Fraud in Horse Sales: Florida’s Rule 5H and Unfair and Deceptive Acts by Equine Sellers, Agents, and Others
Florida is unique in the nation by reason of having the most comprehensive statutory and common law addressing fraud in the equine industry. Given the great economic impact of the equine industry to state and national economies,1 several other states have attempted to address the issues of horse sale fraud, but none have gone so far as Florida in addressing and mandating certain minimum requirements for disclosures and consent during the purchase and sale of a horse.
The taking of secret profits, kickbacks, and undisclosed commissions are, unfortunately, a historic part of commercial practice in the equine industry. Undisclosed agency and compensation arrangements among owners, sellers, agents, trainers, sponsors, and other “facilitators” are common in the horse world and have normalized unfair and deceptive acts that would not be permitted in other industries. The problem is not limited to Florida, nor, indeed, the United States. In England, secret commissions are known, ironically, as “sweeteners.”2
However, in Florida, an agricultural rule passed seven years ago has begun gaining traction with more cases being brought, and settled, in Florida courts to curtail long-entrenched deceptive practices by horse trainers, sellers, agents. This is to say that parties injured by historic practices are starting to avail themselves of their rights. The reason? Florida law goes further than any other state in proscribing improper conduct in the purchase and sale of horses and prescribing a path toward remedies for wrongful conduct.
Florida’s Rule 5H-263
With an equine population trailing only Texas and California,4 Florida is now the third state that has enacted a law specifically imposing affirmative duties of disclosure upon the seller of a horse, as well as agents and anyone paying consideration to any party or agent to an equine sales transaction. Florida’s Rule 5H is the strongest incarnation of law and rulemaking in the nation to address fraud by both misrepresentation and concealment, undisclosed dual agency, and secret profit-taking in horse sales. Other states have grappled with these issues in specific equine disciplines, such as racehorse sales, but have not developed law that is nearly as comprehensive as Florida law in mandating disclosures and consent.
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
Notably, Florida’s law offers a particular prescription for a remedy for violation of Rule 5H: If the violation causes actual damages, then the violation is deemed an unfair and deceptive trade practice under FDUTPA, thus, triggering the remedies available thereunder.18 Unique among the three states, Florida is the first state to expressly provide that violation of any provision of Rule 5H, which causes actual damage is a per se unfair and deceptive trade practice.19 Other states sometimes apply their unfair trade practice acts to equine transactions,20 but none except Florida have specifically declared such conduct, if causing actual harm, a per se violation.21
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 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
This per se violation approach of Rule 5H, introduced early in the iterations of drafts of Rule 5H, reflects the legislative evolution of the equine fraud statutes of California and Kentucky from specific prohibitions and requirements in the racehorse industry to broader protections for the public consumer in any Florida equine purchase and sale transaction. Thus, Rule 5H is a natural extension of the goal of FDUTPA, which, according to the legislature, is “to protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.”25
The cause-and-effect link created by Rule 5H to FDUTPA to rein in fraud and malfeasance in horse sales is not accidental. The Florida Supreme Court has held that FDUTPA applies to private causes of action arising from single unfair or deceptive acts in the conduct of any trade or commerce, even if it involves only a single party, a single transaction, or a single contract. An unfair practice is “one that ‘offends established public policy’ and one that is ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’”26
• Seller’s Obligations Under Rule 5H — Under the robust requirements of Rule 5H, a seller in a Florida horse sale must “at a minimum”:27
• Provide to buyer a written bill of sale, which must “accompany” the sale;28
• Provide a written statement in the bill of sale that seller is the lawful owner of the horse and legally entitled to convey ownership;29
• Obtain written consent of the buyer that the buyer is consenting to use of a dual agent;30
• Provide written disclosure to the buyer of any commissions, consideration, or other things paid by seller to any agent or person;31
• Disclose to purchaser prior to sale if the horse being sold has been subjected to certain veterinary treatments within seven days prior to the private sale of the horse or any interest therein;32
• Provide accurate disclosure of the medical history of a horse when requested by a buyer or buyer’s agent;33
and
• Provide written disclosures of warranties or representations with respect to the horse’s age, medical condition, prior medical treatments, and the existence of any liens or encumbrances.34
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. imposing such strong remedies through FDUTPA, Rule 5H is intended as a remedial statute to protect consumers in the equine industry.37
