THE BATTLE OF ALEXANDRA
Jerry Brown, the owner of Thorograph performance figures, charges potential racehorse buyers more for his recommendations on which horses in training to purchase than traditional bloodstock agents charge. Brown, who does not consider himself a bloodstock agent, figures his advice is worth it.
James Lauffer disagrees.
A judge in Paintsville, Ky., will decide over the next couple of days whether or not Lauffer knowingly stiffed Brown for the $271,423 Brown claims he is due after Lauffer bought a 50% interest in Rachel Alexandra for $600,000 following her second-place finish in the Grade 3 Pocahontas Stakes at Churchill Downs in November 2008, then resold that 50% interest for $5 million to Jess Jackson and Harold McCormick after the daughter of Medaglia d’Oro won the Grade 1 Kentucky Oaks by 20 1/4 lengths the following May.
Of course, there’s more to the story. Lauffer, who sued Brown after Brown attempted to collect his fees (5% of sale price, 5% of future earnings, 5% of appreciation in value), said the advice given him that “Rachel Alexandra is a good horse” could have come from any number of agents using any number of speed or performance figures. Brown, in his court memorandum, says he specifically predicted Rachel Alexandra would win the Kentucky Oaks and that Lauffer used Brown’s “trade secrets” toward his profits without properly compensating Brown.
Then there is the matter of how Lauffer allegedly came to get the specific recommendation of Brown’s that Rachel Alexandra was a horse worth buying at up to $1.2 million. Brown had been communicating directly with Ron Kirk, a Lexington, Ky., insurance agent and horse owner/breeder who apparently knew Lauffer and a third man, Greg McDonald, through poker games. Kirk said he and the two men were looking to buy a racehorse as partners and solicited Brown’s advice. Over a series of months, Brown conducted his research and made several recommendations, including one to purchase the mare Kiss With a Twist, which the partners allegedly tried to do without success.
Including in the communications between Brown and Kirk, according to documents, was an email from Kirk to Brown saying, “I have told them your commission (and other) rates, but it would ‘seal the deal’ if you sent them to me by email reply, so that we have it clearly documented.”
After Brown made his recommendation and sent specific data to Kirk to purchase Rachel Alexandra, Lauffer had two direct telephone conversations with Brown. According to Brown, Lauffer said he was not willing to pay Brown’s standard fee and would not pursue a deal to purchase the filly. Then, according to court documents, Lauffer called Florida bloodstock agent Don Brauer, who had been involved in the transaction, and asked Brauer if Brown could be cut out of the transaction. When Brauer said no to that request, Lauffer allegedly told Brauer he and his partners were no longer interested in pursuing the purchase.
When Lauffer did buy the interest in the filly, according to documents, he at first attempted to not pay Brauer for his services rendered, then offered a lesser amount.
Brown is seeking not just the money he says he is owed for his standard fees, but all the profits Lauffer made on the deal, which Brown estimates total $4,928,451. His claim is based on several legal challenges, including quantum meruit, unjust enrichment, disgorgement, fraud, and punitive damages.
Lauffer contends it was he and not a partnership with Kirk and/or McDonald that bought Rachel Alexandra, and he therefore did not owe Brown anything.
Brought into play by the attorneys representing the two parties (Andre Regard for Brown and Thomas Miller of Miller, Griffin & Marks for Lauffer) is Kentucky statute KRS 230.357, which regulates bloodstock transactions. Somewhat ironically, the statute was pushed in the state legislature by Jess Jackson, who bought Rachel Alexandra from Lauffer and breeder Dolphus Morrison, as a protection against buyers from unscrupulous agents who collected commissions without disclosure from both buyer and seller in a transaction.
The trial is expected to last two days. Elliott Walden of WinStar Farm and Chris Young of Overbrook, both of whom have done business with Brown, are scheduled to testify on Brown’s behalf. Headley Bell of Mill Ridge Farm will serve as an expert witness on Lauffer’s behalf.
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Tags: andre regard, chris young, churchill downs, dolphus morrison, elliott walden, harold mccormick, headley bell, James Lauffer, Jerry Brown, jess jackson, kentucky oaks, Kiss with a Twist, medaglia d'oro, mill ridge farm, Miller Griffen & Marks, Overbrook, Paintsville, Paulick Report, Pocahontas Stakes, Rachel Alexandra, Ray Paulick, Thomas Miller, Thorograph, winstar farm
April 6th, 2010 at 10:43 am
It sounds to me that Jerry Brown somehow feels he is entitled to some reimbursement.It doesn’t(didn’t) take a rocket scientist to say Rachel was going to be a good horse.Unless there is a signed contract stating what his fees are, he should get nothing.Shame on him.Sounds like he is trying to take advantage and bully someone into paying a commission he doesn’t deserve.Stick to your guns Mr. Lauffer.
