Court Will Enter Injunction Forcing AQHA to Register Clones & Their Offspring

On August 12, 2013, an evidentiary hearing was held on Plaintiffs’ request for attorneys’ fees and for injunctive relief that would require the AQHA to register clones and their offspring. 

Following the hearing, U.S. District Judge Mary Lou Robinson informed counsel that she would grant an injunction requiring the AQHA to register horses produced by cloning and their offspring.

On August 14, 2013, the court entered an order (which can be accessed here) setting forth specific changes and additions to AQHA rules and regulations, which, according to the order, the judge is considering for inclusion in the injunction. The order requires that any objections to the proposed rule changes be submitted by noon on August 19, 2013.

The court has not yet ruled on Plaintiffs’ request for nearly $900,000 in attorneys’ fees. The court ordered the Plaintiffs to furnish their billing statements to AQHA, and also ordered AQHA to file any objection to the request for attorney’s fees, by August 14, 2013. A copy of AQHA’s objection to Plaintiffs’ attorneys’ fees, filed yesterday, can be found here.  

AQHA’s primary objection to Plaintiffs’ fee request is the fact that the jury did not award any damages to Plaintiffs. Plaintiffs had sought $5.7 million in damages and sought to treble those damages under the antitrust laws for a total of $17.1 million. However, the jury awarded Plaintiffs zero damages.

At this point, the court has not yet entered final judgment in favor of Plaintiffs. According to this press release, AQHA will file a Motion for Judgment as a Matter of Law after entry of final judgment. In that motion, AQHA will request that the Court enter a take nothing judgment in favor of AQHA based on the fact that the jury’s verdict was not supported by the evidence. Should the court not grant AQHA’s motion, AQHA will file a notice of appeal thereby starting the appellate process.

Case Information: Abraham & Veneklasen Joint Venture, et al v. American Quarter Horse Association; Cause No. 2:12-CV-00103-J in the U.S. District Court for the Northern District of Texas (Amarillo Division)

Related Posts:

Federal Jury Rules Against AQHA in Cloning Suit

Federal Lawsuit Alleges AQHA Cloned Horse Registration Policy Violates Antitrust Law

Federal Jury Rules Against AQHA in Cloning Suit

Today, a 10-person jury in the U.S. District Court for the Northern District of Texas, Amarillo Division ruled that AQHA Rule REG106.1, which prohibits the registration of cloned horses and their offspring in AQHA’s breed registry, violates federal and state anti-trust laws. The jury awarded no damages.

In a statement published today on AQHA’s website, AQHA Executive Vice President Don Treadway, Jr. said,

When individuals with shared interests, goals and values come together to form a voluntary association to serve a common purpose, the members have a right to determine the rules for their association. The wisdom of our membership –which is largely not in favor of the registration of clones and their offspring—has not been upheld by this verdict.

Whether nor not clones will be able to be registered with the AQHA in the foreseeable future is still up in the air. According to AQHA President Johne Dobbs,

We will meet with our legal counsel and executive committee regarding our appeal options in continuing to fight for our members’ rights and announce our decision in that regard in the near future.

The plainitffs in the case have requested injunctive relief, in which they have asked the court to order the AQHA to register their cloned horses.  They have also requested that the court order the AQHA to pay at least a portion of their legal fees.  A hearing on the injunctive relief and fees request has not yet been held.  The jury’s verdict has not been reduced to a final judgment, nor has the court issued an opinion in the case at this time.  

Case InformationAbraham & Veneklasen Joint Venture, et al v. American Quarter Horse Association; Cause No. 2:12-CV-00103-J in the U.S. District Court for the Northern District of Texas (Amarillo Division)

Related Post

Federal Lawsuit Alleges AQHA Cloned Horse Registration Policy Violates Antitrust Law

Federal Lawsuit Alleges AQHA Cloned Horse Registration Policy Violates Antitrust Law

On April 23, 2012, AQHA member Jason Abraham and two related business entities sued the American Quarter Horse Association (AQHA) in the U.S. District Court for the Northern District of Texas, Amarillo Division.

The complaint asks the court to order the AQHA to revoke AQHA Rule 227(a), on the basis that an outright restriction on the registration of cloned horses and their offspring allegedly violates federal antitrust laws.

Rule 227(a) was approved in 2004 by the AQHA board of directors, which prohibits all cloned horses and their offspring from being included in the AQHA’s breed registry. 

Other breed registries, such as the Jockey Club and the Paso Fino Horse Association, have also ruled that cloned horses and their offspring are not eligible for registration.

As discussed in this prior post, Texas law (which may or may not be deemed applicable in this case) favors a policy of judicial non-intervention with respect to the internal affairs of voluntary associations, such as the AQHA. An exception to Texas’s policy of judicial non-intervention can apply in cases where a valuable right or property interest is at stake in a lawsuit, and cases where a voluntary association’s rules violate the law.

