Dear Trainers, A MUST read about CA laws regarding Horse sales and Commissions

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These are not NEW laws but I have found that they are widely unknown or intentionally over-looked laws regarding Horse Sales and Commissions.

Dear Trainers,

      Being an old and wise Appy, with extra large ears, I hear an awful lot of Barn gossip and drama. One topic that has come to my attention recently was the wide variety of practices amongst trainers when buying or selling horse’s for their clients. I might not be the most popular Appy for bringing this sensitive subject to my Blog but I’ve never claimed to be terribly PC in the first place.

      We all know that helping a client to purchase or sell a horse can sometimes lead to treading on uneven footing. Whether it is a matter of simply not understanding the California Laws or having to work with a less than ethical agent on the other end, things can get stickier than my favorite Molasses treats. Furthermore, with a Trainer’s labor intensive job that tends to be underpaid I realize it can be very tempting to accept incentives that may be offered to entice you towards a certain horse for your clients over another. This causes a “Conflict of interest” and believe it or not, IT IS ILLEGAL. (unless you fully disclose these amounts to both parties ahead of time, more about that later)

Here are some Quick Spot points for starters that Trainers and Agents NEED to know when buying, selling, and representing:

SPOT # 1. You MUST disclose your commission, IN WRITING, to your client.
This includes ANY monetary gain that you will be making from the sale or purchase of the horse.

SPOT #2. Be careful when accepting a payment that will be going directly through you because again, you need to remember that ANY monetary gain that results from that horse’s sale or purchase MUST be disclosed in writing to your client.

SPOT #3. Double dipping is ILLEGAL.
This is when a trainer or agent accepts a commission from the seller as well as the buyer. It is an obvious conflict of interest and the only way this is allowed is if both parties, the seller AND the buyer, show their consent and knowledge of the arrangement IN WRITING.

SPOT #4. Standard commission for the horse industry is 10% – 25%.
Though, any monetary compensation can be arranged so long as all parties are aware and consent to the arrangement, IN WRITING.

SPOT #5. Next, if you’ve ever been wrangled up by the law (or even watched a TV show) then you are familiar with the phrase “What you say can and may be used against you in a court of law.” This means you should be careful about intentionally misrepresenting or even being overly flamboyant about your claims of said horse. “It’s a perfect beginners child-safe horse. I’d trust it anytime” Yet the whole barn down the street from yours knows how many times it has left your arena at a bolt and come running into their property with a screaming child attached to its back. Hey, maybe it IS a wonderful child’s horse when it is in a small enclosed space, under supervision, after a 1 hour lunge and with the gate shut. I have known some great horsey friends of mine that just need to come with a few pointers from their previous humans to be successful. Just please remember, the truth is always best.

SPOT #6. Failing to obtain written consent from your client for your monetary gain off the sale or purchase of their horse can be punishable as a FELONY. (see the court cases [2] and [3] below as examples)

SPOT #7. Be smart. Protect yourself, your reputation and your client. Create a transparent contract and relationship with them. Include the sale price on the Bill Of Sale and have the Buyer and the Seller sign it themselves.
I know, I know, I feel like this may be a touchy spot and unpopular point that I am making. But if you really do not like this point perhaps you should re-read Items 1-6.

Current CA Laws:
For general purposes I will outline 3 important statutes that exist in California, Florida, and Kentucky. These are the 3 states that currently have laws specific to the sales of horses. But of course, I am not a lawyer, just an Appy Pony. So if you want up-to-date laws please search your own states laws carefully and if you want legal advice, please consult an Equine Lawyer.
Required:
1. A written Bill Of Sale signed by both parties that specifies the purchase price of the horse.
2. Written disclosure to both purchaser and seller of sales commissions (if the amount or value will be $500 or more; and
3. Written consent by both purchaser and seller if someone is acting as a dual agent.

