Source: https://www.floridabar.org/news/tfb-journal/?durl=%2Fdivcom%2Fjn%2Fjnjournal01.nsf%2F8c9f13012b96736985256aa900624829%2Fd93b1be59278bd318525833100465e7c
Timestamp: 2018-12-17 01:35:13
Document Index: 119662903

Matched Legal Cases: ['§230', '§19525', '§19525', '§230', '§535', '§19525', '§19525', '§19525', '§230', '§19525', '§230', '§501', '§501', '§٥٠١', '§501', '§٥٠١', '§٥٠١', '§501', '§1961', '§391', '§392', '§817', '§718']

Florida Bar Journal – Fraud in Horse Sales: Florida’s Rule 5H and Unfair and Deceptive Acts by Equine Sellers, Agents, and Others – The Florida Bar
by Avery S. Chapman
In 2008, Florida joined Kentucky and California with a legislative initiative to prevent fraud and encourage honest transactions. Specifically, the Florida Department of Agriculture and Consumer Services, Division of Marketing and Development, after public hearings, promulgated Florida Agricultural Code Rule 5H-26.001 et seq. (Rule 5H).5 The express purpose of Rule 5H “is to address unfair and deceptive trade practices surrounding the sale and purchase of horses in Florida. This rule enhances consumer protection by implementation of minimum requirements relating to the sale and purchase of horses in Florida.”6
Rule 5H codifies the common law concerning fraud by misrepresentation, fraud by concealment, and negligent misrepresentation across all manners of equine transactions and is not limited to racehorses. That rule also imposes obligations of written disclosures and consent agreements on sellers and agents in Florida horse sales. Previously in 2007, the Kentucky Legislature had passed Kentucky Revised Statute §230.357, which defined dual agency in equine transactions, required a written bill of sale and full disclosure of such types of agency, and otherwise required disclosure of undisclosed payments, commissions, and similar kickback-like payments. However, that statute was limited only to the racehorse industry.7 The limited vision of regulation of only the racehorse industry had been established, in 1994, in California wherein that state enacted California Business and Professional Code §19525, which required a written bill of sale, disclosure of any commission received in the purchase and sale of a racehorse, and written consent of that payment.8
Florida has developed equine transactions law further still, and Florida law is markedly broader in industry application than both Kentucky and California in that Florida’s Rule 5H covers the sale of all horses in Florida, regardless of equine discipline or industry, and enumerates specifically and the type and number of fraudulent acts prohibited.9 Specific requirements include minimum information on a bill of sale, which must accompany the purchase and sale transaction,10 as well as numerous affirmative disclosures and written consents.11
In comparison, California’s C.B.P.C. §19525 simply covers only a limited class of equine sales transactions: those involving racehorses and the racing industry.12 Likewise, Kentucky’s later K.R.S. §230.357 remains constricted to the racehorse industry as well but expanded the scope of prohibited practices and activities. Although the laws of all three states except horses purchased through auctions,13 Florida’s Rule 5H governs any type of horse without restriction as to its use or purpose.14 In addition, and unlike California’s code, which requires only a bill of sale stating the purchase price and execution by the purchaser, seller, or their agents,15 Florida’s Rule 5H requires eight distinct pieces of information, including affirmative disclosures of any warranties or representations being made or relied upon.16 Similarly, Florida’s Rule 5H goes further than Kentucky by lowering the threshold price in private sales triggering the disclosure and bill of sale requirements from $10,000 to any sale of a horse.17
In this way, a violation of Rule 5H operates as a form of strict liability for actual damages, attorneys’ fees, and costs incurred by the harmed party.22 This specific per se provision was not included in the original rule; instead, it was added in the incipient drafting of the rule during the public comment period.23 By making a Rule 5H violation, which causes actual damage a per se Florida Deceptive and Unfair Trade Practices Act (FDUTPA) violation, a party harmed by a Rule 5H violation may immediately access the additional remedies of FDUTPA, including the recovery of reasonable attorneys’ fees and costs, and injunctive and declaratory relief.24
• Provide accurate disclosure of the medical history of a horse when requested by a buyer or buyer’s agent;33 and
As noted, a seller of a horse who violates any provision of Rule 5H that causes actual damages is specifically deemed to have committed an unfair and deceptive act under Florida law,35 which subjects the seller to buyer’s remedies under FDUTPA, including declaratory judgment, actual damages, attorneys’ fees and court costs,36 in addition to remedies available under state and local law. By imposing such strong remedies through FDUTPA, Rule 5H is intended as a remedial statute to protect consumers in the equine industry.37
• If an agent of the purchaser, provide a written statement acknowledging that as the person signing on behalf of the purchaser, the agent understands that any warranties or representations from the owner or the owner’s agent being relied upon, including warranties or representations and the existence of any, should be stated in writing as part of the bill of sale;45 and
• The trainer must disclose to the trainer’s principal the agent’s legal or equitable interest in a horse the trainer is purchasing for trainer’s principal or is recommending to be purchased by the trainer’s principal;47 and
In Selleck v. Cuenca, Case No. GIN056909, North County of San Diego, California (Sept. 9, 2009), the court deployed an analysis essentially based on the general business law of fraudulent misrepresentation and breach of fiduciary duty. In that case, the court was faced with a factual scenario in which the principals never spoke directly with one another, each relying on each’s agents to conduct and consummate the transaction. The buyer then brought an action against seller, trainer, and veterinarians for alleged failure to disclose a pre-existing deep digital tendon injury and injections given 30 days prior to the pre-purchase exam.
