final approval of this
Settlement Agreement, to enter the Final Approved Order and Judgment, which
shall, inter alia:

 

 - 30 - 

 

 

i.             Grant final approval to the Settlement and Settlement Agreement
as fair, reasonable, adequate, in good faith and in the best interests of the
Class(es), and order the Parties to carry out the provisions of this Settlement
Agreement;

 

ii.             Dismiss with prejudice and without costs all Complaints pending
in the Formaldehyde MDL and the Durability MDL, including the Representative
Complaints, and dismiss with prejudice and without costs the litigation against
Defendant and the Released Parties;

 

iii.           Adjudge that Releasing Parties are conclusively deemed to have
released Defendant and the Released Parties of the Released Claims;

 

iv.           Bar and permanently enjoin each Class Member who has not timely
submitted a Request for Exclusion from prosecuting against the Released Persons
any and all of the Released Claims;

 

v.             Reserve continuing and exclusive jurisdiction by the Court to
preside over any ongoing proceedings relating to the Claims or this Settlement
Agreement;

 

vi.           Determine under Fed. R. Civ. P. 54(b) that there is no just reason
for delay and direct that the Final Judgment as to the Released Parties to be
final and appealable and entered forthwith; and

 

vii.          To the extent stock will be used to fund the Settlement, find and
conclude that the Court has sufficient information before it to assess the value
of the claims and securities to be exchanged in the Settlement. Additionally,
conclude that the applicable procedural and substantive fairness requirements of
Section 3(a)(10) of the Securities Act have been satisfied, and find that any
such stock used is exempt from registration under Section 3(a)(10) of the
Securities Act.

 

 - 31 - 

 

 

12.CLASS COUNSEL FEES AND ADMINISTRATIVE COST

 

A.           Co-lead Counsel for the Formaldehyde MDL and the Durability MDL may
jointly or separately file for costs and fees in this action. At a time to be
set by the Court, but no later than forty-five (45) days before the Final
Approval and Fairness Hearing, Class Counsel may seek an award of attorneys’
fees of up to 33.33% of the Settlement Fund, and for actual costs and expenses,
together with the cost of Notice and administrative costs, to be paid from the
Settlement Fund. Co-Lead Counsel for the Formaldehyde MDL and Co-Lead Counsel
for the Durability MDL may jointly or separately file motion(s) for attorneys’
fees, costs, and expenses.

 

B.           Within thirty-one (31) days of Final Approval Order and Judgment
and entry by the Court of an order awarding attorneys’ fees, costs, and expenses
(“Fee, Cost, and Expense Order”), any awarded attorneys’ fees, costs, and
expenses shall be paid to Class Counsel from the Escrow Account by the Escrow
Agent, notwithstanding the existence of or pendency of any appeal or collateral
attack on the Settlement or any part thereof or the Fee, Cost, and Expense
Order. In the event that the Effective Date does not occur or the Settlement is
terminated pursuant to its terms, or if, as the result of any appeal or further
proceedings on remand, or successful collateral attack, the Fee, Cost, and
Expense Order is reversed or modified pursuant to a final court order and
attorneys’ fees, costs, and expenses have been paid out of the Escrow Account to
any extent, then Class Counsel shall be obligated and does hereby agree, within
ten (10) business days after receiving notice of the foregoing from Defendants’
Counsel or from a court of appropriate jurisdiction, to refund to the Escrow
Account such attorneys’ fees, costs, and expenses that have been paid, plus
interest thereon at the same rate as would have been earned had those sums
remained in the Escrow Account. For avoidance of doubt, however, under no
circumstances shall Class Counsel be required to return to the Escrow Account or
the Defendant the $500,000 paid pursuant to section 4(A)(i) to the Settlement
Administrator or to any other Notice consultant or provider.

 

 - 32 - 

 

 

13.SERVICE AWARDS

 

Subject to approval by the Court, the following seven (7) Plaintiff households
identified in the Formaldehyde MDL representative complaint (A-G below) and the
five (5) Plaintiff households identified in the Durability MDL representative
complaint (H-L below) will each receive a Service Award for their service as
named Plaintiffs in the MDLs in the amount of $5,000 each:

 

A.           Lila Washington (California) (dec.)

 

B.           Maria and Romualdo Ronquillo (California)

 

C.           Joseph Michael Balero (California)

 

D.           Ryan and Kristin Brandt (Florida)

 

E.           Devin and Sara Clouden (New York)

 

F.           Kevin and Julie Parnella (Texas)

 

G.           Shawn and Tanya Burke (Illinois)

 

H.           Erin Florez (Alabama)

 

I.           Jim Moylen (California)

 

J.           Kelly Ryan (Nevada)

 

K.          Karen Hotaling (New York)

 

L.           Logan Perel (Virginia)

 

No individual shall be entitled to more than one Service Award. If a husband and
wife, or other co-purchasers were both Plaintiffs, they are entitled to a single
Service Award.