• Agent’s Obligations Under Rule 5H — An agent within a Florida equine sales transaction has even more onerous affirmative obligations when participating in a horse sale. In addition to the requirements of seller, an agent of a seller has the following additional legal obligations:
• If acting as a dual agent, before receiving consideration from some party other than the agent’s principal, disclose in writing to purchaser and horse owner any consideration, compensation, fees, a gratuity, or any other item of value in excess of $500, related directly or indirectly to such transaction, from an individual or entity, including any consignor involved in the transaction, other than the agent’s principal;38
• Obtain in writing the consent to such consideration from each principal for whom the agent is acting;39
• Upon request by his or her principal or principals, furnish copies of all financial records and financial documents in the possession or control of the agent pertaining to the transaction to the principal or principals;40
• Disclose to the agent’s principal the agent’s legal or equitable interest in a horse the agent is purchasing for the agent’s principal or recommending be purchased by the agent’s principal;41
• Disclose to purchaser prior to sale if the horse being sold has been subjected to certain veterinary treatments within seven days prior to the private sale of the horse or any interest therein;42
• Accurately disclose all information about the medical history of a horse within an agent’s knowledge that is responsive to an inquiry from a purchaser or purchaser’s agent about the medical history of a horse;43
• Provide a written statement that the agent is the owner’s duly authorized agent and that the agent is authorized to convey legal title to the horse pursuant to a written bill of sale;44
• 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
• Provide a written, executed contract from the party against whom a dual agent seeks a commission, fee, gratuity, or any other form of compensation.46
Florida law, thus, casts a much wider net than Kentucky or California because it regulates a much broader range of possible commercial activities, relationships, and combinations thereof. Florida law does not just stop at regulating the conduct of seller and buyer’s agents, however. Florida recognizes that there are other individuals or entities involved in horse sales, discussed below, whose conduct may give rise to deceptive or unfair acts unless regulated.
• Trainers’ and Facilitators’ Obligations Under Rule 5H — Trainers often serve as seller or buyer agents and, therefore, are held to the same affirmative obligations as agents under Rule 5H, described previously herein. But there are often other individuals, neither agents nor trainers, who participate in some way in a horse purchase and sale transaction. Those “others” are most accurately described as “facilitators” to a horse sale in that they somehow act to effectuate the purchase and sale transaction. Those facilitators, if they have an interest or expect to receive anything of value, or pay or give anything of value to another involved as a seller or to an agent in a Florida horse sale transaction, are also bound to make certain disclosures under Rule 5H. Specifically:
• 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
• The person or entity making a payment to another’s agent must disclose in writing the payment to both the purchaser and owner of the horse subject to the transaction.48
With this final set of requirements, Florida’s law exceeds any other jurisdiction and includes requirements for not only sellers and agents, but trainers and facilitators and any others who participate in the movement of value or information in an equine purchase and sale transaction. This is a very powerful development, because in practice, these facilitators and others often are the cause or source of fraudulent acts or omissions in horse sales.
Fraud and Secret Profit-Taking in Horse Sales
• Common Scheme Patterns — When it occurs, fraud in equine purchase and sale transactions usually centers around a core nexus of secret profit-taking and nondisclosure of compensation by an agent, trainer, or other facilitator involved in the transaction. That secret profit comes in the form described in Rule 5H-26.003(7) as an undisclosed “commission, fee, gratuity, or any other form of compensation.” There are various forms of fraud or secret profit-taking. In one scenario, an agent who is aware of his or her principal’s desire to purchase a horse at a particular price point. The agent locates a horse at a lower price, but does not purchase it immediately, instead using the principal’s purchase money to purchase that horse and then sells it to the principal, thus, taking both a secret profit as well as a disclosed commission from the principal.
In another scenario, a buyer or seller’s agent asks what the seller wishes to receive from the sale of a horse; then one or both of the agents involved mark up the sale price, close the transaction, remit the asking price to the seller, and pocket the difference. Undisclosed profit-taking markups of 100 percent or more of the seller’s asking price are not unheard of in the equine industry. Another far-too-common scenario is that a buyer’s agent does not disclose any commission the agent is receiving from the seller or that the buyer’s agent is also working as a dual agent.49 Yet another scenario of fraud arises when the seller or seller’s agent, either alone or together with buyer’s agent, fails to accurately disclose the veterinary medical history or condition of the horse to the buyer.50 All of those scenarios cause actual damage to the principal buyer because of the increased purchase price point and commissions paid.
