A U.S. District Court judge on Thursday ruled to dismiss a fraud and breach of contract suit involving the retirement of 1998 Kentucky Derby (gr. I) winner Real Quiet.
George Hofmeister's Highland Stud Farm filed the suit against trainer Bob Baffert, who trained the colt for owner Mike Pegram. Highland bought Real Quiet from Pegram for $1.1 million in 1998. The agreement stated that Highland would take possession of the horse once he retired from racing or Dec. 1, 2000, whichever came first. The decision to when to retire Real Quiet rested solely with Baffert, according to the agreement.
To acquire Real Quiet for the 2000 breeding season, Hofmeister entered into a second agreement with Pegram on Feb. 8, 2000. The second agreement gave Pegram five shares in Real Quiet in exchange for his early retirement. When the horse arrived in Kentucky, he was examined and discovered to have a career-ending injury to his suspensory ligaments.
Hofmeister sued claiming that Baffert knew the horse was injured at the time the second contract was made and that he was forced to pay for something he for which he was already entitled.
Eastern Kentucky District Court Judge Joseph Hood said Hofmeister's suit did not hold up for a couple reasons.
A majority of Highland Farm's claims were dismissed due to Kentucky's "economic loss doctrine," which places limits on how tort law can be applied to commercial sales disputes. Tort law, out of primary concern for safety, holds a manufacturer or distributor responsible for a defective product they placed in the open market. Contracts, however, allow each party to weigh the risks of a venture and decide what's acceptable.
In the Real Quiet case, two sophisticated businessmen and horsemen went through rigorous negotiations before making their agreement, according to Lexington attorney Mike Meuser, who represented Baffert.
"You cannot then make some vague notions of fraud and ask the court to undo what was set in the contract," Meuser said. "(Hofmeister) asked for warranties regarding Real Quiet's physical condition and we refused to give those warranties. He proceeded with the agreement."
Barry Hunter, Hofmeister's attorney, reserved comment on Hood's ruling. Hunter had just received a copy of the ruling Friday morning and said he had not had adequate time to review it. Hofmeister was out of town and could not be reached for comment.
Highland had also sued for breach of contract, which was not affected by the economic loss doctrine. Hood, however, said the original contract clearly stated that Baffert would decide when Real Quiet would retire from racing.
"The defendants were not obligated to retire the horse," Hood stated in his ruling. "The contractual language is straightforward, and the court will not permit plaintiffs to renter a simple matter complex."
While injury eventually ended Real Quiet's racing career, expert testimony indicated the horse was injured while breezing on Feb. 8--the day Hofmeister and Pegram made their second agreement.
"We had several experts testify that the horse could not have breezed on Feb. 8 with that injury," Meuser said. "When Dr. Larry Bramlage saw this horse about seven days after he arrived, he testified the injury was a new injury. It was an unfortunate coincidence."
Real Quiet stands at Vinery Farm near Lexington for a $15,000 stud fee. His first crop became yearlings this year. He bred 102 mares in 2000 and 99 mares in 2001.