11/24/2006 1:00AM

Legal hurdles impede ban proposal

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LEXINGTON, Ky. – Thoroughbred owner James McIngvale has made it well known that he would like to see penalties added to the code of ethics the bloodstock sales industry developed in 2004. He has proposed that the Thoroughbred auction industry penalize violators of the code by banning them from horse sales.

But the legal issues around identifying and punishing such agents – even those convicted of fraud – make it unlikely that auction houses will support McIngvale’s proposal, legal experts and sale executives say.

A sale company’s key concern is potential legal liability, says attorney Bob Beck, a partner in Stites and Harbison and an equine law specialist for three decades. Without the specific legal authority to deny an agent the ability to make his or her living at a sale, sale companies could be on thin legal ice if they impose bans.

“It seems to me that unless you have a specific piece of legislation, whether it be federal or state, then any sales company would be risking liability to take the kind of actions suggested,” Beck said. “If they exclude somebody from the grounds, the person excluded has certain common-law rights of due process. So the sale company would have to set up a procedure that would meet those due process rights. If they did then exclude somebody, then they’re liable to get sued for defamation or for acting arbitrarily or for restraint of trade, because those agents may need to be at the sale to pursue their livelihood. All those things are, I think, barriers to a sale company voluntarily agreeing without some type of federal law or state regulation to take on that role.”

“I know casinos can ban people from coming and playing in their casinos if they don’t like them,” McIngvale said. “I don’t see any difference. They rule people off at racetracks all the time.”

Said Beck: “There is some law to the effect that racetracks have a common-law right to exclude people from their grounds if the exclusion meets certain criteria.” Gamblers using illegal betting methods, for example, might be excluded from a track. “But that does not apply to the sale company, to my knowledge.”

The practicalities of carrying out a ban are daunting to sales companies, one executive said privately, partly because they appear time-consuming, legally risky, and beyond the companies’ usual business of selling horses. A sales company would have to establish a hearing procedure, handle appeals, gather evidence, vet foreign agents’ records, and determine when, if ever, to reinstate a banned agent.

“What you’re doing in some ways is trying to make the sale companies into a court,” Beck said. “I don’t think they’re necessarily prepared to do that. It’s certainly not the reason they exist, and it might be opening Pandora’s box to try to force a sale company to try to take on that role.”

“If the industry wants Keeneland to perform a function, at the end of the day, I suspect Keeneland will,” said Buddy Bishop, a trustee at Keeneland, which conducts four auctions a year. “Keeneland has not had any summit meeting to determine what our official posture is. But my thinking would be, if the industry wants us to do something, we’ll listen, and if it’s practical, we’ll try to do it. But a lot of problems would need to be solved before I see any sale company being the industry’s policeman. We’ve got a whole justice system to deal with these things. When you short-circuit all of that and have a private company determine whether somebody can make a living or not, that’s a pretty severe power.”

McIngvale argues that would provide a useful deterrent.

“There’s got to be a way to police ourselves with the government getting involved,” he said. “It’s like the National Football League has drug policies, where you fail two or three times, then you’re out. I think something like that ought to be in horse racing for people who are nefarious towards the people who are paying the bills, which are the owners.”

But auction executives and lawyers say that if the industry is to impose tough sanctions, it will need to get legal authority or else get the state to be in the business of licensing and regulating bloodstock agents. Until then, auction houses are unlikely to take on the legal risk of that role.

Fasig-Tipton’s chief operating officer, Boyd Browning, declined to say whether the company had discussed any possible role it might have in meting out penalties. “We continue to be interested in working on ways to provide greater buyer confidence and a level playing field for all participants, both buyers and sellers,” he said.

“I understand the thoughts, and I think the thoughts are well-placed,” said Bishop. “But in my own view, all of these cases we’re hearing about are involved in litigation, and that’s the appropriate forum if somebody has been defrauded.”

* Royal Anthem (Theatrical-In Neon, by Ack Ack) will relocate from Hopewell Farm in Kentucky to Tullogher House Stud in Ireland, where he will stand as a steeplechase stallion, the Racing Post has reported.

* A Sadler’s Wells-Sabria weanling colt brought about $837,900 to top day four of the Tattersalls December foal sale in Newmarket, England, on Friday. Coolmore agent Demi O’Byrne purchased the topper on a day that saw 154 lots bring about $24,067,680, up 91 percent from last year’s total for 178 horses. Average price was about $156,284, more than twice last year’s figure.