Gold v. Lumber Liquidators, Inc.

Docket number: 14-cv-05373-RS

The Hamilton Lincoln Law Institute, and its Center for Class Action Fairness represent an objector to a class action settlement originally proposed to pay attorneys $9.2 million of the $14 million in cash defendants Lumbar Liquidators agreed to pay as part of the settlement, leaving only a few million dollars in cash to pay damages to the affected consumers. The settlement would waive those consumers’ claims that Lumber Liquidator’s Morning Star Strand Bamboo flooring could not withstand normal ambient moisture because it was defectively manufactured and fails prematurely well before its 30-year lifetime.

Plaintiffs contend that their fees are fair because the settlement also provides $16 million face value worth of “vouchers.” But to redeem these vouchers, class members must spend hundreds of dollars on yet more flooring products from Lumber Liquidators in the next three years. The vouchers cannot be redeemed for cash, cannot be sold, and cannot be used to buy gift cards.

On behalf of a class member Benjamin Faber, the Hamilton Lincoln Law Institute’s Center for Class Action Fairness filed an objection to the settlement on May 21, 2020. At minimum, the “vouchers” are coupons under the Class Action Fairness Act (CAFA), and so fees should not be awarded until the amount of coupons redeemed is actually known. Faber’s objection is supported by a recent Fourth Circuit involving almost identical coupons with the same defendant, In re Lumber Liquidators Chinese-Manufactured Flooring Prod. Mktg., Sales Practices & Prods. Liab. Litig., 952 F.3d 471 (4th Cir. 2020). In the Fourth Circuit opinions, similar settlement vouchers (there called “e-credits”) were found to be “coupons” under CAFA. The same determination should apply here.

Faber contended that only 25% of the cash fund should be awarded to the attorneys until the actual redemption rate of coupons is known. Attorneys should not be able to walk away with most of the cash while leaving their clients with coupons few class members are likely to redeem.

Before the fairness hearing, class counsel agreed to defer fees pending coupon redemption, thus resolving Faber’s primary objection.

A fairness hearing occurred on September 24, 2020, and the district court approved the settlement over objections on October 22, but it reserved judgment on the total fee award until the three-year claims period elapsed. It awarded only 25% of the $14 million fund and required the parties to issue status reports concerning redemption of coupons.

As of February 22, 2024, only $4.4 million of vouchers had been redeemed, which is high for a coupon settlement, but still a far cry from the $16 million coupon valuation of the settlements. Plaintiffs have requested reminder notices sent to class members reminding them to redeem their coupons, which is a positive side-effect of tying attorney compensation to results actually achieved. CCAF continues to monitor the settlement to ensure supplemental attorneys’ fee awards remain proportional to value received by class members.

When the district court issued its final order on attorney’s fees on February 2, 2024, the final amount of coupons redeemed equaled just over $6.4 million. Again, this far exceeds the average coupon settlement but remains far short of the $16 million valuation put forth by the settling attorneys prior to HLLI’s involvement. All told, thanks to HLLI and Faber’s objection insisting plaintiffs’ attorneys’ fees reflect the actual benefit received by the class, they were able to reduce the total fees from $9.2 million to a more reasonable $5.1 million (plus $900,000 in expenses), a dramatic increase in cash for the class and a reminder of the benefits to the class action system of properly structured incentives for class counsel.

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