Thanks for taking your time to report this issue and help making Ubuntu better.
I can confirm the error message still shows up on the latest version of xzless on Ubuntu Trusty.
I found that the same issue has been reported to Debian, along with a patch which was forwarded upstream. It looks like the issue has been fixed in xz, but the newer version has just not been packaged yet.
Thanks for taking your time to report this issue and help making Ubuntu better.
I can confirm the error message still shows up on the latest version of xzless on Ubuntu Trusty.
I found that the same issue has been reported to Debian, along with a patch which was forwarded upstream. It looks like the issue has been fixed in xz, but the newer version has just not been packaged yet.