Luxury homebuilder, Toll Brothers has agreed to settle a shareholder lawsuit for $16.2 million. The lawsuit had been filed by shareholder Milton Pfeifer in 2008, and alleged that the directors of Toll Brothers falsely told investors that Toll Brothers would be able to weather the housing market downturn.

According to the lawsuit, the directors of Toll Brothers including co-founders Robert and Bruce Toll made these claims to shareholders, and went on to sell millions of shares of the company between 2004 and 2005. They profited very heavily, allegedly earning as much as $650 million from the sales of those shares.

Those shares were being sold even as concerns about the housing market bubble began to rise. Even as California shareholder dispute lawyers and investors grew concerned about the impeding crash, the directors of the company went to great lengths to convince them that the company was well-positioned to weather any impact of the crash.

In fact, between 2004 and 2005, executives of the company projected as much as 20% net income growth to investors for 2006 and 2007. However, in December 2005, Toll Brothers lowered the projected growth for 2006 to just .5%. Shareholders were immediately concerned about this down marking of the projected growth rate.

Toll Brothers executives continue to deny that they had any access to inside information. They also deny claims about breach of fiduciary duty, or that they made any false or misleading statements about the projected growth of the company.

As part of the settlement, the insurer for Toll Brothers will pay $9.8 million, while the defendants will pay the remaining money.