Business

Single mother wins legal battle with Lumber Liquidators over formaldehyde issue

Anna Schmidt, a 42-year-old single mother sits with her 13-year-old daughter Mei Ling Yu at their home in Garner. Schmidt took Lumber Liquidators to small claims court and won a $796.85 judgment after she installed laminate flooring in her daughter's bedroom and everyone in the house took sick with flu-like symptoms. Hundreds of class action cases have been filed alleging that Lumber Liquidators is selling flooring with unsafe levels of formaldehyde.
Anna Schmidt, a 42-year-old single mother sits with her 13-year-old daughter Mei Ling Yu at their home in Garner. Schmidt took Lumber Liquidators to small claims court and won a $796.85 judgment after she installed laminate flooring in her daughter's bedroom and everyone in the house took sick with flu-like symptoms. Hundreds of class action cases have been filed alleging that Lumber Liquidators is selling flooring with unsafe levels of formaldehyde. tlong@newsobserver.com

When Anna Schmidt, a 42-year-old single mother of four, decided that the new laminate wood flooring in her Johnston County home was making her family sick, she figured that taking on a corporate giant was the quickest way to fix the problem.

Rather than join one of the many class action lawsuits that have been filed against the company that sold her the flooring, Lumber Liquidators, Schmidt took the national retailer to small claims court seeking a refund.

“I don’t know why they did not settle out of court,” Schmidt said. “They must have been so confident that they were going to win.”

To the surprise of some – but not the feisty Schmidt, who represented herself – she emerged with a $796.85 judgment in her favor.

Her victory is even more impressive when you consider who represented Lumber Liquidators in Schmidt’s case: Colon Willoughby, who was Wake County’s top prosecutor for nearly three decades before going into private practice.

“I’m surprised that she would be able to win over the former district attorney,” said Raleigh lawyer Scott Harris. His firm, Whitfield Bryson & Mason, has filed class action lawsuits against Lumber Liquidators.

More than 100 class action cases have been filed alleging that Lumber Liquidators is selling laminate wood flooring with unsafe levels of formaldehyde, a carcinogen. The stakes are much higher in those cases, which are looking to represent thousands of customers and seek punitive damages as well as actual damages.

But Schmidt’s legal case against the Virginia-based retailer, which has 356 stores nationwide and generated $1 billion in revenue last year, may be the first regarding the formaldehyde issue to be adjudicated. Lumber Liquidators chose not to appeal the ruling and instead paid the judgment.

However, because the ruling came in small claims court, it can’t be cited as precedent by others seeking damages against the retailer over the formaldehyde issue.

Schmidt never tested for formaldehyde levels in her home and has no proof that the flooring made her family sick. But she has no doubt that’s what happened – especially since her family’s health quickly improved after she closed up the bedroom and stuffed towels in the door crack. A few days after that, she had the flooring removed.

“Everybody’s sicknesses miraculously disappeared,” said Schmidt, who has her own cleaning business and typically cleans three or four houses daily.

Although biased against Lumber Liquidators, Harris, the attorney, isn’t reading any broader significance into Schmidt’s victory.

“I think it’s good for her,” he said. “I just don’t know if it has any real meaning beyond her particular issue.”

Harris said he was reluctant to attach any significance to the case because, unlike higher courts, there’s no transcript of the proceedings of small claims court cases and therefore no way of discerning why Wake County Magistrate Brian Flatley ruled as he did. Flatley declined to comment on his ruling.

Similarly, Willoughby, who practices in Raleigh with McGuire Woods, wouldn’t comment on Schmidt’s case other than to say that he had substituted for a colleague who had a conflict and couldn’t appear in court that day.

“I’m not authorized to speak on behalf of (Lumber Liquidators),” he said.

As for Lumber Liquidators, it issued a short statement regarding the case: “While Lumber Liquidators defends itself vigorously against allegations that it disputes, this small claims matter sets no legal precedent and cannot be cited in any future litigation. In the interest of all parties concerned, the company decided to forgo our right to appeal and resolve the matter.”

Federal investigations

Lumber Liquidators has been in turmoil since March 1, when the news show “60 Minutes” linked the company’s laminate flooring imported from China to unsafe levels of formaldehyde. “60 Minutes” reported that when it purchased 31 boxes of laminate flooring at stores in five states and sent them to two labs for testing, only one was in compliance with formaldehyde emission standards.

In its initial response to that broadcast, Lumber Liquidators said the tests conducted for “60 Minutes” were flawed and that its products were “completely safe.”

But the company’s stock plummeted and its sales fell 12.8 percent in March. It soon reported that federal prosecutors were conducting a criminal probe; the Consumer Product Safety Commission and the Securities and Exchange Commission also launched investigations.

Lumber Liquidators also reported that, from early March through early May, it sent thousands of air quality testing kits to customers who requested them. Of 3,400 test kits that had been returned and analyzed, the company said, 97 percent of the homes had formaldehyde levels that met World Health Organization guidelines. (Technically speaking, the tests measured the formaldehyde levels in the home, not in the flooring per se.)

Still, on the same day the retailer released those test results, it announced that it was suspending sales of all laminate flooring produced in China.

Senior management has felt the repercussions as well – CEO Robert Lynch and Daniel Terrell, the chief financial officer, departed as the company’s problems mounted.