To give a few easy examples of encounters I’ve witnessed:
“PADDING”
I do not mean the type of padding that get’s stuffed under my neighbors shoe every 6 weeks.
You know what I am referring to….
Let’s say a trainer’s client, Lady NoLuck, asks him to sell her horse, Breakneck Bert. She tells her trainer that she wants to get $50,000 for Bert because of all the wonderful things he can do. The trainer has a friend that has a client that was searching for a horse exactly like old faithful BreakNeck Bert and has $75,000 to spend on this new horse of her dreams. The two trainers decide that it is a good match and that they will sell the horse for $75,000 but only give Lady NoLuck her asking price of $50,000, splitting the difference between them. Neither Lady NoLuck nor the daydreamy buyer are aware of this. THIS IS A NO-GO and is against the law

“DUAL AGENT”
I recently had a common case of Dual agent in my own barn. There is a wonderfully fancy, yet entirely too egotistical pampered show pony that lives a few stalls down from me. Always prancing about and flaunting his many show ribbons up on the tack room wall. We will call him “Mighty Might” for this discussion. Anyways, Mighty Mights young child rider was sadly outgrowing him and facing the inevitable possibility of having to sell him. Being so impressive he quickly attracted the attention of other children in the barn and was purchased right away by another client of the same trainer.
No surprise there, sometimes I feel like he is all they can talk about. <rolling my eyes>.
The point is that the trainer acted wisely. She made sure that both parties understood that Dual Agent was unavoidable and that she was obviously representing both sides. She chose to act with complete transparency, discussing the merits of the pony, the pro’s and the con’s and made sure that all vet records were open for the sharing. She also let them know that there would only be ONE commission in total. This would be a 10% commission to be paid to the trainer, which would be split between both parties. After the buyer was satisfied and sure that they indeed needed to have the famous “Mighty Might” for their child rider then all parties consented to the arrangement in writing and the transaction was completed.
Now, you do not have to only accept one single commission of 10%. In fact, the law doesn’t even care if you charge BOTH your clients 110% each BUT it will need to be in writing and consented to by BOTH parties prior to the transaction.

