The current but clouded ownership of Horse of the Year Curlin remained unchanged following a hearing in a Kentucky state court Jan. 22, with a judge overruling a motion for foreclosure on the minority interest owned by jailed attorneys Shirley Cunningham Jr. and William Gallion.
Senior Judge Roger Crittenden in a one-sentence statement overruled the motion filed on behalf of more than 400 former clients of Cunningham and Gallion who have won a $42 million judgment against the attorneys for alleged mishandling of their settlement in the prominent fen-phen diet drug class action lawsuit.
“I think it is very premature,” Crittenden told an assembled group of 12 attorneys and several media members attending the hearing held in Franklin County Circuit Court.
The motion, which was filed in December, asked the court to foreclose on the membership interests and sell the property in Tandy LLC, the parent company of Cunningham and Gallion’s racing entity, Midnight Cry Stable, and distribute the funds to the plaintiffs.
Crittenden did not elaborate on his ruling, nor did any of the attorneys question the decision. But Angela Ford, who represents the fen-phen plaintiffs, said her clients were satisfied with the separate establishment of a court-appointed receiver of Tandy’s financial affairs, and earlier offered to withdraw the foreclosure motion.
“We prefer that a receiver stays in place,” Ford said after the hearing. “That is an alternative for the court for the rest of the LLC, or it can just maintain receivership for Curlin, which is already in place. The receivership is easier for us.”
The court last November granted a charging order that assigned any distribution of funds from Tandy to Cunningham and Gallion – such as race earnings or the sale of the colt to stud – to the fen-phen plaintiffs. A Jan. 14 letter written by Ford to Crittenden said she would withdraw the foreclosure motion.
“Simply put, the whole of Tandy may be worth substantially less at a foreclosure sale than the sum of its parts,” Ford wrote in the letter. “The only way to insure the plaintiffs recover meaningful value is to permit a receiver to liquidate assets and distribute the proceeds subject to the charging order.”
But the receiver apparently hasn’t taken care of all the problems. Attorney Andre Regard, who represents Tandy, told Crittenden that for whatever reason, the bills owed by the company weren’t being paid, even though the judge had issued an order authorizing the receiver to do so. Included in outstanding payables are training bills to trainer Steve Asmussen that are believed to total around $30,000 to $40,000.
“Nothing has been paid,” Regard told Crittenden, who vowed to look into the situation. “Anything we can do to have these paid would help, your honor, otherwise we are going to have a bunch of other lawsuits.”
Among other decisions in the hour-long hearing, Crittenden overruled a Tandy motion to dismiss intervening parties in the lawsuit such as majority owner Stonestreet Stable. Richard Getty, an attorney representing Stonestreet Stable, which is comprised of Jess Jackson and his wife, Barbara Banke, told Crittenden it was important for the majority owner to stay in touch with what was happening in the case.
“So far, Mr. Getty hasn’t made himself an annoyance in this lawsuit,” a smiling Crittenden said. “It would probably be beneficial for them to be part of the lawsuit for now.”
After the hearing, Getty said, “In order to assure ourselves that we know anything and everything that is going in respect to Tandy, that might affect either directly or indirectly this very valuable horse, we will continue to monitor only those proceedings that we know in advance might have some effect.”
In previous conversations with The Blood-Horse, members of Jackson’s legal team indicated they have a first-right-of-refusal clause incorporated into the original sales agreement with Midnight Cry, which last year sold an 80% interest in Curlin to an ownership group that included Stonestreet Stable, Padua Stable and George Bolton. Padua and Bolton have since been bought out by Stonestreet Stable.
Should the Tandy/Midnight Cry interest ever be sold, either by court order or otherwise, the clause could be viewed by law as an automatic buyout bid to Stonestreet Stable.
Cunningham and Gallion are currently incarcerated in a Boone County jail as a result of actions in a separate federal criminal action against them and fellow attorney Melbourne Mills Jr., who also formerly represented the fen-phen plaintiffs. The three attorneys are accused of skimming up to $64 million of the $200 million judgment awarded in the diet-drug class-action lawsuit.
Curlin was named Horse of the Year during the 37th Eclipse Awards ceremony Jan. 21, the day before the Kentucky court hearing.