Toll to Pay $25 Million to End Lawsuit Alleging Company Misled Investors
Toll Brothers Inc., the largest U.S. luxury-home builder, agreed to pay $25 million to settle a lawsuit that alleged the company misled investors about its ability to weather the slump in the housing market.
The City of Hialeah Employees’ Retirement System in Florida sued in April 2007, claiming directors misrepresented demand for Toll’s new homes in fiscal year 2005 and growth projections for 2006. The Laborers Pension Trust Fund for Northern California joined as co-plaintiff seeking to represent investors who bought shares from Dec. 9, 2004, to Nov. 8, 2005. Toll denies any wrongdoing.
Toll and its board “wish to eliminate the uncertainty, risk, burden and expense of further litigation, and to permit the operation of the company’s business without further distraction,” according to settlement papers filed Oct. 28 in U.S. District Court in Philadelphia.
Toll in August reported its first quarterly profit since 2007. The homebuilder, based in Horsham, Pennsylvania, recorded a $26.5 million third-quarter gain from a tax benefit, ending a streak of 11 straight quarterly losses.
Martin Connor, Toll’s chief financial officer, declined to comment on the settlement. In a Sept. 8 regulatory filing, Toll said the agreement was reached in July and will be funded entirely by the company’s insurers.
Under the agreement, which requires a judge’s approval, plaintiffs’ lawyers will receive fees totaling about 25 percent of the settlement amount, or $6.25 million, plus expenses of as much as $750,000, according to court papers.
Toll rose 67 cents, or 3.8 percent, to $18.52 at 4 p.m. in New York Stock Exchange composite trading. The shares have fallen 1.5 percent this year.
The case is City of Hialeah Employees’ Retirement System v. Toll Brothers Inc, 07-cv-1513, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).
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