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Equine ethics: The nuts and bolts of the new dual agency law

A horse industry ethics bill making it unlawful to receive commissions from both buyer and seller without full disclosure sailed through the Kentucky General Assembly this session and was signed into law by Governor Fletcher on March 28, 2006. The new law, which took effect in July, will require written documentation of all horse sales involving more than $10,000 in addition to severely penalizing the practice of bloodstock agents receiving undisclosed commissions known as “dual agency.” The bill was sponsored by Louisville Democrat, Denver Butler, chairman of the House Licensing and Occupations Committee. However, the real impetus for the law was California winemaker Jess Jackson, better known for his Kendall Jackson wineries, who pushed for the legislation in the wake of a recent lawsuit he filed that complains of corruption in how thoroughbred horse sales are conducted. In his lawsuit Jackson has alleged that he has been defrauded out of millions of dollars by the practice of dual agency. The law has two main components: the written contract requirement and the restrictions on dual agency. 

Written Contracts 
For all transactions greater than $10,000 governed by Kentucky law involving any sale of a horse used for racing or showing, including prospective racehorses, breeding prospects, stallions, stallion seasons, broodmares or weanlings, the transaction must now include a written bill of sale stating the purchase price and be signed by both the purchaser and the seller or their duly authorized agent. However, in transactions relating only to a breeding season or fractional interest in a stallion, the bill of sale may be signed by the syndicate or stallion manager. For public auctions, the bill of sale requirement may be satisfied by an auction receipt signed by the purchaser or the purchaser’s agent. Although, an agent can only sign an auction receipt on behalf of his or her principal if authorized in writing. 

Restrictions on Dual Agency 
Excluding auction companies, for transactions greater than $10,000, the new law makes it illegal for any person to act as an agent for both the purchaser and the seller in any sale of a horse without both parties’ prior knowledge and written consent. The law also makes it illegal for any bloodstock agent to receive any form of compensation in excess of $500 from an individual or entity other than the person the agent represents. However, an agent may receive such a fee if that other relationship is fully disclosed in writing to both the purchaser and seller and each person for whom the agent is acting gives their written consent. Another controversial aspect of the law requires bloodstock agents, upon request, to furnish their employers with copies of all financial records and financial documents relating to such horse sales, but excluding any of their own evaluations of the horse in question. 

To enforce these new restrictions, this law creates a private cause of action for injured parties and grants them the ability to recover the cost of the lawsuit, attorney’s fees and three times the difference between the price paid for the horse and the actual value of the horse at the time of sale. Plaintiffs can also recover three times the amount of any undisclosed or unapproved fee from a third party in excess of $500. This law may affect the manner in which horse sales are conducted in Kentucky and horse sales outside the state involving Kentucky residents. If you have any questions regarding these changes or how it will affect you or your business, please contact us.

  • Partner

    Chris is a member of the Business Services Department and Chair of the Private Equity/Mergers & Acquisitions Practice Group.  He practices in the areas of mergers and acquisitions, health care, securities, private equity ...

  • Senior Partner

    Phil is a member of the firm's Litigation Department and is a trial lawyer in the Lexington office. He represents business clients in federal and state courts and in administrative proceedings. Phil has significant experience ...

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