Item 1. Legal Proceedings
Item 1. Legal Proceedings.
We are involved in various legal proceedings that arise from time to time in the ordinary course of our business. We believe we have established adequate reserves for any probable losses and that the outcome of any of the proceedings should not have a material adverse effect on our financial position or long-term results of operations or cash flows. It is possible, however, that charges related to these matters could be significant to our results of operations or cash flow in any single accounting period.
With respect to administrative or judicial proceedings involving the environment, we have determined that we will disclose any such proceeding if we reasonably believe such proceeding will result in monetary sanctions, exclusive of interest and costs, at or in excess of $1 million.
On April 29, 2025, a verified stockholder of the Company filed a derivative complaint in the Delaware Court of Chancery, on behalf of the Company, against D.R. Horton, Inc., the Company’s Executive Chairman and certain of the Company’s directors. The complaint, which is captioned Mississippi Public Employees’ Retirement System v. D.R. Horton, Inc., C.A. No. 2025-0465-MTZ, asserts claims for breach of fiduciary duty arising out of lot sale transactions between the Company and D.R. Horton. The complaint seeks judgment awarding the Company damages against the defendants and awarding the plaintiff the costs and disbursements of the action, including reasonable attorneys and experts fees.
The Company disputes the allegations of wrongdoing in this matter. Nevertheless, the outcome of this lawsuit is uncertain and cannot be predicted with any certainty. Accordingly, at this time, the Company is not able to estimate a possible loss or range of loss that may result from this lawsuit or to determine whether such loss, if any, would have a material adverse effect on its business, financial condition, results of operations or liquidity.
On September 6, 2024, the Maryland Department of Environment (MDE) filed suit in the Circuit Court for Harford County, Maryland against the Company and D.R. Horton regarding various alleged stormwater compliance issues and violations at a project in Maryland dating from 2022 through 2024, seeking injunctive relief and civil penalties. These matters were resolved through a consent decree with MDE entered into in May 2026 which implemented certain additional best management practices at the project and required defendants to pay civil penalties, to contribute funds to a trust for use in restoration of impacted waters, and attorneys' fees of which the Company's payments were $637,500, $840,000 and $325,000, respectively.
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