Consultant Jerry Brown, who was awarded $25,000 for his role in the sale of Horse of the Year Rachel Alexandra, has appealed that ruling, contending that he is owed more than $4.7 million.
In his appeal, Brown and his Thoro-Graph Inc. allege that Johnson Circuit (Paintsville, Ky.) Court Judge John David Preston correctly ruled that Brown was entitled to a fee for his role in the sale of the filly in late 2008, but the court erred in how much it awarded him. The appeal also contends that the trial court erred by failing to rule on Brown’s claims of fraud and by holding that the consultant was not entitled to financial relief in the form punitive damages and "disgorgement of profits."
The court had determined that Brown had provided advice and services that played a role in the purchase by James Lauffer of half-interest in Rachel Alexandra from breeder Dolphus Morrison for $500,000. Lauffer purchased his interest in the filly, who at the time had two wins from five starts, after a deal fell through in which he was attempting to purchase her in partnership with Ron Kirk and Greg McDonald. Brown had brought Rachel Alexandra to the attention of the Lauffer-Kirk-McDonald partnership but the deal never went through because the potential buyers thought she was overpriced at $1.2 million.
Rachel Alexandra was eventually purchased by Jess Jackson’s Stonestreet Stables and Harold McCormick for $10 million and was voted 2009 Horse of the Year.
Lauffer brought the suit, seeking a legal determination that Brown was not entitled to a commission for his role in the deal. Lauffer eventually paid Florida bloodstock agent Don Brauer, who was working with Brown in the offering of the filly.
In his counterclaim in the Lauffer suit and in his appeal, Brown is seeking $4.7 million. That figure is based on his standard fee of a 5% commission on the initial purchase price, plus 5% of any future earnings, 5% of the increase in a horse’s value, and an award that is allowed when fraud is involved. A Kentucky statute of disgorgement allows for an award to include the amount of profit made on a deal when fraud is involved.
In his appeal, Brown asks the court to "order Lauffer to surrender the $4.5 million in profits he unjustly has retained by virtue of egregious and fraudulent conduct. The proper award to Brown is $4,771,423."
In awarding $25,000 to Brown, Preston determined that the consultant was entitled to a 5% commission that is customarily paid to an agent acting in a similar capacity. Brown contended that he is not an agent and that his services justify the rate structure he charges.
But even if the appeals court upholds the lower court finding that disgorgement was not involved and Brown is not entitled to $4.7 million, he is seeking $271,423 under the terms of his standard fee structure.
An attorney for Lauffer said he is reviewing the appeal and will file a response.
