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DIMARIO v. COPPOLA

May 4, 1998

JOHN A. DIMARIO, Plaintiff, against ALBERT P. COPPOLA, SR. and DRUMLANRIG FARM, Defendants.


The opinion of the court was delivered by: WEINSTEIN

AMENDED MEMORANDUM, ORDER, AND JUDGMENT

 WEINSTEIN, Senior District Judge:

 TABLE OF CONTENTS

 I. Introduction

 II. Facts and Contentions

 A Oral Agreement

 B Horse Racing Industry

 C Runaway Groom

 III. Procedural History

 IV. Law

 A Standard for Summary Judgment

 B Existence of Binding Agreement

 i Express Reservation

 ii Partial Performance

 iv Type of Agreement Usually Reduced to a Writingiii Material Terms to Be Negotiated

 v Consideration

 V. Application of Law On Existence of Contract to Facts

 VI. Statute of Frauds

 VII. Statute of Limitations

 VIII. Construction of Terms of Oral Agreement

 IX. Unjust Enrichment

 X. Conclusion

 I. Introduction

 This case involves the construction of unique oral employment agreements within the Thoroughbred horse racing industry. Plaintiff, the former trainer of Runaway Groom, a successful Thoroughbred race horse, claims breach of a June 1982 oral employment contract with defendants Albert P. Coppola, Sr. and Drumlanring Farm. All parties agree that if there was a contract it incorporated the standards and customs of the horse racing industry. At issue is enforceability and construction of the agreement. Applying industry standards as well as New York's contract principles, summary judgment for the defendants is required.

 II. Facts and Contentions

 A. Oral Agreement

 In June of 1982, the plaintiff and defendants entered into an oral employment contract: the plaintiff would train and race the defendants' Thoroughbred stallion race horse, Runaway Groom. The horse was then moved from Canada to Belmont Park in New York. Plaintiff trained the horse from June, 1982 to October, 1982.

 Oral employment agreements between race Horse owners and trainers are standard in the horse racing industry. Tr. at 3; Tr. at 38. These agreements provide for trainer compensation equal to the cost of the daily upkeep of the horse plus 10% of the horse's winnings. Def. Res. to Pl. Opp. Sum. J. at 3; J. DiMario Dep., Vol. 2, at 35-37.

 Plaintiff alleges that successful trainers are traditionally entitled to additional compensation. This remuneration, plaintiff contends, was declared by the defendants on numerous occasions between 1982 and 1993 to be 10% of the earnings derived from the syndication of the horse, namely 10% of the gross proceeds realized from the sale of forty equal shares of the horse. It is plaintiff's view that this additional payment is required by industry custom. Defendants maintain that customary additional compensation is limited to one breeding right of the trainer per year in the stallion, as opposed to a percentage of the syndication.

 Plaintiff asserts that defendants orally confirmed that the additional compensation would be 10% of the syndication of the horse after it won "The Prince of Wales" race on August 8, 1982, and again on August 21, 1982 after it won "The Travers Stakes." Dep. J. DiMario, Vol I, at 42-48, 134-140, 158, and Vol. II, at 34-41, 43-45, 77. By 1993, ten years after syndication began, only twenty nine shares of the forty provided in the syndication agreement had been sold. Coppola Dep. at 59.

 Defendants maintain that plaintiff was given notice that he would not receive 10% of the gross profits derived from syndication of the horse when the syndication agreement was executed in March of 1983, thus causing the six year statute of limitation to begin running on the sale of the first share of the syndication agreement, so that the statutory period expired in 1989. Plaintiff counters, that while syndication of the horse was started, it was never completed so the statute of limitations did not begin to run until the defendants repudiated the contract sometime in 1993.

 During the course of plaintiff's employment he received a per them rate of $ 108 per day and 10% of the horse's gross winnings. In 1983, when the horse was syndicated, plaintiff also received one breeding right per year in the stallion. Plaintiff has exercised this right every year since 1984. J. DiMario Dep., Vol 1, at 92; Tr. at 14. Defendants claim that this lifetime breeding right is payment in full for any additional compensation.

 B. Horse Racing Industry

 The horse racing industry has a long and rich tradition from which modem trade usage and custom is derived. Contests of speed between horses are among the oldest diversions of humanity. See 11 Encyclopedia Britannica 714 (1967). Horse racing owes much of its development to the Greeks, who by 1200 b.c. had developed and refined the sport of chariot contests. See Melvin Bradley, Horses: a Practical and Scientific Approach 36 (1981). Racing without chariots is said to have later developed independently, though it was "an important part of the first Olympic games" of 776 b.c. Id. As early as 1500 b.c. "Kikkuli of the land of Matinni" composed a lengthy treatise on the breeding and training of horses. 11 Encyclopedia Britannica 714 (1967).

 Modern day racing, "the sport of kings," owes its origin to the nobility of England who developed racing as a popular amusement. Id. at 714-15. It is the traditions of Western Europe's aristocracy that have defined modem equine standards and practices, including the industry's reliance on oral "gentlemen's" agreements. But cf. John J. Kropp, et al., Horse Sense and the UCC: The Purchase of Racehorses, 1 Marq. Sports L.J. 171, 173 (1991) ("The days of handshake deals in the horse business are rapidly coming to an end.").