The “LESSER REALIZED MISTAKE”
Okay, last example but a very common mistake. Desperate Duey cannot pay for his horse, Two Buck Chuck, anymore and sends it to a trainer to take “on the cuff” to sell for him. “On the cuff” means that the trainer will incur some or all of the expenses for a time while selling the horse. They make an arrangement that Duey expects to get $15,000 for the horse even though the horse is worth more. He tells the trainer to sell it for whatever more he can get and that he is welcome to keep the rest. Sounds like an amicable arrangement given the risk and burden that the trainer must take to keep the horse while for sale. Also, so long as it is in writing, the Trainer is on the up and up with Duey and all is fine. However, here comes the sticky Molasses part. You see, Silly Sally rides at this same ranch and falls in love with Two Buck Chuck. She is a client of the same trainer and has just started looking for a horse of her own. She has $25,000 to spend. Silly Sally is relying on her trainers expert opinion and knowledge as to whether to buy this horse but the trainer stands to gain additional monetary value from representing the seller, Duey. So this is also a conflict of interest and falls under Duel Agent. It is a common and likely scenario, after all, the trainer must have liked and believed enough in the horse to be willing to take him “on the cuff” in the first place. Probably even more so than a monthly paying sales horse. Ultimately the trainer sells Sally the horse for $25,000 and pockets the $10,000 difference. Maybe the trainer is even feeling that the moral thing to do is not to charge Sally a commission at all, since he was technically making one from the seller.
But without disclosing the profit to Sally this is still ILLEGAL.
WHY? Because as Silly Sally’s trainer, the trainer owes the client something called “fiduciary duties.” Duties described as Loyalty, Good Faith, and Fair dealing. The trainer should not profit from the transaction without full disclosure of the profit to Sally.
You are probably thinking “WHAT? How am I suppose to make money in this business legitimately?”
Never fear, Appy Pony is here.
A solution to this would be to disclose your arrangement that you have with Duey to Sally. Add up the training, board, extra feed, advertising, transportation, grooming etc etc that you have put into Two Buck Chuck and that Duey now owes you out of the sale. Count that as reimbursement for services owed by Owner. Make sure this is carefully documented and true. Then let Sally know that Duey will be paying you a ___% commission for taking the horse on the cuff and selling the horse and this is why you do not feel the need to charge her an additional commission. It is not necessary to disclaim the low ball amount that Desperate Duey was willing to take for his homeless horse in his time of need, that is completely between you and Duey. Your discount for being in the right place at the right time and for being trusted by Duey does not need to apply to Sally. BUT it is necessary that Sally understands the profit, if any, that you are making from Duey to represent a horse that you are now selling to her.
Just like any other Duel Agent circumstance.
If we worked thru this it would look something like this:
Fair market Value of horse is estimated at $25,000 (and please be sure that this is the true approximate fair market value, after all you are negotiated a deal that is a conflict of interests. It is smartest to be fair to all parties involved) Maybe Duey owes you $5,000 in back expenses on Two Buck Chuck and is paying you a 20% commission on the sale price.
20% of $25,000 is $5000.
(20% – 25% or even higher is a common arrangement for a horse taken “on the cuff” because it can be risky for the trainer and is essentially a favor to the Owner as well)
The Trainers calculated “Profit” would be $5,000, that is the commission. 
This is what needs to be disclosed to Sally.
Sally is likely getting a great deal. She is buying a horse that she loves, for the right price, a horse that her trainer believes in, and she is saving a big commission off of it because it was in-house. Duey is getting a great deal because he couldn’t pay for the horse any longer and so would not have been capable of promoting it for sale himself. He would never have found Sally if not for you being willing to take the horse on the cuff. $15,000 is better than giving it away due to hardship at the end of the month.
Finally, the trainer has made a fair amount of money to reimburse for expenses and the leap of faith he took in the horse.
A win win for everyone and completely legal.

Courtesy of my Owner and the internet, here are some Example court cases for you to look at that show the gravity of ignoring these laws:

[1] Neal v. Janssen, 270 F.3d 328 (2001) In 1997, internationally known dressage trainer Sjef Janssen was commissioned to sell the Neal family’s horse, “Aristocrat”. In their agreement to one another the Neals were to pay Janssen a 10% commission on the sale price. A typical commission for the Horse industry. Once finding a buyer, Janssen told the family that he could only get $312,000 for Aristocrat. Janssen actually ended up selling the horse for $480,000 but did not disclose to the Neals the difference in price. Jansseen profited $168,000 plus his 10% agreed upon commission for $31,200. Later, the Neal Family learned the true sale price and sued Janssen for breach of fiduciary duty and fraud.  A jury awarded the Neal family $250,000 in compensatory damages AND $250,000 in punitive damages. This was not only unethical but ended up being a $500,000 mistake by Janssen.

[2] United States of America v. Kenneth Berlin, U.S. District Court, Richmond Virginia, Case #3:03CR0042-001 (2004) and
[3] United States of America v. Joshua Cardine, U.S. District Court, Richmond Virginia, Case #3:03CR00424-001 (2004)
The federal government successfully prosecuted criminal cases against Kenneth Berlin [2] and Joshua Cardine [3] in 2004. Both were Hunter/Jumper trainers located in Virginia.  Mr. Cardine and Mr. Berlin were alleged to be involved in numerous horse sales schemes in which they sold horses on behalf of their clients and then remitted only a portion of the proceeds to the clients, and in some cases remitted none of the proceeds. Both trainers pleaded guilty to conspiracy to commit fraud and swindle of livestock in interstate commerce.
This is a felony.
Josh and Kenneth were sentenced to 18 and 21 months in federal prison, followed by three years of probation. The court also ordered the trainers to make restitution to their clients, or victims, in the amount of $94,300.