April 6th, 2010 at 10:53 am
I thought that Jess Jackson went to court trying to clean-up the tactics of bloodstock agents? Poker games, parties that were second and third hand to the deal, and everyone who mentioned the words “Rachel Alexandra” want a piece of the pie.
Will Jerry Brown score on an “O2X” pattern play?
April 6th, 2010 at 11:06 am
Racing, because of the money potential, seems to attract the worst of people and in people, like flies around you know what. Didn’t Brown write the letter to editor extolling Zayat’s character, based on the fact that Zayat was using great people like him? No wonder he has no money left.
April 6th, 2010 at 11:26 am
Ho-hum, another instance of “he said - he said” where owners and agents are at odds over money. You’re right, Albany - the best of horses always brings out the worst in people. But it seems to be that way in other businesses as well, so why should our sport be different?
Brown seems way off base with this one. Lauffer said up front he wasn’t interested in paying the commission structure Brown demanded, and it seems as if he wasn’t interested in working through Brown at all. Jerry Brown didn’t have exclusive rights to sell Rachel Alexandra, so if the owner got the opportunity to buy her through another avenue than so be it - he just has to abide by the terms of the contract he signed.
For what it’s worth Lauffer sounds like a real charmer, too, not wanting to pay anybody commissions even when he hits a home run. This sure is a great game.
April 6th, 2010 at 11:30 am
There is a 2-fold problem here, though at this juncture it is Brown who is looking like the jackass. Unless there is something in writing saying he gets x-% of future sale, earnings, what have you, he is SOL. He SHOULD be paid for his services rendered in recommending the horse to be purchased to begin with. Bloodstock agents get a bad name, and some deserve that bad name (ie-someone said in passing, that’s a nice horse, or hey, did you see hip # such and such and suddenly should be paid 5%), however, if you come rolling into town with a sackfull of money to buy horses but don’t know sand from apple butter, and someone is doing all this research for you, you need to pay them, whether you buy something or not. People want all sorts of research and this and that done for them, but, oh, to pay you for it? Looking into family histories, making mating recommendations? They suddenly get real reluctant when it comes time to write those checks. And that work takes TIME, and that is money. What the thoroughbred industry overall needs to do is take a long look in the mirror, check the date on the calendar, and grow the hell up already.
April 6th, 2010 at 12:28 pm
I’d like to be compensated for the time I wasted reading this.
April 6th, 2010 at 12:36 pm
Who in their right mind would agree to buy a runner and give up ” 5% of sale price, 5% of future earnings, and 5% of appreciation in value” ??? Are people really doing this? I find it hard to believe.
April 6th, 2010 at 12:41 pm
You can tell the horse business is in trouble, when KY horsemen start ripping each other off. Usually KY horsemen only have the balls to steal from out of state clients.
April 6th, 2010 at 1:15 pm
Last time anyone pulled-off a deal such as Brown claims, was when an attorney named Gulbenkian brought together the Arabs and Oil Companies to close a deal. He didn’t want to appear greedy (what lawyer does?) so he proposed :”This deal may not produce profits for any of the parties, so instead of charging my usual fee, why don’t we settle for me getting 5% of any revenue?” That was the agreement. Gulbenkian got wealthier than any other party.
I guess there are several bloodstock agents making a living from Arabs and others on nearly identical terms. Brown feels he should do as well.
April 6th, 2010 at 1:22 pm
KRA 230.357 (11) pretty much spells it out in plain language what you need to do to get paid. Common law claims of quantum meruit and unjust enrichment are going to crumble in light of the explicit language of the statute. If you want or expect a piece of the pie, you better get it in writing, and it better be signed by the parties from who you want the dough:
(11) No contract or agreement for payment of a commission, fee, gratuity, or any other form of compensation in connection with any sale, purchase, or transfer of an equine shall be enforceable by way of an action or defense unless:
(a.) The contract or agreement is in writing and is signed by the party against whom enforcement is sought; and
(b.) The recipient of the compensation provides a written bill of sale for the transaction in accordance with subsections (2)(a) and (3) of this section.
Brown deserves to be paid for his research, but come on. We’re all big boys and girls in this game. You want to get paid, get it in writing. You can’t buy a house for 4 mill without reams of paperwork; and your sales agent can’t get paid without a signed agreement; why should a 4 million dollar horse transaction be different?
April 6th, 2010 at 1:25 pm
If people don’t want to pay Jerry Brown’s rates they don’t have to. They can go somewhere else where I’m sure they an get a lower price on recommendations of what horses to buy. That’s the free market, yeah?
But it seems just a little sleazey to take Brown’s advice and then pretend you don’t have to pay for if, if thats what happened.
The winners here are the attorneys and I would guess they don’t all charge the same ra tes!