Just wanted a refund

The controversy hadn’t yet erupted in February, when Schmidt had saved up enough money to replace the carpet in the first-floor bedroom vacated by her 18-year-old son when he joined the Army. Her oldest daughter, Mei Ling, 13, was tired of sharing a room with her 8-year-old sister, Emma, and wanted to move into the bedroom.

Schmidt was delighted with how the new flooring looked. And although there was a pungent odor, she dismissed it, thinking it would go away.

She also didn’t worry too much about the assortment of symptoms that she and two of the three children still living at home came down with – including sore throats, runny eyes and, for her 16-year-old son, Reis, nosebleeds. It being February, she assumed it was “something viral.” (Her daughter Emma wasn’t affected. “Her bedroom is upstairs and away from everything,” Schmidt said.)

But Schmidt’s attitude changed in mid-March when she told some neighbors about her family’s ailments and one of them asked, “Didn’t you just install flooring?” – and then proceeded to tell her about Lumber Liquidators being in the news.

Schmidt immediately did an Internet search and found that it was flooring like hers, which was clearly labeled as “Product from China,” that had been red-flagged in news reports. The next day she was on the phone with the manager of the Lumber Liquidators store in Raleigh where she purchased the flooring asking for a refund.

“I told him, all I want back is the cost of the product,” she said. “I said I will be happy to rip it out of my daughter’s room and bring it to your store and you can have it back. ... I just want it out of my house.”

The manager insisted the product was safe – Schmidt got the impression he was reading from a script – and balked at refunding her money because the flooring already had been cut and installed. He also asked her if the product was defective.

“I said, aside from the poison, everything was beautiful,” Schmidt said.

After calling Lumber Liquidators’ headquarters and getting nowhere, she called the store manager again and “explained to him that if he didn’t take it back I was going to take him to court. And he said, fine, go right ahead. So I did.”

Her day in court

Schmidt, who left home at age 16 yet managed to put herself through college – she majored in criminal justice at the University of Albany – was familiar with small claims court. She had successfully pursued a claim when she lived in Saratoga, N.Y., where she owned a cookie business, which gave her some confidence.

The complaint form she filed with the Wake County Small Claims Court – accompanied by a $96 filing fee – included a succinct, handwritten summary of her case: “Lumber Liquidators sold me a product that is harmful and unsafe for myself and my family,” Schmidt wrote. “They are refusing to refund my money. It is exposing us to harmful amounts of formaldehyde. The flooring was installed and has now been removed.”

When her day in court came April 30, she arrived armed with receipts and other documents – including a photo of the box showing her flooring came from China. She estimates her case took about 20 minutes.

Schmidt is convinced she scored points with the magistrate when the Lumber Liquidators store manager complained in court that she had removed the flooring without testing it. Schmidt’s defense was that the test kit that Lumber Liquidators sent had only arrived at her house the week before – about a month after she had contacted the company and, from her perspective, far too long.

“I said, it was making us sick, so obviously sick,” Schmidt said. “So if the health and welfare of my family was a priority, why would you not get the test kit out immediately?”

With regard to that delay, Lumber Liquidators issued a second statement saying that it “has offered home air test kits to thousands of consumers in what we believe is among the largest home air testing programs ever conducted in the U.S. The scope and scale of the testing has caused some delay for customers, especially for those who requested test kits early in the program. We have been informed that more recently, the results are being distributed in accordance with a more regular schedule.”

Schmidt didn’t get all the damages – more than $1,400 – that she sought. She won reimbursement for the price of the flooring and the cost of having it removed. But she failed to recover the cost of installation and the cost of equipment she bought for the installation – which she had attempted herself before deciding she needed to hire a handyman to finish the job right.

Regardless, Schmidt has chalked up her day in court as a victory.

Lumber Liquidators

Business: Sells hardwood flooring and other types of flooring, including laminate wood flooring, at 356 stores nationwide.

Headquarters: Toano, Va.

Acting CEO: Thomas Sullivan

2014 revenue: $1.05 billion

2014 net income: $63.4 million

The story so far

March 1: “60 Minutes” links the company’s laminate flooring imported from China to unsafe levels of formaldehyde.

March 2: Lumber Liquidators responds to the “60 Minutes” report by issuing a lengthy statement saying the news show used an improper test method.

Early March through May 1: 26,000 air quality testing kits are sent to customers who request them; 3,400 test kits are returned and analyzed. The results, announced on May 7, show that that 97 percent of the homes have formaldehyde levels that meet World Health Organization guidelines.

April 29: In a filing with the Securities and Exchange Commission, the company reports that 103 class actions lawsuits have been filed in federal and state courts over the laminate flooring. The U.S. attorney’s office for the Eastern District of Virginia, the Consumer Product Safety Commission and the Securities and Exchange Commission launch investigations.

May 7: The company halts sales of laminate flooring from China.

May 21: Lumber Liquidators announces the resignation of Robert Lynch, president and CEO. Its founder, Thomas Sullivan, becomes the acting CEO.

May 28: A federal judge in Minneapolis hears arguments on consolidating the many class action lawsuits against Lumber Liquidators. A ruling is expected shortly.

Staff writer David Ranii

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