In Maryland, the court in Gussin v. Shockey, 725 F. Supp. 271 (D. Md. 1989), considered charges of breach of fiduciary duty, fraud, and violations of RICO53 when considering an arrangement between the parties under which the defendant agreed to assist the plaintiffs in buying, maintaining, breeding, and selling thoroughbred horses. The plaintiffs, who were inexperienced “in horses,” relied on the defendant’s 20 years’ experience in buying and selling horses. The plaintiffs later discovered secret profit-taking, which they characterized as kickbacks, from sellers in transactions in which Shockey was representing the Gussins as buyers. The court granted summary judgment to plaintiffs on the relevant counts and entered a judgment for the plaintiffs for $575,000.54
• Caveat Emptor Is Not a Defense — While the doctrine of caveat emptor might tempt some charged with a Rule 5H violation to claim immunity under that doctrine, there is a common law exception to the doctrine of caveat emptor, which arises when the parties contract for a heightened disclosure obligation.57 Rule 5H specifically enhances Florida’s law of the duty of disclosure,58 among parties to an equine transaction,59 thus, similarly creating by rule a legal exception to the doctrine of caveat emptor.60 Rule 5H codifies the duty of sellers, agents, and others by requiring the disclosure of medical history, specific veterinary treatments, and compensation arrangements.
• Florida’s Rule 5H Sets the Highest Standard for Transparency and Ethical Conduct During Horse Sales — The relevancy of Florida law to the national equine industry is not to be overlooked. By adopting the robust Rule 5H, Florida has become the leader in the nation in its emphasis on fair disclosure in all horse sales. By way of example, Guy Lamothe, of the Thoroughbred Owners of California, which represents 10,000 licensed owners in California, some of whom purchase many horses in Florida, explained in support of the draft of Rule 5H: “The policies you develop in Florida have a direct impact on buyers in California, and any other location for that matter,”66 noting that the Thoroughbred Owners of California had previously published its positions for full disclosure on ownership and medical history. “Buyers want to be assured of meaningful access to market information, and a level playing field.”67Further, the United States Equestrian Federation, representing over 100,000 members nationally, has recently formed a taskforce to promote transparency in the purchase and sale of horses and to educate their members as to the existence of laws that protect their members during equine transactions.68 Florida is clearly the national leader in such equine industry law, and Rule 5H is a powerful tool for the equine law practitioner.
4 American Horse Council, 2005 Economic Impact Study, Executive Summary.
5 F.A.C.R. 5H-26.001 et seq. was promulgated under the department’s rulemaking authority pursuant to Fla. Stat. §535.16.
8 Cal. Bus. & Prof. Code §19525.
12 Ca. Bus. & Prof. Code §19525(a).
13 See Cal. Bus. & Prof. Code §19525(j); K.R.S. §230.357(9); F.A.C.R. 5H-26.003(8).
14 See, e.g., F.A.C.R. 5H-26.001, 26-003(1) and 26.004, all of which govern the sale of “a horse.”
15 Cal. Bus. & Prof. Code §19525(b)(1) and (2).
17 Compare K.R.S. §230.357(11) to F.A.C.R. 5H-26.001 et seq.
20 See, e.g., Laxson v. Giddens, 48 S.W.3d 408, 411 (Tx. Ct. App. 2001) (“The plan was simple enough, buy a horse cheap and sell it at a huge profit. There is nothing inherently wrong with this unless to accomplish the objective the seller commits a fraud or violates a statute. Here the buyer claimed she was duped into paying an outrageous price because of the actions of two individuals. The jury found both defendants responsible. The trial court disregarded the jury finding as to one of the defendants. We reverse the trial court’s judgment and render judgment based on the jury’s verdict.…Violation of the DTPA [Texas Deceptive Trade Practice Act] is per se an unlawful act.”).
22 Fla. Stat. §§501.211(1)–(2).
25 Fla. Stat. §501.202(2). Under FDUTPA, the Florida Legislature has declared that deceptive or unfair methods of competition and practices in trade and commerce are unlawful. Diamond Aircraft Indus. v. Horowitch, 107 So. 3d 362 (Fla. 2013) (citing Fla. Stat. §§٥٠١.٢٠٤, ٥٠١.٢٠٧٥ (٢٠١١)). “The express legislative purpose of FDUTPA is to protect individual consumers and certain defined business activities from deceptive, unfair, or unconscionable methods of business competition and trade practice.” Id. at 367 (citing §501.202). See also Fla. Stat. §٥٠١.٢٠٣(٧) (٢٠١١) (defining “consumer” under FDUTPA to include both individuals and certain types of business activities). The legislature has specifically articulated that the provisions of FDUTPA are to be construed liberally with this legislative purpose. See Fla. Stat. §٥٠١.٢٠٢.