• Other Jurisdictions Address the Schemes with General Business Law — In the absence of an equine-specific law as Florida’s Rule 5H, other state courts resorted to less equine-specific existing law when confronted with fraudulent conduct and omissions scenarios. For example, in a Texas case, wherein agents conspired to mark up a horse’s sale price and pocket the extra profit, the Texas court of appeals deployed a per se unfair trade practice act analysis when considering that scheme involving two actors:
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.51
Therein, lacking an equine-specific 5H-type law, the Texas court employed an analysis of the law of conspiracy to impute liability to the defendants:
“Wallace contends that conspiracy to violate the DTPA is not actionable. This appears to be an issue of first impression in Texas. Wallace is wrong.…[T]he gist of a civil conspiracy is the damage resulting from commission of a wrong which injures another, and not the conspiracy itself.”52
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
In contrast, Florida’s Rule 5H allows the aggrieved to go straight to the heart of the matter: an unfair and deceptive act, to obtain the powerful remedies thereunder, often with limited defenses available.
Defenses to a 5H Claim Are Limited
• Custom in the Equine Industry Is No Defense — A defense frequently raised by those taking a secret profit or engaging in a dual agency commission is that it is the custom of the equine industry.55 But that is a specious argument because although a principal may be charged with knowledge of a custom, an agent nevertheless still has the duty to act in good faith and fair dealing, particularly to a principal who does not know of the fact of the dual agency or secret profit-taking.56
• 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.
In addition, there is a general common law duty when selling property not to actively misrepresent, omit, or conceal material facts, particularly those not readily apparent.61 Rule 5H does not preemptively replace that common law duty. Similarly, an “as is” clause in a Florida contract does not protect the seller or agents or facilitators from intentional concealment claims.62 An aggrieved purchaser may bring alternative claims for fraudulent inducement and concealment, negligent inducement, and otherwise. Rule 5H, nevertheless, remains the surest path toward the expanded remedies under FDUTPA in connection with a Florida horse sale.
• Good Faith Is Not a Defense — Rule 5H contains no good faith exception for noncompliance with its heightened disclosure and consent requirements. Therefore, 5H is a strict liability rule and noncompliance in good faith does not excuse the violation of the rule.63 Further, if the violation of Rule 5H causes a party actual harm, the law provides that the aggrieved party has established a FDUTPA violation and may invoke all of the remedies available thereunder.64 The purpose of that strict liability of Rule 5H is to compel horse sellers, agents, and other transaction facilitators to comply with the specific requirements of the law to avoid fraud and deception.65
• 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. adopting the robust Rule 5H, Florida has become the leader in the nation in its emphasis on fair disclosure in all horse sales. 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.”67 Further, 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.
1 The equine industry across all disciplines contributes approximately $39 billion in direct economic impacts to the U.S. economy on an annual basis, which grows to $102 billion annually, if considering indirect and induced spending. American Horse Council, 2005 Economic Impact Study, Executive Summary (June 28, 2005), available at http://www.manesandtailsorganization.org/American_Horse_Council_2005_Report.pdf.
2 Richard Evans, Jockey Club Probe Bloodstock “Fraud,” Daily Telegraph, Jan. 27, 2004, at Sport 1.
3 F.A.C.R. 5H-26.001 et seq.
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.
6 F.A.C.R. 5H-26.001.
7 Id.
8 Cal. Bus. & Prof. Code 19525.
9 There are some minor exceptions for documents memorializing sale of horses passing through auction. See F.A.C.R. 5H-26.003)(6) and (8). However, Rule 5H still provides for voluntary medical information disclosure in such transactions. F.A.C.R. 5H-26.003(9).
10 F.A.C.R. 5H-26.004.
11 F.A.C.R. 5H-26.003.
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).