For more information, see the following articles:

Lawsuit Challenges AQHA Cloned Horse Registration Policy

Suit Filed: Claims AQHA Ban on Cloned Horses Violates Antitrust Law

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Horse-Related Partnership Disputes

A lot of horse owners call in complaining of disputes with their partner in a horse.  Most disputes arise when a partner quits paying his or her share of the expenses on the horse, or when one partner wants to sell the horse and the other does not. Most predicaments arise when there is no written partnership agreement concerning the partners' rights and duties with respect to the horse.

I advise all of my clients who co-own a horse with another party to put their agreement in writing.  The agreement should include:

  • the partners' respective rights and responsibilities,
  • designate who is allowed to take possession of the horse and when,
  • a provision about what happens when one partner stops paying her share of the expenses,
  • who gets to decide the horse will be sold, and
  • how sales proceeds will be allocated between the partners.

Absent a written agreement, multiple owners of one horse will likely be viewed as a "general partnership" from a legal perspective if the parties intended to make a profit on the horse and share in the profit and expenses.  The rules governing all partnerships in Texas (including those with no written partnership agreement) are found in Chapter 152 of the Texas Business Organizations Code.

In order for a Texas partnership to sell 100% of a horse, the "majority-in-interest" must agree if the sale is in the "ordinary course of business," and all partners must agree if the sale is "outside the ordinary course of business."  Tex. Bus. Org. Code Sect. 152.209.  In the case of 50/50 owners, this default rule can result in a stalemate if the partners disagree on a horse sales transaction.  This highlights the necessity of a written partnership agreement.

In the case of a complete stalemate, a partner can bring a lawsuit against another partner under the Remedies Section (152.211) of the Texas Business Organizations Code for breach of fiduciary duty to the partnership (refusal to enter into a sales transaction to the detriment of the partnership) or breach of the partnership agreement (failure to pay their share of expenses).  A partner can also ask the court to dissolve the partnership and order the assets of the partnership sold or distributed to the partners.

In some cases, one partner will buy a horse with his/her own money before the commencement of a partnership relationship.  Later, the original owner might add partners by having them pay the original owner some portion of the purchase price and/or agree to pay a percentage of the expenses related to the horse.   In those cases, the bill of sale and registration papers will initially be in the name of the partner who originally bought the horse.  

It is important to note that horses acquired in the name of a partner will be presumed to be property of that partner, regardless of whether the property is used for partnership purposes, if the instrument transferring title to the horse (the bill of sale) does not indicate the owner's capacity as partner or the existence of the partnership, and if the horse is not acquired with partnership funds.  Tex. Bus. Org. Code Sec. 152.102(c).

The legal presumption cited above causes many problems in an unwritten partnership scenario.  If a horse is intended to be partnership property, partners should create a new bill of sale transferring the horse from the original owner to the partnership or the names of all partners, and transfer the horse's registration papers (if any) to the partnership. 

Partnership lawsuits are notoriously messy...especially when there is no written agreement.  Be very wary of entering into any kind of partnership on a horse unless you have an agreement in writing and you completely trust the other person.  Also be aware that if your partner is in possession of the horse, your partner may deny you access to it or even sell it and pocket the proceeds in the event of a dispute.  

Transfer of Jockey Club Papers after Lien Foreclosure Sale

When you sell a registered Thoroughbred in a valid foreclosure sale, you may or may not be able to obtain the Certificate of Foal Registration (i.e. the “Jockey Club papers”) from the original owner. In either case, pursuant to Rule 9 of the Jockey Club’s American Stud Book, you or the buyer must provide the Jockey Club with the following items in order to have the horses’ papers transferred to your name or the buyer’s name:

1) A check or money order payable to The Jockey Club covering the fee for Duplicate Certificate of Foal Registration;

2) A set of four color photographs of the horse (front, both sides, and rear views) clearly showing the color, and the markings (or lack of markings) on the head, legs and body;

3) A completed and signed Duplicate Certificate Form containing the written description of the markings on the horse, including the exact location of the head and neck cowlicks;

4) Proof of ownership of that specific horse (for example, a bill of sale or canceled check including the name or pedigree of the horse, date of sale and the name of the new owner);

5) An opinion from an attorney, indicating that the sale was conducted in accordance with the laws of the state; and

6) Any further evidence and assurances as The Jockey Club may require, such as genetic typing, parentage verification, or information regarding the circumstances and validity of the sale.

More information, including the American Stud Book rules discussed above, can be found on the Jockey Club’s website.

For instructions on transferring ownership of a registered Appaloosa, go to the APHA's website. 

Transfer of Horse's Papers After Lien Sale

When you sell a horse at a lien foreclosure sale, you will want to transfer its registration papers into the name of the buyer at auction, whether that be you or a third party.  Most breed registries have policies and procedures relating to horses purchased in a lien foreclosure. Depending on the breed registry, you will be asked to provide certain items such as a notarized affidavit stating that the stableman has complied with the law relating to the foreclosure; a copy of the written notice of the foreclosure sale; a copy of the statute by which the foreclosure was conducted; and a notarized bill of sale from the stableman. If you can provide all of the items requested by the breed registry, you will most likely be able to get the horse’s papers transferred into your name.