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Note 9 - Litigation Loss Contingencies
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3 Months Ended |
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Nov. 30, 2012
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| Legal Matters and Contingencies [Text Block] |
NOTE
9 – LITIGATION LOSS CONTINGENCIES
The
Company is involved in various claims, litigation and other
legal proceedings that arise in the ordinary course of its
business. The Company records an accrual 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 is in the early stages of litigation,
the Company has determined that no accruals for losses
related to the lawsuits is reasonably estimable or deemed
reasonably likely at this time.
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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