 

14.CLAIM PROCESSING AND DISTRIBUTION OF SETTLEMENT

 

A.           Class Members may electronically complete and sign the appropriate
Claim Form and submit it to the Settlement Administrator via an electronic Claim
Form submission process to be established by the Settlement Administrator.
Alternatively, Class Members may submit such Claim Forms via U.S. mail. A Claim
Form shall be considered defective if the Claimant fails to timely submit the
Claim Form, provide the required information on the Claim Form, or fails to
electronically or physically sign certifying that the Claimant is entitled to
the benefit sought.

 

 - 33 - 

 

 

B.           Within thirty forty-five (45) days of the entry of the Final
Approval Order and Judgment, the Settlement Administrator will notify Class
Counsel of any Class Member who has submitted a deficient Claim Form, and those
Class Members will be given ten (10) calendar days from the date of the
deficiency notice to cure the deficiency.

 

C.           Within sixty (60) days of the Effective Date, the Settlement
Administrator will distribute the checks and the vouchers.

 

D.           Cash payments made pursuant to this Settlement Agreement will be
made to Claimants via physical checks mailed to the address provided on the
Claim Form. Alternatively, if elected, Store-credit Vouchers will be mailed to
the address provided on the Claim Form. Class Counsel and Counsel for Defense
shall confer before the Settlement Administrator begins to distribute the checks
or Store-credit Vouchers to the Class Members who have submitted an Approved
Claim. If an appeal is filed, distribution of Settlement Fund to Claimants will
be stayed until further order by the Court.

 

E.           The Class Members acknowledge that the Claims process may take
longer than described above due to the number of potential Class Members. The
Settlement Administrator will employ all due commercially reasonable speed to
distribute claimed cash payments and Store-credit Vouchers to Approved Claimants
as set forth herein.

 

F.           The Class Members shall be entitled solely to the Settlement Funds
and Store- Credit Vouchers for settlement and satisfaction against Defendant and
the Released Parties for the Released Claims, and shall not be entitled to any
other payment or relief from Defendant or the Released Parties. The Class
Representatives, Class Members and their counsel, Class Counsel, as well as the
Settlement Administrator will be reimbursed and indemnified solely out of the
Settlement Funds. Defendant and the other Released Parties shall not be liable
for any costs, fees, or expenses of any description, including any costs, fees
or expenses of the Class Representatives or their attorneys, experts, advisors,
or other representatives of the Class.

 

 - 34 - 

 

 

15.RELEASE BY ALL SETTLEMENT CLASS MEMBERS

 

A.           Effective upon Final Approval, Plaintiffs, for and on behalf of
themselves, and every member of the Settlement Classes, every purchaser of
Chinese-manufactured laminate flooring sold by Lumber Liquidators between
January 1, 2009 and May 31, 2015, and each of their respective heirs and
assigns, except for those who have requested to be excluded from the Classes
pursuant to Section 8 of this Agreement, and those who as of the Final Approval
and Judgment have filed personal injury cases as set out in Exhibit A (hereafter
the “Releasing Parties’), jointly and severally, hereby RELEASE, HOLD HARMLESS,
FOREVER DISCHARGE, AND SHALL FOREVER BE ENJOINED FROM PROSECUTION against
Defendant and the Released Parties of any and all claims, causes of action,
lawsuits, proceedings, damages, judgments, losses, penalties, liabilities,
rights, obligations, duties, demands, liens, actions, administrative
proceedings, warranty claims, remedies, costs, fees of any kind, expenses, and
claims of any kind whatsoever, including based on fraud, whether known or
unknown, continent or unsuspected, disclosed or undisclosed, liquidated or
unliquidated, asserted or un- asserted, accrued or un-accrued, in law, in equity
or otherwise, in contract, tort, warranty, strict liability or otherwise, that
have been, could have been, or in the future can or might be asserted in any
court, tribunal or proceeding (including but not limited to any claims arising
under federal, state, foreign or common law, including any federal or state
consumer protection law or personal injury claim), by or on behalf of Plaintiffs
or any member of the Class, whether individual, direct, class, representative,
legal, equitable, or other type or in any other capacity against Defendant and
the Released Parties, which the Releasing Parties ever had, now have, or may
have had, from the beginning of time to the Effective Date, by reason of,
arising out of, relating to, or in connection with the acts, events, facts,
matters, transactions, occurrences, statements, representations,
misrepresentations, omissions, or any other matter whatsoever related directly
or indirectly to: 1) the Plaintiffs’ and Class Members’ purchase and/or use of
Chinese-manufactured laminate flooring sold by Lumber Liquidators between
January 1, 2009 and May 31, 2015; 2) the manufacture, sale, distribution,
labeling, marketing or advertising of Chinese-laminate flooring sold by Lumber
Liquidators between January 1, 2009 and May 31, 2015; 3) Defendant’s compliance
with state or federal labeling laws and regulations related to the
Chinese-laminate flooring sold by Lumber Liquidators between January 1, 2009 and
May 31, 2015; and/or 4) any claim by Plaintiffs of any nature related to
Chinese-manufactured laminate flooring sold by Lumber Liquidators between
January 1, 2009 and May 31, 2015 (the “Released Claims”).

