CDI Lawsuit: Midnight Cry Earnings
by Ryan Conley
Date Posted: 12/15/2007 9:57:02 AM
Last Updated: 12/18/2007 1:17:22 PM

Churchill Downs has filed a Kentucky court action against Midnight Cry Stable's co-owners, saying it wants a court to decide who should get purse money earned by their runners.

The complaint for interpleader was filed Dec. 12 in Boone County Circuit Court, and seeks to decide whether $32,744 in earnings from three horses owned by the racing entity of Shirley Cunningham Jr. and William Gallion should go to the stable, or to more than 400 former clients who claim they are due some of the horse owner's winnings.

The purse money doesn't involve leading Horse of the Year candidate Curlin, who is owned 20% by Midnight Cry Stables.

In the complaint, Churchill Downs said it filed the action because it doesn't want to pay the incorrect party and then be involved in possible future litigation. The complaint also names as defendants the former clients, who have won a class-action judgment against the attorneys for their handling of settlement funds in the prominent fen-phen lawsuit.

Tandy LLC, the Kentucky limited liability company that is the parent company of Gallion and Cunningham's racing entity, Midnight Cry Stable, was also named in the lawsuit.

"Churchill has in its custody and possession the funds at issue; is now and at all times has been ready and willing to pay such funds to the party legally entitled to them, and is a mere stakeholder that claims no beneficial interest in the funds," the complaint said.

CDI received a notice of garnishment from an attorney representing the fen-phen plaintiffs, who earlier won a $42.5-million judgment against Cunningham, Gallion, and fellow attorney Melbourne Mills Jr. The three lawyers are accused of skimming $64 million that should have gone to their clients in the $200-million settlement of the diet drug case.

In early November, Boone County Chief Senior Judge William Wehr, who has since recused himself from the fen-phen settlement litigation, signed a charging order that assigned future distributions of earnings and assets from Midnight Cry's horses to the fen-phen plaintiffs. The three attorneys are also involved in a separate federal criminal case.

On the flip-side, Andre F. Regard, an attorney representing Tandy, has told CDI it faces potential legal action if the racetrack company doesn’t release $70,000 in purse winnings at Churchill Downs and The Fair Grounds.

“The inexplicable failure of Churchill Downs will result (in) immediate and serious harm to Tandy LLC for which Churchill Downs may be found liable for damages if the funds are not released today,” Regard wrote in a letter dated Dec. 3.

The $32,744 in Churchill Downs’ purse money is for earnings generated by the Midnight Cry-owned horses Stormin Baghdad, Golden Thief, and Gatorize. Stormin Baghdad and Golden Thief each won races in their only start at the recent Churchill Downs fall meet, while Gatorize, who is owned in a partnership, finished third in one start.

Midnight Cry has a 20% ownership interest in Curlin, who this year won the Breeders’ Cup Classic – Powered by Dodge (gr. I), Preakness Stakes (gr. I), Jockey Club Gold Cup (gr. I), Arkansas Derby (gr. II), and Rebel Stakes (gr. III).

The other 80% ownership interest in Curlin is controlled by Jess Jackson's Stonestreet Stable and George Bolton, partners who in early November announced a buy out of a fourth member of the partnership, Padua Stable.

Separately, The Cincinnati Post has reported that a previous Wehr ruling orders future Midnight Cry earnings resulting from Curlin's racing or stud career to be placed in escrow via a court-appointed receiver. The receiver, Matthew Garretson of Cincinnati, will place into escrow any funds Midnight Cry receives from future winnings or stallion fees Curlin realizes, or from the potential sale of the horse.

Wehr has since stepped down from the case and has been replaced by Senior Judge Roger Crittenden of Frankfort.



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