I just returned from the 2010 National Conference on Equine Law , held last week in Lexington, Kentucky. This was my fifth year in a row to attend the conference, and it was a great year.  The conference had a record number of attendees–180 practitioners from all over the United States. This year’s lineup of speakers and topics was the best I’ve seen so far in five years.

I was lucky enough to be invited to speak this year.  My topic was "A Multi-Jurisdictional Comparison of Equine Liens".  With only 30 minutes to speak, I only had time to cover Texas, Kentucky, and Florida.  However, I hope the materials are helpful by reference to every practitioner or horseman regardless of state.  My handout can be accessed in two parts: Part 1 and Part 2.  Click here for a copy of my PowerPoint presentation.

Takeaways from my presentation:  1) no matter what state you’re in, and regardless of whether your state requires it, always send written notice directly to the debtor (if you can find them) before foreclosing on an equine lien; 2) if you want to do a private lien sale under the UCC foreclosure provisions, make sure you can prove to a judge or jury that your debtor was engaged in a "farming operation" (i.e. they are in the horse business–not just a hobbyist); and 3) there may be multiple liens on the horse at issue.  Be aware of which lien has priority.  The person in possession of the horse almost always has the most bargaining power, regardless of priority.

Ned Bonnie, a long-time Kentucky horseman, equine lawyer, and graduate of Yale undergrad and law school, told me he also attaches (seizes via court order) the original registration papers to a horse when a lien dispute arises.  I like this idea, though it requires filing a lawsuit in Texas.

Other highlights from this year’s conference:

1) Frank T. Becker’s annual Equine Case Law Update–The "case of the year" (the year’s most wacky or novel case) was State v. Coates, 2009 WL 2414334.  Frank calls it a "silly case of no legal significance", but interesting nonetheless!  It involved a case of "road rage" between a jogger and a horseman fighting over who should yield a pathway.  The jogger intentionally startled the horse and ended up getting arrested.  Horsemen 1, joggers 0.

2) Ted Martin and April Neihsl talked about the recoverability of damages in equine cases.  Ted stressed the importance of determining the fair market value of the horse at issue and said it is usually determined by 1) expert testimony; 2) previous sales prices and offers to buy; and 3) the owner’s testimony (in some cases).

April addressed the recoverability of lost profits, sentimental, and punitive damages.  April stressed that when proving up lost profits, it is essential that the plaintiff had income in the past and that the focus is on net profits rather than gross profits.  Also, while sentimental damages are rarely awarded in equine cases, some states (Colorado, Illinois, Oregon, Tennessee, and Utah) allow them by statute.  

3) Bob Webb and Chris Coffman discussed the IRS’s "National Research Program" that is targeting many horse businesses.  The key issue to survive these audits is to prove that the horse operation is a for-profit business, or a trade at the very least.

4) Doyice and Mary Cotten discussed changes in the law affecting the enforceability of liability waivers.  The most frequent causes of liability waiver failure are, according to the Cottens: 1) statutory prohibition of waivers in some states (such as Montana and Louisiana); 2) lack of clarity in the waiver (use of phrase "all liability"); 3) inclusion of waiver in entry form or membership contract; 4) waiver is overbroad or too narrow; and 5) surprisingly–the party to be released is not named in the waiver!

5) Paul Husband presented on the law determining whether someone is an independent contractor or an employee.  Paul stressed the importance of this issue as 6,000 employment tax audits are planned as part of the IRS National Research Program.  The Obama administration has budgeted $25 million to target misclassification of workers as independent contractors.  If an employer misclassifies an employee as an independent contractor, they can receive the "100% penalty" (the person with signature authority on checks for the employer personally pays the employee’s tax and serves time in jail).

6) Jay Hickey of the American Horse Council addressed current federal legislation affecting the horse industry.  The Economic Stimulus Bill contains at least one thing that might benefit horse owners–$1.7 billion that can be used for the maintenance and construction of equine trials.  The AHC encourages local organizations to contact district offices to make sure funds are appropriated to horse-related projects.

7) Julie Fershtman discussed liability issues surrounding equine shows and events.  Because most shows or rodeos do not get each spectator to sign a liability waiver, it is important that event sponsors ask their insurance company about insuring against spectator liability.  Furthermore, it was noted that many accidents at equine activities do not involve horses at all, thus bringing them outside the Equine Activity Acts.  Sponsor insurance should, if possible, cover all premises liability issues…not just accidents involving horses.

8) Krysia Carmel Nelson and Tamara Tucker addressed liability issues in boarding and training arrangements.  They suggested including the following clauses in some boarding/training agreements: 1) "training disclaimer" to protect against claim that bad training diminished value of horse; 2) "risk of loss/indemnity" provision to curtail claims that the trainer or boarding facility injured the horse; 3) "veterinary power of attorney" to protect boarding facility from claim that veterinary services were not authorized and ruined horse; 4) "abandonment clause" holding that after a certain period of time, a horse becomes property of the boarding facility/trainer if the owner doesn’t pay, make contact, or move the horse.

9) Bruce Smith and Mike Meuser covered fraud in horse sales transactions.  They addressed the crucial issue of a seller’s duty to disclose a known defect in a horse.  A duty to disclose can arise when 1) a sales contract requires it; 2) a seller voluntarily makes a partial disclosure that is misleading; 3) the seller knows the buyer has the wrong impression about something related to the horse; 4) a confidential or fiduciary relationship exists; and 5) the seller knows the horse has dangerous propensities.

10) Gregory Dennis, a practitioner who specializes in veterinary malpractice and disciplinary proceedings, discussed various issues surrounding veterinary malpractice cases involving horses.  His presentation highlighted the difference between general negligence in veterinary actions versus veterinary malpractice.

If you would like further information about this year’s conference, please click on the individual presenters’ names discussed above to find their contact information, or contact me for details.

  • The $25 Million budgeted to target the misclassification of workers was from the Department of LABOR, not the IRS. The IRS Examination and Collection Budget for fiscal year 2010 is over 4.7 Billion, with an increase of $332.2 Million over the prior year for examination and collection.

    Plus the 29 states that are participating in the Questionable Employment Tax Practice initiative along with the IRS and the Department of Labor are eligible to receive federal grants to pay into the overall government funding.

    The 100% penalty is just the monetary penalty. The jail sentences can be based on some of the same facts, but the criminal convictions have additional elements to be proven. The 100% penalty is quite easily triggered.

  • Well said paul!