April 2008

An attorney called me last week to ask what her client, a trainer, should do about a prospective buyer who had picked up a horse from the trainer to "try out" but failed to bring the horse back after the trial period.  The trainer had been hired by the horse’s owner to find a buyer for the horse.  After months of trying to make contact with the prospective buyer, the trainer finally made contact to learn that the horse had allegedly died of colic while in the prospective buyer’s care.  There were no written agreements between the owner and trainer or owner/trainer and prospective buyer.

The first thing I asked was whether they called the police or sheriff when the horse was not returned.  In potential theft situations, it is always advisable to call law enforcement and get a copy of their report.  I also suggested a bit of investigative work to determine if the horse was, in fact, dead.  They had called the vet the prospective buyer usually uses, but the vet had no record of seeing the horse.  I suggested that they send a letter to the prospective buyer asking for proof that the animal was euthanized and asking him to pay the asking price for the horse.  The next step was to file suit if he did not pay (I suggested that she make the trainer and owner joint plaintiffs).

Under Texas law, the trainer and owner in this situation have a colorable claim for conversion and theft under the Texas Theft Liability Act (the "TTLA") against the potential buyer.  People with ownership or possessory rights have standing on both claims. And assuming the trainer spent money to take care of the horse while in her care and was going to get a commission on the sale, the damages element is also satisfied as to the trainer.  Attorneys’ fees and costs are recoverable by the prevailing party under the TTLA.

Is the trainer liable to the owner in this situation?  The trainer would only be liable to the owner under the “principal-agent” theory if the trainer acted without actual authority when she gave the horse to the prospective buyer to try out.

What’s the lesson here?  The trainer and owner would have been in a better position if they had obtained a written agreement with the prospective buyer containing a "risk of loss" provision, whereby the prospective buyer would agree to pay the owner if the horse died or was injured in the prospective buyer’s care.  The trainer could have also required the prospective buyers to make payment in escrow for the horse, and agreed to return the money if and when the horse was returned.

My brother-in-law, Adam Rowe, recently asked me what I thought about the ASPCA’s and other activist groups’ recent attempts to pass legislation that would ban horse-drawn carriage rides in New York City.  The activists claim that the industry as whole should be banned because the horses are allegedly overworked and deprived of proper food, water, and shelter.  If you go to the Carriage Horses-NYC blog, a site maintained by one such activist group, you see a woman standing next to a horse in harness and holding a heart-shaped sign bearing the slogan, "Give These Horses Their Freedom."

My first reaction to the activists’ cause was, assuming at least some carriage operators treat their horses well, why would they want to ban the trade as a whole? The draft horses have a job and are being put to use, which in my mind is preferable to the dubious fate of the "unwanted horse", which many of these horses might become if they cannot be used for surrey rides.  Due to the recent ban on horse slaughter in the U.S., many in the horse industry predict that unwanted horses will be now be euthanized and disposed of, or shipped to Mexico or Canada for slaughter.  See USA Today article on subject.  The activists (and many other horse lovers, myself included) would probably prefer that the carriage horses be released into vast green pastures to run free for the rest of their lives (which can be 30 years or longer).  However, the activists trying to pass this legislation seem short on ideas on who will take care of the horses once they are "given their freedom."

Another thought is that the mistreatment of carriage horses is already illegal in New York.  According to New York law (McKinney’s Agriculture & Markets Law Sect. 353), a carriage driver is guilty of a Class A misdemeanor if he "overdrives, overloads, tortures or cruelly beats" a horse or allows another to do so. He is also liable if he deprives a horse of "necessary sustenance, food or drink," or neglects or refuses to furnish a horse such "sustenance, food, or drink".  I assume that if a particular carriage driver is charged under this criminal statute, his business will not flourish for long. 

Perhaps the most humane thing the activists can do is involve local law enforcement in the investigation of the carriage drivers whom they suspect are guilty of animal cruelty, and let the carriage operators who properly treat their horses continue to do business in peace.

Every horse business should have a written business plan.  There are a couple of reasons for this.  First, if your business is a start-up, the business plan will help you reduce financial risk by realistically assessing anticipated income and expenses before the business is launched.  Second, a written and regularly-updated business plan will help you in the case of an audit by the IRS, especially if the IRS suspects that your horse business may actually be a "hobby" or that you did not actively participate in the management of the business.  Finally, a written business plan, especially if attractively packaged, can help foster good business relationships with banks, creditors, and others in the horse industry who can either send you business or help you in some other way.

Since there is really no downside to have a written business plan, I suggest that every horse business (including businesses that have been operating for a while without a written business plan) keep an electronic and hard copy of a business plan that addresses the following items:

1)  A summary of the business goals and objectives of the business;

2)  An outline of how you will attain your business goals; 

3)  A list of the types of advisers you will consult (such as horse industry mentors, accountants, and attorneys);

4)  How the business will be owned (i.e. through and entity such as an LLC, who all owns an interest in the business, the percentage interest each owner holds, etc.);

5)  How the business will be financed (i.e. where you will obtain the initial capital needed to start up the business, and the amount needed);

6)  Projected income and expenses for the next 6 months and year (be conservative…most business plans underestimate expenses and necessary capital;  also, you should avoid projecting income and expenses further out than one year as these often become meaningless due to changing conditions and strategies);

7)  The method(s) you will use to find and secure good clients (advertising, networking, shows, etc.).

There really is no "magic formula" for a good business plan, nor should it be set in stone.  Your business is your dream, and your plan needs to set out your unique and individual vision and talents.  Your business plan will act as a "road map" for your business to help you stay on course with your goals and avoid foreseeable hazards.  It should be updated and revised at least once per year, if not more often.

To help you get started, see the attached Sample Equine Business Plan, to which you can add information to fit the needs of your particular horse business.  As you can see, my sample is fairly basic.  There are a lot of sample business plans you can pull up online, and most of those are pretty complex.  One site that provides sample business plans is BPlans.com.  Do not let the complexity of others’ business plans intimidate you into not doing one at all.  While more detail is better in some instances, do not put off doing a business plan just because you don’t know your exact numbers or you see others putting pie graphs in their business plans.  The key here is to have something in writing that you can add to and enhance as your business grows.