I hope my Trainer friends found this helpful!!

Love and Carrots,

Appy Pony

I would like to give credit to the following websites which helped me in my thirst for more knowledge.
– Equine Legal Solutions: BTW, they have some great contracts that you can purchase, if needed.
– Alison Rowe: Equine Law Blog
– HG Legal Sources http://www.HG.org

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Dear Appy Pony, HELP! My trainer can’t steer!!!

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Dear Appy Pony,

I will start by giving you a quick background of myself. I was born on a large beautiful race breeding farm to a mother that was a famous racehorse. But I don’t do well under pressure and needless to say, I failed to live up to my mothers expectations. The Owner of the track sent me away to something called an “auction.” Anyways, that’s all behind me now because I have a wonderful loving Owner who cares for me and spends lots of time with me. For the past few weeks we have had a wonderful time riding around the small circle arena together. I am a good listener and my new Owner is very soft and gentle with her cues. She seems to prefer that I do not go too fast and this life seems much lower in pressure to me.

One day recently, I could barely overhear a conversation between my Owner and a new “Trainer” as I was eavesdropping thru the tackroom/stall wall. I like to eavesdrop and do this often. If a human comes by I just quickly slacken my expression and pretend like I am merely napping and leaning up against that wall. The conversation was something about the trainer riding me, learning something new, vacation, I’m not really sure but they definitely said my name. I’m sure of that.

The very next day the trainer came to my stall to take me out instead of my beloved new Owner. I expressed my suspicion with a loud snort and a few steps backwards but the trainer seemed confident so I allowed her to halter me and I followed willingly to go get tacked up. This Trainer lady took me to a large arena on the other side of the property that had many different colored road blocks scattered throughout it. There was one that looked like a brick wall, another like a stone wall, and one even looked like a large mound or wall made entirely of grass. The trainer let me stop to stare and snort at the wall of grass but to my surprise it certainly didn’t smell like grass at all. Strange.
I was very nervous to be away from my familiar circle arena but I felt that I might somehow disappoint my beloved new Owner if I did not cooperate with this Trainer. So every day I tried my best to be brave.

I was pleasantly surprised the first few rides because once she was in the saddle we seemed to get along just fine, despite my previous suspicions. She was very talented at steering and managed to help me maneuver safely around the arena without crashing into any of these crazy looking roadblocks that someone had haphazardly left inside the riding arena. Each day I stepped out with more confidence and pretty soon we were going through all the usual paces together. I missed my loving Owner but I was beginning to like this trainer as a good substitute during whatever a “vacation” means. Until one day…………

One day, everything suddenly took a turn for the worst. It was like my trainer had completely forgotten how to steer correctly. One moment I am happily cantering around the arena in and around all of the road blocks and then the very next moment she is facing me directly at one!!! YIKES!! With the impressive prowess of a cat I managed to swerve at the very last second in a desperate attempt to correct our path and save us from impending doom. I’m still not sure how I narrowly missed that collision course she set us on, but I did. Only now this Trainer lady is hanging off my side with her arms wrapped around my neck screaming obscenities. In hind sight I think perhaps she was feeling ill and had lost her ability to correctly steer, I think I should have halted to assist her with her dismount but I had no idea that she wanted to get off. After what just happened all I could think was to panic so I began to do what I do best….run.

Now, you must understand that I am a very forgiving and understanding horse and so if this had been a one time incident I probably would not feel the need to seek your professional help but to my horror it has now happened every time she has taken me out for a ride. I even tried another strategy to help keep us both safe. After I had time to ponder on the event back in my stall I realized that bolting around and taking off running was forcing her to dismount at a high speed and only causing her to become more and more angry. One evening while brainstorming I came up with an excellent idea and decided to try it the very next ride. As usual we spent the first 15 – 20 minutes going through our paces easily but inevitably there came a time during our canter that she would point me straight at one of the road blocks. This time I resisted the urge to dodge and run. Mustering all my courage I faced straight forward to that daunting obstacle at hand, tucked my hind quarters as best I could and slid safely to a halt right in front. Unfortunately my plan was not perfect because the Trainer lady then went sailing over my head, over the roadblock and onto the ground on the other side. All my self control in mustering up a steady halt suddenly vanished and panic struck my heart once again. Before I knew it I was doing what I do best….. running like a half crazed maniac around the large arena. Like I said, I don’t do well with pressure.