 

 - 35 - 

 

 

The Released Claims, however, shall not include any claims to enforce the
Settlement Agreement, or the request of Class Counsel for fees, costs, and
expenses as set forth in, or as related to, this Settlement Agreement. Nor shall
the Released Claims extinguish any existing express warranty rights that do not
pertain to the allegations in the Durability MDL or the Formaldehyde MDL, to the
extent they exist.

 

B.           The “Released Parties” shall include Lumber Liquidators, Inc., its
parent, subsidiaries, and affiliates, including but not limited to, Lumber
Liquidators, Holdings, Inc.; Lumber Liquidators Services, LLC; Lumber
Liquidators Leasing, LLC; individual Lumber Liquidators retail stores located
throughout the United States; the China Regional Office; Fesco; Pure Air Control
Services; ED Labs; and including but not limited to any controlling persons,
associates, affiliates, or subsidiaries and each and all of their respective
past or present officers, members, managers, directors, stockholders,
principals, representatives, employees, attorneys, financial or investment
advisors, insurers, consultants, experts, accountants, bankers, testing
laboratories, advisors or agents, heirs, executors, trustees, general or limited
partners or partnerships, limited liability companies, members, joint ventures,
personal or legal representatives, estates, administrators, predecessors,
successors, and assigns.

 

 - 36 - 

 

 

C.           In agreeing to the foregoing waiver, the Releasing Parties
expressly acknowledge and understand that they may hereafter discover facts in
addition to or different from those which they now believe to be true with
respect to the subject matter of the claims released herein, but expressly agree
that they have taken these possibilities into account in electing to participate
in this release, and that the release given herein shall be and remain in effect
as a full and complete release notwithstanding the discovery or existence of any
such additional or different facts, as to which the Releasing Parties expressly
assume the risk.

 

D.           As of the Effective Date, by operation of the entry of the Final
Approval Order and Judgment, each Class Member who does not file a valid Request
for Exclusion, automatically, upon entry of the Final Approval Order and
Judgment, shall be held to have fully released, waived, relinquished, and
discharged the Released Parties from the Released Claims, to the fullest extent
permitted by law, and shall be enjoined from continuing, instituting, or
prosecuting any legal proceeding against the Released Parties relating in any
way whatsoever to the Released Claims.

 

 - 37 - 

 

 

E.           The Releasing Parties, on behalf of themselves and their respective
assigns, agree not to sue or otherwise make a claim against any of the Released
Parties that is in any way related to the Released Claims.

 

F.           With respect to the Released Claims, the Releasing Parties shall
expressly waive any and all provisions, rights, and benefits conferred by any
law of any state or territory of the United States which is similar, comparable
or equivalent to California Civil Code Section 1543, which provides:

 

A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.

 

16.DISMISSAL

 

The Releasing Parties stipulate and agree that upon the Court’s entry of the
Final Approval Order and Judgment, and after expiration of any appeals of that
Order, the following shall be DISMISSED WITH PREJUDICE (except for those
Personal Injury cases filed in the Formaldehyde MDL or in state court and
included on Exhibit A):

 

A.           All cases pending before the Court consolidated in In Re: Lumber
Liquidators Chinese-Manufactured Flooring Products Marketing, Sales Practices
and Products Liability Litigation, MDL No. 1:15-md-02627, including any
additional filed and/or transferred cases as of the date of Final Approval
Order; and

 

B.           All cases pending before the Court in In Re Lumber Liquidators
Chinese- Manufactured Laminate Flooring Durability Marketing and Sales Practices
Litigation, MDL No. 1:16-md-2743, including any additional filed and/or
transferred cases as of the date of Final Approval Order.

