LL/DC – All the normal noises when something like this happens.  I'm not privy to LL but I used to help fix things like this for a living – USUALLY they are blown way out of proportion, often by bears seeking to make a mountain out of a molehill and the lawsuits are all part of that game.

LL has hundreds of floor types and this one, even if it were a best-seller, would be 5-10% of installations in one state and even if that state were 20% of their business, then 1-2% of $2.5Bn (3 years) in revenues affected = $25M or 1/3 of one year's profits WORST CASE.  Then figure impact on sales (which they can turn around with good p/r) flattens them out for a year and we're certainly not talking about a BP-like disaster, are we?  

Very much unlike the companies we looked at above, LL is valued at $1.4Bn (at $52) with $1Bn in sales and $75M in profit – a p/e of 20 for a company with very good growth and I'd consider this a growing pain but certainly not the end of their business. 

Those LL 2017 $40 puts ended up selling for $12.50 once trading began (about 11) and are still there now for a net $27.50 entry and the 2017 $35s dropped to $13.50 and the $55s are fetching $6 so net $7.50 on the spread is about what we were looking at but with a short $12.50 on the $40s, it's now a net $5 credit, which drops the worst-case net entry to $35 so let's do 5 in the LTP so we can see how it goes.   The potential upside is $10,000 at $55 vs owning 500 shares at net $35 ($17,500) and, if they drop 50% more ($20) – we're happy to DD.