Lumber Liquidators (LL): Research, Not Hyperbole by “Max Vision” – Disclosure – the author of this piece has a long position in LL

In the last article, I explained some of the issues surrounding the “deconstructive test” method. The Gotcha Camp would have you believe that this is a settled issue. They are making a logical leap that just isn’t warranted. Because the testing method is promulgated by the regulatory agency, they are then inferring that the results can be interpreted by the layman. In this article, I will go straight to the source, the Air Resource Board and its enforcement division. California is surprisingly public in its disclosure of its enforcement activities. It’s a shame that the Gotcha Camp didn’t do a little more research in this area to confirm their thoughts.

Lumber Liquidators: Gotcha Camp’s statement

The Gotcha Camp has made the following statement and quote in its defense of its reliance on the deconstructive test:

“Contrary to Lumber Liquidators’ claims, deconstruction isn’t a new or unproven test method. Rather, it was developed over several years, with industry consultation and peer review, and was finally published in 2013. For more on this, see CARB’s Standard Operating Procedures (SOP) here and its Final Statement of Reasons (FSOR) here – which, on page 42, states:

Agency Response [24-Landry-070423-CWIC]: Yes it is correct that finished products must be deconstructed to test for compliance. But, we disagree that there is great uncertainty in the enforcement program. Deconstructive testing is needed for finished goods to verify compliance with the emission standards.”

Lumber Liquidators: Issues with Gotcha Camp’s statement

There are a few things wrong with these statements from the Gotcha Camp.

First, there are absolutely no “peer-reviewed” studies on the “deconstructive test” method and its results. That is a factual misstatement. I can’t tell if that is just ignorance, an outright lie or purposefully misleading.

Second, the statement from the Final Statement of Reasons (which is the legislative history of the ATCM), is fairly misleading because it makes it appear as though the deconstructive test method is a well-established method to verify compliance. This statement was from 2007. Remember the law was passed in 2008, and the full CARB Phase 2 compliance rules went into effect in 2012.

However, let’s visit the Air Resource Board’s own website. The Enforcement Division of the Air Resource Board puts out a very detailed Enforcement Summary at the end of each year, typically in the May of the following year. So, let’s go back and look at what the enforcement division had to say regarding the Composite Wood Products Program, of which CARB 2 is a part:

“Enforcement Division (“ED”) staff completed the screening of composite wood product samples and processing of protocols, and evaluated data to determine the reproducibility of the formaldehyde emissions analyses for both raw wood panels and deconstructed finished goods. ED worked with other divisions to address method equivalency issues that severely limited the number of samples that could be tested during 2012.”

Enforcement Report 2012.

As you can see from the above statement, the ED staff struggled throughout 2012 to address the “method equivalency issues” between the testing of “deconstructed finished goods” and raw wood panels.  This is 4 years after the law was signed.  Keep in mind, that it is the raw wood panels that are regulated under CARB.

Fast forward one year to the comments from 2014 on the prior year’s work of 2013.

“Provided assistance to the Stationary Source Division and the Monitoring and Laboratory Division in preparing samples for the interlab study and equivalency testing and commented on enforceability issues during regulatory development activities with U.S. EPA.”

“Initiated investigations on composite wood in laminate and engineered hardwood flooring.”

Enforcement Report 2013.

This was all in the 2013. If you recall, the original short report by Xuhua Zhou was posted in June 2013. That author sent a letter to the head of the Air Resource Board.

Lumber Liquidators: The testing and results of the ED’s work

In addition to the summary description above, the ED provides detailed reports on its activities in Appendix B of both reports (see above for link.)

Under the title, Investigation and Case Resolution Statistics, there is further detail on the testing and results of the ED’s work. In 2012, the ED tested 50 samples, 8 of which were “uncertified or tested greater than the limit.” In 2013, there were 40 samples tested, 14 of which were “uncertified or tested greater than the limit.” The most interesting of this is the next data point: In 2012 and 2013, there were zero (0) enforcement cases opened during year or pending at the end of each year.

In other words, despite a failure rate of 35% in 2013, the Enforcement Division opened zero cases.

The Gotcha Camp has cited the following statement from Lumber Liquidators as “conclusive” proof (the smoking gun) that Lumber Liquidators has somehow admitted that their products are not in compliance.

Nevertheless, CARB has “deconstructed” our products after conducting routine inspections, as well as (we believe) products from others in the industry. In CARB’s preliminary findings, some of the samples of our product that they deconstructed and tested exceeded the CARB phase 2 limits for raw composite wood cores.

Company 8-k.

However, as we can see from the data above, 35% of the samples tested in 2013 failed, however, not a single enforcement case was even opened. That just seems odd.

Lumber Liquidators: Deconstructive method

What conclusions can you draw from this data. I think there are a few possibilities:

  1. The “deconstructive method” only provides a rough guide for the ARB to investigate further, and those additional steps in their investigation process have not resulted in any full-fledged cases being opened.
  2. The testing methodology behind the “deconstructive method” may have equivalency parameters, equating results from the deconstructive methods to what the results would have been had the original testing occurred on the pre-finished composite board. For example, a deconstructive test might yield up to .90 ppm, but that would equate back to only 10% of that result at the original composite board state, yielding a pre-finished results of only .09 ppm, thus not exceeding the CARB 2 standards. These equivalency parameters are not published because the “deconstructive method” is an enforcement test, not a test for the general public or class action attorneys.
  3. The enforcement division in charge of the Composite Wood Program is a straw man group and doesn’t act. The Gotcha Camp might then suggest, that this division will be forced to act, now that the “news is out.”

Obviously, I can’t be sure of either of these, but I would lean more towards 1 or 2 for the following reason.

Steve Giorgi is the same person in charge of enforcement at ARB for both the Composite Wood Products and Consumer Products.

In 2013 alone, the Consumer Products Program, over which Steve is in charge, tested 2,004 samples of which 585 were “uncertified or greater than the limit” and opened 73 cases, yielding $1,594,625 in fines and settlements. Overall, the enforcement divisions of ARB opened 1,065 cases and collected $9,930,420 in fines and settlements in 2013. In other words, the enforcement divisions of ARB are active regulators, they know how to test, prosecute and fine. Remember, not a SINGLE case under CARB 2

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