Commitments and Contingent Liabilities

3 Months Ended

Feb. 28, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In the opinion of management, the disposition of these matters will not have a material adverse effect on the Company’s condensed consolidated financial statements. The Company is also a party to various lawsuits involving purchases and sales of real property. These lawsuits include claims regarding representations and warranties made in connection with the transfer of properties and disputes regarding the obligation to purchase or sell properties.

The Company has been engaged in litigation since 2008 in the United States District Court for the District of Maryland regarding whether the Company is required by a contract it entered into in 2005 to purchase a property in Maryland. After entering into the contract, the Company later renegotiated the purchase price during the downturn, reducing it from $200 million to $134 million, $20 million of which has been paid and subsequently written off, leaving a balance of $114 million. In January 2015, the District Court rendered a decision ordering the Company to purchase the property for the $114 million balance of the contract price, to pay interest at the rate of 12% per annum from May 27, 2008, and to reimburse the seller for real estate taxes and attorneys’ fees. The Company believed the decision was contrary to applicable law and appealed the decision.

On March 23, 2017, the United States Court of Appeals for the Fourth Circuit held oral argument in the appeal. The timing of a final decision is uncertain. While the Company continues to believe the trial court decision is contrary to applicable law, after assessment of the oral argument, the Company has concluded that it is appropriate to establish an accrual of $140 million for the litigation. The accrual represents the high end of the range of expected liability associated with the litigation. This accrual will be charged against first quarter earnings. In addition to the accrual, the Company would be required to purchase the property, which is the subject of the litigation, for $114 million, which approximates the Company's estimate of the fair value of the property. If the District Court decision is reversed on appeal, the Company will not have to purchase the property or pay interest, real estate taxes or attorneys’ fees, and the accrual will be reversed. If the appellate court directs further proceedings at the trial court level, the accrual may be reduced depending on the basis for the decision and the direction given to the trial court.