 The popularity of the sport with the general public is credited to Henry II who in 1174 promoted the Smithfield races, where the aristocracy came to purchase race horses, and the multitudes came to watch. See 11 Encyclopedia Britannica 714 (1967); see also Bradley, supra, at 36. It was Charles II who is credited with establishing the modem day Thoroughbred bloodline, earning him the title "father of the British turf." 11 Encyclopedia Britannica 714. Modern day race horses trace their origin to three sires: Godolphin Barb, Byerly Turk, and Darley Arabian. See Bradley, supra, at 40. Records of the progeny of these stallions has been meticulously kept for centuries. See id. In 1791 the General Stud Book was established to record Thoroughbred blood lines; and at this time the Thoroughbred breeding population was closed. See 11 Encyclopedia Britannica 715.

 The American Stud Book was established in 1873. It traces the history and origin of Thoroughbreds in America. See Bradley, supra, at 40, 42-43. Both the General Stud Book and American Stud Book, referred to as horse registries, are maintained and controlled by breed associations. 11 Encyclopedia Brittanica 715-16, 719. These organizations ensure that no horses bred through artificial insemination or embryo transfer are registered. See Stephen Budiansky, The Nature of Horses 238 (1994). Unlike the dairy-cattle business, the horse industry restricts breeding methods to maintain tradition and control. See id. at 236-39 This adherence to strict regulation, has engendered specialized terminology and customs.

 After successful male Thoroughbred race horses have finished their career, they are often retired to a breeding farm. This is referred to as being retired "to stud." Ex. 3; Leonard Green and Jonathan Green, Investing in Stallion Syndication, Thoroughbred Times, Jan. 25, 1997, at 74. The owner of the stallion either retains the breeding rights or "syndicates" the animal. See id. In syndication the ownership interest in the thoroughbred is divided into shares, designed to provide access to breeders "when sole ownership is cost-prohibitive." Timothy Nicholas Sweeney, Keflas v. Bonnie Brae Farms: A Practical Approach To Thoroughbred Breeding Syndications and Securities Law, 75 Ky.L.J. 419, 422 (1987).

 The standard syndicate agreement has "evolved into 40 shares for public sale, with three to six shares for the stallion manager or farm, and additional lifetime breeding rights to the horse's trainer, jockey, or both." Ex. 3; Green, supra, at 74. Each of the forty interests is equal and cannot be further sub-divided, but a full interest may be transferred. See Ex. 10; see also Thomas A. Davis, et al., Horse Owners and Breeders Tax Manual § 2.06(a), at 2-69 (1987 ed.).

 Each syndicate interest grants the holder a proportionate share in the profits and expenses of the stallion, and one breeding right per year, called a "season" Jocelyn De Mourbray, The Thoroughbred Business xiii (1987); see also Kefalas v. Bonnie Brae Farms, Inc., 630 F. Supp. 6, 6 (E.D. Ken. 1985); Thomas Kiernan, The Secretariat Factor vii-x (1979). A season, also referred to as a "cover" or "nomination," "is the right to have a mare serviced by a named stallion during a particular [annual] breeding season." Jocelyn De Mourbray, The Thoroughbred Business xiii. These definitions are derived from traditional horse breeding terminology. Just as a mare who is at the point in her estrous cycle when she is ready to breed is said to be "in season," the stallion who copulates with the mare "covers" her back. Id. at 9.

 There are profits only if the stallion is able to breed with more than the allotment of mares that constitute the entire syndicate, or "book." Tr. at 14. The additional seasons, or covers, are sold in a market commonly referred to as the bloodstock market. Tr. at 15. The stallion's seasons are sold to outside parties in two ways. First, on a guaranteed live foal basis if the offspring stands and nurses. Tr. at 28. Second, on a non-guaranteed basis, for the right to breed the horse with no guarantee of a live foal. Tr. at 27-28.

 Expert testimony identified the lifetime breeding right as entitling the holder to breed one mare to the stallion each year. Tr. at 14. The holder does not share any of the profits of the stallion or pay any of the management fees. Tr. at 14.

 C. Runaway Groom

 [SEE RUNAWAY GROOM IN ORIGINAL]

 Runaway Groom was highly successful. The horse competed in, and won, various stake races including "The Travers Stakes" in Saratoga, "The Rafty" at Belmont Park, and "The Prince of Wales" in Canada. "Stakes races are the highest class of race in any jurisdiction, and usually involve the largest purses." Kropp, supra, 171 n.1. For example, in 1983, the year that Runaway Groom was retired to stud, stakes races comprised only 3.5% of the races in North America, but "'the purses they carried represented 21% of all the money earned by horses running that year.'" See id. (quoting J. Lohman & A. Kirkpatrick, Successful Thoroughbred Investment in a Changing Market 43 (1984)). The horse was also named "Canadian Three Year Old Champion Colt" in 1982. These victories translated into enhanced value during the initial syndication offerings, since the cost of shares are determined by the racing success of the horse. Dep. J. DiMario, Vol. 1, at 58-60; Ex. 3; see also Thomas Kiernan, The Secretariat Factor viii-ix (1979).

 In March of 1983, Runaway Groom was syndicated. The syndication agreement follows the custom of the industry, providing forty equal fractional interests in the stallion. Syndicate Agreement § 1.1. Each fractional interest grants the holder one fortieth interest in the proceeds of the horse, one yearly breeding right, and an obligation to pay one fortieth of the horses's yearly upkeep. Syndicate Agreement §§ 1.1, 3.6, 4.2(c). It also provides for six annual breeding rights, four of which were conferred to the syndicate manager, Drumlanring Farm, one to the plaintiff, and one to a ...


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