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Note 12 - Litigation Loss Contingencies
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12 Months Ended |
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Aug. 31, 2012
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| Legal Matters and Contingencies [Text Block] |
NOTE
12: LITIGATION
LOSS CONTINGENCIES
The
Company is involved in various claims, litigation and other
legal proceedings that arise in the ordinary course of its
business. In accordance with ASC 450, Contingencies,
an accrual is recorded for a loss contingency when its
occurrence is probable and damages can be reasonably
estimated based on the anticipated most likely outcome or the
minimum amount within a range of possible outcomes. The
Company makes such estimates based on information known about
the claims, and experience in contesting, litigating and
settling similar claims. Disclosures are also provided for
reasonably possible losses that could have a material effect
on the Company's financial position, results of operations or
cash flows.
Because
each of the lawsuits below involves complex legal issues and
uncertainties and are in the early stages, the Company has
recorded no accrual for loss related to the lawsuit and is
unable to estimate a reasonably possible loss or range of
loss.
As
discussed in a Form 8-K filed on December 19, 2011, on that
date the Company and the District filed a lawsuit against the
State of Colorado by and through the Land Board. The
complaint was filed with the District Court, City and County
of Denver, State of Colorado. The Company and the District
are claiming that the Land Board breached, and will breach,
agreements entered into by the Land Board with the Company
and the District in connection with a 1996 settlement
agreement. Those agreements include (i) the Amended and
Restated Water Lease, dated as of April 4, 1996, between the
Land Board and the District and (ii) the Service Agreement of
the same date between the Company and the District. As
initially reported in a Current Report on Form 8-K filed on
November 29, 2011, the Land Board issued a Request for
Proposal that included a draft lease agreement related to oil
and gas rights at the Land Board’s Lowry
Range. The Company believes the draft lease
agreement did not adequately address or protect the
Company’s exclusive right to provide water to the Lowry
Range. The Land Board subsequently entered into an
oil and gas lease for the Lowry Range, which, like the draft
lease, does not protect the Company’s exclusive
rights. As a result of this breach, the Company
and the District are claiming damages which will be proven at
trial.
As
disclosed in two Form 8-K’s, one filed on February 16,
2012 and one filed on February 29, 2012, HP A&M initiated
a lawsuit against the Company in District Court, City and
County of Denver, State of Colorado on February 27, 2012
alleging breaches of representations made in connection with
the Arkansas River Agreement. The HP A&M
claims relate to the issues currently being litigated between
the Company and the Land Board regarding the Company’s
exclusive right to provide water service to the Land
Board’s Lowry Range property. The Company
believes the allegations are without merit, and intends to
vigorously defend against them.
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