April 6th, 2010 at 2:12 pm
Before people go all nuts on this being a greedy grab they need to look at the details first.
It’s worth noting that this lawsuit was raised in the press back in April 2009 - a year ago and before the massive Kentucky Oaks victory. Further his advice was given *before* she registered her first stakes victory. Few may know it but IEAH looked at buying Rachel in 2008, in fact she failed the vet because of a bone chip in her left front ankle. That was later fixed.
I’ll be the first to say the terms of the agreement are tantamount to highway robbery - but the time to laugh at them and tell Brown to pound sand was before he did one lick of work.
From April 2009 …
http://www.thoroughbredtimes.com/national-news/2009/April/28/Consultant-files-suit-over-Rachel-Alexandra-deal.aspx
At the end of the day some much reduced payment (vs. the accrued claim) will be awarded and life will move on.
April 6th, 2010 at 2:27 pm
It’s worth looking at Brown’s success rate before jumping down his throat about his rates. He’s identified many stakes winners and has a higher success rate than others who offer similar services. The best doctors and basketball players get paid more than the average ones… Why shouldn’t that apply to Brown’s services?
April 6th, 2010 at 3:02 pm
Jerry can charge whatever the market will bear, good for him. But geez guy, how hard is it to get it in writing and signed? Maybe spend a little on your own lawyer fees upfront and get it done right.
Or do you prefer not having a paper trail? I suppose there would less need to pay your taxes then? Hmmmm?
April 6th, 2010 at 5:35 pm
I liked Rachel to be a stakes winner before the Oaks too. For some reason he doesn’t want to pay me either.
“Brown, in his court memorandum, says he specifically predicted Rachel Alexandra would win the Kentucky Oaks and that Lauffer used Brown’s “trade secrets” toward his profits without properly compensating Brown.”
Hmm, Pot, say hello to Kettle. Brown lifted Ragozin’s “trade secrets” toward his profits with compensating him. Brown’s as low as they come.
April 6th, 2010 at 6:30 pm
Good Lord…what’s next?! I think the fees requested are ridiculous; however, no one should ever get this involved in a transaction without some signed paperwork in place.
I have given my own opinion, free of charge, many times. If someone calls me & asks me what I think of a sales prospect, I tell them my opinion. Especially if they are just good friends. When it comes to walking around the sales grounds or doing a lot of research, I would and do ask for a fee for my time.
In the case of these private transactions, one had best have a well-documented paper trail. If Brown can produce any type of emails that have Lauffer agreeing to anything or specifically requesting his opinion, he may have at least one leg on which to stand in court. Emails & electronic communication are now often very admissable in court as far as “binding,” if two parties do have some agreement or communications that imply some agreement.
Though…I have never heard often, if ever, of any transaction for bloodstock work that requested future earnings, except in the breeding area.
April 6th, 2010 at 6:43 pm
Interesting that Lauffer’s defense is that he bought RA as an individual and not as a member of the partnership [which, by implication, used Brown's services].
Is he saying that he acknowledges that the Partnership had an oral agreement with Brown and, if the Partnership had purchased RA, Brown’s fee would have been due and payable as stated?
This is an interesting argument. Is an individual a separate entity from a Partnership that he is a Partner in? Especially if it is only a 3 member partnership, and all members are involved in every issue that concerns the partnership?
My gut feeling is: No. Since partnership debts follow the member of the partnership upon dissolution, so should the information learned as a member of the partnership. If that information had value to the partnership, then it should have the same value to each member once the partnership has been dissolved, or if a partner acts on his own behalf, using such information.
The Partnership knew of Brown’s fees and continued to do business with him. Thereby implicitly agreeing to the terms laid out. Brown made a recommendation to buy RA. Whether or not it was a no-brainer is irrelevant. No one else had yet made the same recommendation to them (as far as we can tell).
Brown is a man who performs a service. He gets paid for his service. If it is not a service with perceived value then no one would pay for it and he would go broke. His “handle” is that he is willing to share in the client’s risk by only taking 5% up front. If the recommendation is no good, then he earns far less than a regular bloodstock agent. But if he hits the jackpot (i.e. RA,) then he shares in the profits.
I don’t know the man, but I can’t see anything wrong with his business plan. I see Lauffer as the bad guy here. He used Brown’s information and made a killing, yet doesn’t want to pay for it. Between the Plaintiff and Defendant, based on this information, I think Brown wins easily.
