A Circuit Court judge in Kentucky has awarded Jerry Brown, who operates Thoro-Graph, Inc., a total of $25,000 (plus costs) for his role in the purchase by James Lauffer of a half-interest in eventual Horse of the Year Rachel Alexandra.
While Judge John David Freeman of Johnson (Paintsville) Circuit Court ruled that Brown had provided advice and services to Lauffer in connection with his purchase of the filly, the monetary award in the April 12 ruling is far less than the nearly $5 million sought by Brown in the case that was initially brought by Lauffer.
Lauffer initiated the litigation in order to get a legal determination that Brown was not entitled to a commission stemming from the plaintiff’s purchase of a half-interest in Rachel Alexandra from her owner-breeder, Dolphus Morrison. Evidence in the case showed that Brown, who does not act as an agent, had brought Rachel Alexandra to the attention of various parties, including Lauffer, in late 2008.
Working with Florida bloodstock agent Don Brauer, Brown recommended Rachel to a group that included Lauffer, insurance agent and horse owner Ron Kirk, and Lexington businessman Greg McDonald. That deal did not transpire for various reasons, with Kirk backing out because he thought the filly was overpriced at $1.2 million and McDonald declining because he did not like the commission being charged by Brown.
Brown testified, and witnesses on his behalf corroborated, that he charges a 5% commission on the initial purchase price, plus 5% of any future earnings and 5% of the increase in a horse’s value. Rachel Alexandra, was eventually sold by Lauffer and Morrison to Stonestreet Stables and Harold McCormick for $10 million. Citing a state statute on disgorgement that allows for an award to include the amount of profit made on a deal when fraud is involved, the total being sought by Brown was $4,928,451. The judge ruled there was no disgorgement and fraud in the case.
Among those testifying, either in person or via affidavit, that they had secured Brown’s services in the past and paid his commission structure were Chris Young of Overbrook Farm, WinStar Farm racing manager Elliott Walden, Millennium Farm owner Ro Parra, and consultant Rich Decker.
Testifying on behalf of Lauffer were Headley Bell of Mill Ridge Farm and Nicoma Bloodstock, agent Cooper Sawyer, farm operator Marcus Takacs, and Poplar Hill Equine manager John Haggin. All had advised and/or worked with Lauffer on the purchase of horses and testified that 5% commission on a purchase price was the industry norm.
According to a synopsis of the case as outlined in Preston’s ruling, testimony was presented detailing a series of events leading up to Lauffer’s private purchase of the filly. While Brown and Brauer had initially brought the filly to the attention of Lauffer and his potential partners, Lauffer testified that he made the purchase based on his own review of the filly’s races, pedigree, and other pertinent information.
Lauffer testified that neither he nor any of his partners had a written agreement with Brown and Brauer, and that he was aware of Brown’s fees. Although he purchased his half of Rachel Alexandra privately, Lauffer eventually paid Brauer a fee of $15,000 for his role in the transaction.
Much of the testimony centered on Brown’s role in the deal, whether there was an agreement between him and Lauffer, and how much Brown should receive for his services.
Preston determined that even without a binding contract, Brown should be compensated for his services in connection with Lauffer’s eventual purchase of Rachel Alexandra. However, he concluded that the fee should just be 5% of what Lauffer paid for his half-interest.
"The defendant offered no testimony to the effect that his charge for service rendered was any kind of industry standard," the judge wrote. "The plaintiff offered testimony to the effect that 5% was the standard industry fee for services for any person representing someone in the sale of a horse. In fact, 5% seems to be a fee covering a wide range of situations..."
The judge also threw out additional claims made by Brown, including that Lauffer had committed fraud in his dealings with the defendant.