 

 - 38 - 

 

 

17.CONFIDENTIALITY

 

Plaintiffs and Class Counsel agree that they will not affirmatively seek media
coverage in print, Internet, or other media regarding this Settlement Agreement,
but may neutrally respond to press or media inquiries by describing the
Settlement as a good result for the Settlement Class, or other substantially
similar words. Nothing in this paragraph, however, restricts Class Counsel from:

 

A.           Publishing the Settlement and the result on their websites;

 

B.           Utilizing media as set forth in the Court-approved Notice plan;

 

C.           Truthfully responding privately to inquiries concerning the
Settlement from their clients, including Class Members; or

 

D.           Truthfully responding to any press or media inquiries regarding
details of the Settlement.

 

18.AMENDMENT

 

This Agreement may be modified, amended or supplemented only by written
agreement signed by or on behalf of all Parties, and if such modification,
amendment or supplement is to be executed and become effective subsequent to the
entry of the Preliminary Approval Order, only with the approval of the Court.

 

19.AUTOMATIC TERMINATION OF SETTLEMENT AGREEMENT AND TERMINATION RIGHTS

 

In the event that this Settlement Agreement does not become a final, enforceable
contract that is approved by the Court and upheld on appeal for any reason:

 

A.           Except as expressly stated herein, this Settlement Agreement shall
automatically become null and void and have no further force or effect, and all
proceedings that have taken place with regard to this Settlement shall be
without prejudice to the rights and contentions of the Parties;

 

 - 39 - 

 

 

B.           If the Settlement Agreement is not preliminarily or finally
approved by the Court, the Parties will resume the litigation of the referenced
MDLs without prejudice as to their procedural status as of August 17, 2017;

 

C.           This Settlement Agreement, any provision of this Settlement
Agreement and the fact of this Settlement Agreement having been made, shall not
be admissible or entered into evidence for any purpose whatsoever; nor will any
information produced solely in connection with any of the Parties’ mediations be
admissible;

 

D.           If this Settlement Agreement; the order preliminarily approving the
Settlement Agreement and/or Final Order and Judgment approving this Settlement
Agreement is vacated, materially modified or reversed, in whole or part, this
Settlement Agreement will be deemed terminated, unless the Parties, in their
sole discretion within thirty (30) days of receipt of such ruling, agree to
proceed with the Settlement Agreement as modified by the Court or on appeal.

 

E.           If the Settlement Agreement is terminated, any Settlement Funds in
the Settlement Fund Escrow Account or that have come into possession of the
Plaintiffs or Class Counsel, except for any funds paid or owed to the Settlement
Administrator or to any other Notice consultant or provider, or any funds
otherwise paid or owed for any Settlement administration or Notice-related
purpose, shall be returned to Defendant within ten (10) Days of termination.

 

F.           This Section and the Section on Confidentiality shall survive any
termination of this Settlement Agreement.

 

20.SEVERABILITY

 

With the exception of the provisions contained in Section 15, 16 and 19, in the
event any covenant, term or other provision contained in this Settlement
Agreement is held to be invalid, void or illegal, the same shall be deemed
severed from the remainder of this Settlement Agreement and shall in no way
affect, impair or invalidate any other covenant, condition or other provision
herein. If any covenant, condition or other provision herein is held to be
invalid due to its scope or breadth, such covenant, condition or other provision
shall be deemed valid to the extent of the scope or breadth permitted by law.

 

 - 40 - 

 

 

21.INCORPORATION OF EXHIBITS

 

All attached exhibits are hereby incorporated by reference as though set forth
fully herein and are a material part of the Settlement Agreement.

 

22.GOVERNING LAW AND COMPLIANCE WITH TERMS OF SETTLEMENT AGREEMENT

 

All questions with respect to the construction of this Settlement Agreement and
the rights and liabilities of the Parties shall be governed by the laws of the
Commonwealth of Virginia, without giving effect to its law of conflict of laws.

 

The Court shall have continuing and exclusive jurisdiction to resolve any
dispute that may arise with regard to the terms and conditions of this
Settlement Agreement, and the Parties hereby consent to such jurisdiction.

 

23.PREPARATION OF SETTLEMENT AGREEMENT, SEPARATE COUNSEL AND AUTHORITY TO ENTER
SETTLEMENT AGREEMENT

 

A.           The Parties and their counsel have each participated and cooperated
in the drafting and preparation of this Settlement Agreement. Hence, in any
construction to be made of this Settlement Agreement, the same shall not be
construed against any Party as drafter of the Settlement Agreement.