April 6th, 2010 at 8:12 pm
The phrase that comes to mind is “Statute of Frauds.” It means that if a transaction has a value of over $50,000, or concerns real property, it must be in writing and signed by both parties to be valid. This avoids any “he said - she said” or contradictory testimony. Maybe Kentucky doesn’t have this statute - and it exists only in California. If thats true, this is as good a case as any for enacting the statute. It appears from all of Lauffer’s actions and testimony from third parties that he consistently refused to pay Brown’s fee. Therefore, there was never any meeting of the minds as to the engagement of services. It is up to a person or entity holding “trade secrets” to keep them secret. If Brown gave up trade secrets without a contract , then the moment that he uttered the secret, it became public information - and no longer a secret. He himself destroyed the value of his own ostensible “trade secret” because he revealed it. Brown and his lawyer have concocted an idiotic case in order to extort money out of a deal that turned out well. This is exactly what is wrong with the civil legal system. It is allows meritless cases like this to waste court time. If Brown had to pay the legal fees of Lauffer if he lost, its unlikley that the case would have ever been brought. We need to change the civil system so people like Brown cannot waste precious judicial resources with sham claims brought in order to wrongfully extract windfall settlements, The lawsuit is a shameless example of a bloodstock sycophant trying to get rich on other people’s efforts, money and fortune.
April 7th, 2010 at 7:09 am
Either way this issue ends, one thing this is for Jerry Brown is a huge billboard for some hefty commission fees.
Owners in this business need to realize that there are other highly qualified consultants and agents in this business that keep the owners’ interest at heart while charging fair fees.
April 7th, 2010 at 10:29 am
I am literally shocked to read all these posts defending Lauffer. He utilized third parties to gain access to Mr. Brown’s PROPRIETARY data and then stole it. How would you people view this if he used Mr. Kirk’s relationship with Mr. Brown to gain access to Mr. Brown’s office and copied his database when Brown and Kirk were out of the room? There is absolutely no difference. It is also worth noting that, at the time of the purchase, Rachel was no “slam dunk” at $1.2 million and VERY few people would have recommended her at that price. For those of you that doubt this, look up her pedigree as it is not that great. If she would have been only a Grade 3 winner, her residual value would likely have been about 10% of the purchase price. For Mr. Brown’s sake, I hope the jury is not as uninformed and short sighted as most of the posters on this site.
April 7th, 2010 at 6:27 pm
Brown is entitiled to all those fees, so long as he is willing to pay the losses proportional to his commisions on all horses he recommended buying that lost value. Doubt it! Get a contract, a pen, and a life.
April 7th, 2010 at 6:48 pm
I read the article. I missed the part about whether Brown replied to Kirk via email with a detailed listing of fees when Kirk requested that he do so?
Lauffer sounds like he was clear in that he never agreed to the fees when they were presented to him by Brown on the phone.
Was Brown’s “advice” exclusive to Kirk’s partnership or did he share it with with other interested parties, like say, Overbrook Farm?
It seems to me that a set fee for an agent’s time spent or a flat fee per horse would be better for the owners and buyers in this game. Otherwise, the age old incentive to run up prices prevails. Dual agency aside, I want someone working for ME, not running up the price I pay to increase their commission. Human nature is what it is.
As for Brown’s other fees, even if I wouldn’t agree to them myself, at least they are based on the buyer making money and the horse turning a profit for the buyer.
April 7th, 2010 at 10:11 pm
From earlier articles I’ve read on this dispute, Brown did respond to Kirk’s email with his fees specifically laid out. Also, I believe Lauffer solicited the advice from Brown knowing he charged something, but didn’t ask about his charges until after he’d gained the advice from Brown.
Why would Brown want to run up prices on horses? He’ll get paid if they are worth more at the end of their career than at the time of purchase, so it would seem like he would want the price lower in the beginning so the horse would appreciate in value. Helps him look better as well as making the same profit he would have with the higher price…
Whether or not the partnership or Lauffer agreed to the fees, they certainly led Brown to believe they did… at least until after he provided the only thing he could: advice.
And if Lauffer really made a 4-million-plus profit off Brown’s advice, it’s just a dick move to not pay him the 200-something thousand Brown claims is due.
Can’t wait to see what the court decides.
April 7th, 2010 at 11:05 pm
This is another example of an ungratefull person who needed the advice of a professional, got that advice with a fee attached which is normal, ethical, respectable and moral, and because of his greed, did not want to pay! Shame on you Lauffer, I hope Zenyatta kicks Rachels #%$% some day, because the Mosses have way more class than you!
April 8th, 2010 at 12:27 am
Lauffer never agreed to pay the fee. Kirk received or solicited the advice, but he didn’t buy the horse for his partnership. Brown did not have exclusive right to “sell” Rachel. Most of all, he didn’t have a deal in writing with Lauffer for set compensation on the recommended purchase of that projected Oaks winner.
To Rachel the Poster, in general, I think the base 5% commission structure for agents encourages price run ups. It’s math. Brown then adds other commissions based on future performance, unlike many buying agents, and more power to him when he is able to collect on such fees and essentially sell himself as a “partner” on a purchase.