34 F.A.C.R. 5H-26.004(8) (emphasis added). The following statement must be included in the bill of sale: “As the person signing below on behalf of the [p]urchaser, I understand that any warranties or representations from the [o]wner or the [o]wner’s agent that I am relying upon in acquiring this horse, including warranties or representations with respect to the horse’s age, medical condition, prior medical treatments, and the existence of any liens or encumbrances, should be stated in writing as part of this bill of sale.”
36 Fla. Stat. §501.211. “To encourage citizens to invoke the protections of FDUTPA and file actions under that statute, the [l]egislature has provided that a prevailing party in a FDUTPA action may recover reasonable costs and attorney’s fees from the non-prevailing party.” Horowitch, 107 So. 3d at 367 (citing Fla. H.R. Comm. on Governmental Operations, H.B. 1915 (1973), Staff Analysis 3-4 (May 3, 1973)) (stating that the purpose of the attorneys’ fees provision in FDUTPA was to “attract private attorneys to accept a consumer’s civil case since the attorney would be assured that if his client prevails, he would gain a legal fee proportionate to his efforts,” and that the attorneys’ fees provision “applies to civil litigation arising from a consumer transaction in violation of [FDUTPA]”).
51 Laxson v. Giddens, 48 S.W.3d 408, 411 (Tx. Ct. App. 2001).
53 18 U.S.C. §1961 et seq.
54 Gussin, 724 F. Supp. at 278.
55 Restatement (Second) of Agency §391, comment a (1958).
56 Restatement (Second) of Agency §392 (1958).
57 See, e.g., RNK Family Limited Partnership v. Alexander-Mitchell Associates, 788 So. 2d 1035, 1036 (Fla. 2d DCA 2001) (Seller failed to disclose that the property was required to connect to the county wastewater system; the court, thus, concluded that such a provision defeated an affirmative defense relying on caveat emptur.).
60 This statutory exclusion for fraudulent conduct by omission or concealment is not novel to Florida law. For example, in the insurance context, a policy holder is held to a heightened standard of disclosure. See, e.g., F.S. §817.234 (emphasis added), which provides in relevant part: “False and fraudulent insurance claims. (1)(a) A person commits insurance fraud punishable as provided in subsection (11) if that person, with the intent to injure, defraud, or deceive any insurer: 1. presents or causes to be presented any written or oral statement as part of, or in support of, a claim for payment or other benefit pursuant to an insurance policy or a health maintenance organization subscriber or provider contract, knowing that such statement contains any false, incomplete, or misleading information concerning any fact or thing material to such claim; 2. prepares or makes any written or oral statement that is intended to be presented to any insurer in connection with, or in support of, any claim for payment or other benefit pursuant to an insurance policy or a health maintenance organization subscriber or provider contract, knowing that such statement contains any false, incomplete, or misleading information concerning any fact or thing material to such claim; 3.a. knowingly presents, causes to be presented, or prepares or makes with knowledge or belief that it will be presented to any insurer, purported insurer, servicing corporation, insurance broker, or insurance agent, or any employee or agent thereof, any false, incomplete, or misleading information or written or oral statement as part of, or in support of, an application for the issuance of, or the rating of, any insurance policy, or a health maintenance organization subscriber or provider contract; or b. knowingly conceals information concerning any fact material to such application; or 4. knowingly presents, causes to be presented, or prepares or makes with knowledge or belief that it will be presented to any insurer a claim for payment or other benefit under a personal injury protection insurance policy if the person knows that the payee knowingly submitted a false, misleading, or fraudulent application or other document when applying for licensure as a health care clinic, seeking an exemption from licensure as a health care clinic, or demonstrating compliance with part X of chapter 400.”
61 See, e.g., Postregna v. Tanner, 903 So. 2d 219 (Fla. 2d DCA 2005).
62 See, e.g., Levy v. Creative Const. Services of Broward, Inc. 566 So. 2d 347 (Fla. 3d DCA 1990) (“defendant seller of a home” is not “absolved” of the duty imposed upon her to disclose known defects “merely because the contract for the sale” was an “as is” contract. “[W]e discern no ‘as is’ contractual exception to the duty imposed on the seller herein by the Johnson [v. Davis, 480 So. 2d 625 (1985)] decision.”
63 See, e.g., In re Mona Lisa at Celebration, LLC, 472 B.R. 582, 625 (Bankr. M.D. Fla. 20 012) (“Because §718.202 is a strict liability statute, Mona Lisa’s good faith efforts to comply with the statute do not negate its liability.”).
66 Ryan Conley, Hearing: Divide on Florida Horse Sale Rules, BloodHorse.com, April 9, 2008, https://www.bloodhorse.com/horse-racing/articles/154754/hearing-divide-on-florida-sales-rules.
67 Ryan Conley, Expanded Florida Sales Rules Published, BloodHorse.com (May 9, 2008), https://www.bloodhorse.com/horse-racing/articles/154120/expanded-florida-sales-rules-published.