 

B.           In entering this Settlement Agreement, each Party has relied upon
the advice of the Party’s own attorneys of choice, and has not relied upon any
representation of law or fact by any other Party hereto.

 

C.           This Settlement Agreement, including exhibits attached hereto,
supersedes any and all prior agreements, including, without limitation, the MOU,
and it constitutes the entire understanding between and among the Parties with
regard to the matters herein. There are no representations, warranties,
agreements, or undertakings, written or oral, between the Parties hereto,
relating to the subject matter of this Settlement Agreement which are not fully
expressed herein.

 

 - 41 - 

 

 

D.           The Parties each represent and warrant that each of the Persons
executing this Settlement Agreement is duly empowered and authorized to do so.

 

24.COUNTERPARTS

 

This Settlement Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

 

25.BINDING EFFECT

 

This Settlement Agreement shall be binding upon and inure to the benefit of the
Parties and to their respective heirs, assigns, and successors-in-interest.

 

26.ENTIRE AGREEMENT

 

This Settlement Agreement and the Supplemental Agreement referenced in 8.D
above, represent the entire agreement between the Parties and supersedes all
other oral and written agreements and discussions. Each of the Parties covenants
that he, she or it has not entered into this Settlement Agreement as a result of
any representation, agreement, inducement, or coercion, except to the extent
specifically provided herein. Each Party further covenants that the
consideration recited herein is the only consideration for entering into this
Settlement Agreement and that no promises or representations of another or
further consideration have been made by any Person,

 

27.NOTICE

 

All notices, requests, demands and other communications to the Parties or their
counsel required or permitted to be given pursuant to this Settlement Agreement
shall be in writing and shall be delivered personally or mailed postage-prepaid
by First Class U.S. Mail to the following persons at their addresses set forth
as follows:

 

 - 42 - 

 

 

Formaldehyde   Durability Plaintiffs’ Co-Lead Counsel:   Plaintiffs’ Co-Lead
Counsel: Steven Toll, Esq.   Alexander Robertson, IV, Esq. Cohen Milstein
Sellers & Toll PLLC   Robertson & Associates, LLP 1100 New York Ave, NW   32121
Lindero Canyon Rd, Suite 200 Suite 500 — West Tower   Westlake Village, CA 91361
Washington, DC 20005    

 

Defendant Lumber Liquidators, Inc. Lead Counsel: Diane P. Flannery, Esq.
McGuireWoods LLP Gateway Plaza 800 East Canal Street Richmond, VA 23219

 

WHEREFORE, the undersigned, being duly authorized, have caused this Settlement
Agreement to be executed on the dates shown below and agreed that it shall take
effect on the last date of execution by all undersigned representatives of the
Parties.

 

[signatures on following page]

 

 - 43 - 

 

 

Dated this 15th day of March, 2018.

 

Formaldehyde   Durability Plaintiffs’ Co-Lead Counsel   Plaintiffs’ Co-Lead
Counsel       /s/ Steven Toll   /s/ Alexander Robertson, IV Steven Toll, Esq.  
Alexander Robertson, IV, Cohen Milstein Sellers & Toll PLLC   Esq. Robertson &
Associates, LLP 1100 New York Ave, NW   32121 Lindero Canyon Road, Suite 200
Suite 500 — West Tower   Westlake Village, CA 91361 Washington, DC 20005        
  /s/ Niall McCarthy   /s/ Daniel K. Bryson Niall McCarthy   Daniel K. Bryson,
Esq. Cotchett Pitre & McCarthy LLP   Whitfield Bryson & Mason LLP 840 Malcolm Rd
#200   900 W. Morgan St. Burlingame, CA 94010   Raleigh, NC 27603       /s/
Steve W. Berman   /s/ Robert R. Ahdoot Steve W. Berman   Robert R. Ahdoot Hagens
Berman Sobol Shapiro LLP (WA-NA)   Ahdoot & Wolfson, P.C. 1918 Eighth Avenue  
10728 Lindbrook Drive Suite 3300   Los Angeles, CA 90024 Seattle, WA 98101      
   

Defendant, Lumber Liquidators, Inc.

          /s/ Lee Reeves     Lee Reeves     Sr. Vice President, Chief Legal
Officer &     Corporate Secretary     Lumber Liquidators, Inc.     3000 John
Deere Road     Toano, VA 23168    

  

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