Note 7 - Contingencies

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 7 – CONTINGENCIES

On April 24, 2015, a putative class action lawsuit, entitled Van Wingerden v. Cadiz Inc., et al., No. 2:15-cv-03080-JAK-JEM, was filed against Cadiz and certain of its directors and officers ("Defendants") in the United States District Court for the Central District of California purporting to assert claims for violation of §§ 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaint, which purports to be brought on behalf of all Cadiz shareholders, alleges that the Company's public disclosures were inadequate in relation to the Cadiz Valley Water Conservation, Recovery and Storage Project (the "Water Project"). The complaint seeks unspecified monetary damages and other relief. The Company believes that the claims alleged in the purported class action lawsuit are baseless and without merit. On December 2, 2015, Defendants filed a Motion to Dismiss the lawsuit and a hearing on the motion was held in late February 2016. Following court-mandated mediation discussions in April 2016, and notwithstanding that the Company disputes the allegations in the complaint, the parties agreed to settle the case and filed a notice of settlement with the Court on May 6, 2016. On May 9, 2016, the Court dismissed the case without prejudice. On June 16, 2016, the plaintiffs filed a motion seeking preliminary approval of the settlement and supplemented such motion on July 14, 2016 at the request of the Court. On September 30, 2016, the Court issued an order granting preliminary approval of the settlement. In the settlement, the Company makes no admission of liability or wrongdoing and does not concede the validity of any of the allegations or legal claims made in the litigation. A hearing is scheduled for February 6, 2017 to finalize the terms of settlement. The Company recorded a liability of $3.0 million in accrued liabilities based on the terms of the preliminary settlement. The Company’s corporate insurance policy is expected to cover the costs of this litigation and, therefore, the Company also recorded $3.0 million in accounts receivable.

On February 6, 2016, a shareholder derivative lawsuit, entitled

Herman Boschken v. Keith Brackpool et. al.

, was filed against certain Cadiz directors and officers ("Derivative Defendants") in State of California County of Los Angeles Superior Court purporting to assert claims for breach of fiduciary duty, corporate waste, gross mismanagement, and unjust enrichment.  The complaint, which purports to be brought on behalf of all Cadiz shareholders, alleges that the Derivative Defendants made false and misleading statements regarding the Company's business and prospects.  This complaint was filed in the wake of

Van Wingerden v.

Cadiz

, Case No. 2:15-cv-03080-JAK-JEM (C.D.C.A. Apr. 24, 2015), described above, and mirrors many of its factual allegations.  Among other things, the complaint seeks unspecified monetary damages and certain changes to corporate governance policies.  The Company believes that the claims alleged in the lawsuit are baseless and without merit.  Pursuant to a Joint Stipulation and Order agreed to by the parties and entered by the Court on April 22, 2016, this Derivative Case was stayed pending the dismissal, with prejudice, of the Van Wingerden case described above.  With a preliminarily approved settlement completed in the

Van Wingerden v. Cadiz

case, described above, settlement discussions with the plaintiffs in the

Herman Boschken v. Keith Brackpool et. al.

case have resumed. No activity has yet occurred before the Court.  While the Company believes that this purported class action lawsuit is without merit, pursuant to applicable accounting requirements, the Company will evaluate this matter on an ongoing basis and record accruals for contingencies if the Company concludes that it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated.  In many situations, including the purported class action, in which such matters are being contested, the outcome is not predictable and any potential loss is not estimable.

There are no other material legal proceedings pending to which the Company is a party or of which any of the Company's property is the subject.