I would love to ask some of the other horses at the ranch about this, perhaps this poor trainer has been struck by some kind of strange disease of the limbs that cause her to jerk the reins in a direction she is not intending? But I can’t ask anybody because my box stall is located between the tack room on one side and an aisle way on the other so I have no neighbors. My Owner says I cannot be turned out to play with other horse because I may hurt and injure myself, so I am at a complete loss and left in the dark.

Being ever determined to make my beloved Owner proud, when ever she returns, I decided it would be best to try and keep her Trainer friend as safe as possible. So my third and final attempt was during todays ride. I happily greeted her in the stall and willingly followed her to go get tacked up. I remembered that me and my beloved Owner had always had much success in the little circle arena and perhaps that is where this trainer and I belonged as well. So once we were mounted and headed across the property towards the large arena I planted all four legs with confidence and protested either of us going any farther then the little circle arena. For the safety of us both, this is as far as we go and that is final. I was so proud of myself for stepping up and taking the lead, for making the tough decision that needed to be made. If we were going to have a successful ride it was going to be back here far away from any hazardous road blocks.
To my surprise this Trainer lady did not seem to appreciate my concern for her well being. She began to throw a tantrum and the next thing I know there are whips and spurs and all sorts of devices I would never have expected would need to be utilized on a willing sensitive horse such as myself. The day was very traumatic and quite the blur and I would prefer not to go into further details but now you can clearly see why I desperately need your great wisdom and advice.

Please Help quickly!!

Signed,
Alone and Misguided

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Dear Alone and Misguided,

You poor thing!
I am sorry for you but at the same time I can’t help but smile a little at your very innocent mistakes. In your short few years of life here you probably have not had the opportunity to observe the spectacular event of Horse Jumping. This is where a rider intentionally steers a horse towards an obstacle with the expectation that the horse will jump into the air, clearing the obstacle and will land safely on the other side. If you want to impress your Owner when she comes back there are a few tips and pointers I can give you. The next time you are pointed towards an obstacle:

1. I am assuming due to your breeding that you were picked for speedy jumping. So step up your bravery, face that obstacle head on, increase to an impressive racehorse speed and sail into the air to conquer it.

2. Make sure to jump extra high with your legs for safety. They like that.

3. Help them to understand how much you enjoy your new jumping career by frolicking around in every corner after the jump.

4. No matter how tempting, DO NOT stop quickly to smell the flowers, that usually ends badly.

5. Sometimes the rider cannot be trusted to make clear decisions in front of the jump. So I find it best to grab a hold tightly of the bit with your teeth and take over the piloting when you are a few strides away. The rider may assume control back after you are done frolicking thru the corner.

6. I do not have this experience myself but I hear it is dangerous to jump anything Blue. So don’t.

7. Also, DO NOT jump anything that looks like there may be Trolls hiding underneath. Those suckers can leap up and grab your legs in the blink of an eye.

8. If you enter a competition. I believe the number of canter strides taken in between two jumps in a row are counted much like a golf score. The fewer the better.

9. I know you are worried about pressure at horseshows but if you make sure to snort like a dragon and prance around the show grounds when you are outside the arena waiting for your class it will not only intimidate your competition but it will get your lungs expanded to hold lots of oxygen, just in case you feel the need to hold your breath during your performance.

I am excited for your new possibilities. Embrace it and remember all my pointers!!

Love and Carrots,

Appy Pony

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