16 F.A.C.R. 5H-26.004 provides: “Except as provided in subsection 5H-26.003(8), F.A.C., the sale or purchase of a horse or any interest therein in Florida must be accompanied by a written bill of sale that must include at a minimum the following: (1) The name, address, and signature of the [p]urchaser, the [o]wner, or their duly authorized agents. In a transaction solely relating to a stallion season, breeding right, or fractional interest in a horse, the syndicate manager or horse manager may serve as an acceptable agent in response to this requirement. (2) The name of the horse, and its sire and dam if known. (3) The breed and registry status of the horse, if applicable and if known. (4) The age of the horse, if known. (5) The date of the sale. (6) The purchase price of the horse. (7) The following statement: ‘As the person signing below on behalf of the [o]wner, I hereby confirm that I am the lawful [o]wner of this horse or the [o]wner’s duly authorized agent, and I am authorized to convey legal title to the horse pursuant to this bill of sale.’ (8) The following statement: ‘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.’”
17 Compare K.R.S. 230.357(11) to F.A.C.R. 5H-26.001 et seq.
18 F.A.C.R. 5H-26.003(13).
19 Id.
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.”).
21 F.A.C.R. 5H-25.003(13).
22 Fla. Stat. §501.211(1)–(2) .
23 Discussed during the April 7, 2008, public hearing by the Florida Department of Agriculture and Consumer Services, Division of Marketing and Development on a draft of Rule 5H. See 34 Fla. Code and Admin. Reg. No. 4 (Jan. 25, 2008).
24 FDUTPA applies to private causes of action arising from single unfair or deceptive acts in the conduct of any trade or commerce, even if it involves only a single party, a single transaction, or a single contract. An unfair practice is “one that ‘offends established public policy’ and one that is ‘immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’” Samuels, 782 So. 2d at 499 (quoting Spiegel, Inc. v. Fed. Trade Comm’n, 540 F.2d 287, 293 (7th Cir. 1976)). See also Millennium Communications & Fulfillment, Inc. v. Office of the Attorney Gen., 761 So. 2d 1256, 1263 (Fla. 3d DCA 2000). In addition to actual damages, a successful claimant under FDUTPA is entitled to receive reasonable attorneys’ fees and costs. Fla. Stat. §501.2105. Further, FDUTPA expressly states that the remedies afforded that legislation are “in addition to remedies otherwise available for the same conduct under state or local law.” Fla. Stat. §501.213(1).
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) (§§501.204, 501.2075 (2011)). “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. §501.203(7) (2011) (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. §501.202.
26 Samuels, 782 So. 2d at 499 (quoting Spiegel, Inc. v. Fed. Trade Comm’n, 540 F.2d 287, 293 (7th Cir. 1976)); see also Millennium Communications & Fulfillment, Inc. v. Office of the Attorney Gen., 761 So. 2d 1256, 1263 (Fla. 3d DCA 2000) (stating that deception occurs if there is a “’representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer’s detriment.’”) (quoting Southwest Sunsites, Inc. v. Fed. Trade Comm’n, 785 F.2d 1431, 1435 (9th Cir. 1986)).
27 F.A.C.R. 5H-26.004.
28 F.A.C.R. 5H-26.003(1).
29 F.A.C.R. 5H-26.004(7).
30 F.A.C.R. 5H-26.003(2)(b).
31 F.A.C.R. 5H-26.003(3)(a).
32 F.A.C.R. 5H-26.003(10).
33 F.A.C.R. 5H-26.003(12) (emphasis added) provides: “When an [o]wner or its agent provides any medical information in response to an inquiry from a [p]urchaser or its agent about the medical history of a horse, the [o]wner or its agent shall accurately disclose all information within its knowledge that is responsive to the inquiry.”
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.”
35 F.A.C.R. 5H-26.003(13) provides: “A violation of any provision of Chapter 5H-26, F.A.C., resulting in actual damages to a person, shall be considered an unfair and deceptive trade practice pursuant to Chapter 501, Part II, F.S.”
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]”).
37 See Beacon Prop. Mgmt., Inc. v. PNR, Inc., 890 So. 2d 274, 279 (Fla. 4th DCA 2004).
38 F.A.C.R. 5H-26.003(3)(a).
39 F.A.C.R. 5H-26.003(3)(b).
40 F.A.C.R. 5H-26.003(4).
41 F.A.C.R. 5H-26.003(5).
42 F.A.C.R. 5H-26.003(10).
43 F.A.C.R. 5H-26.003(12).
44 F.A.C.R. 5H-26.004(7).
45 F.A.C.R. 5H-26.004(8).
46 F.A.C.R. 5H-26.003(7).
47 F.A.C.R. 5H-26.003(5).
48 F.A.C.R. 5H-26.003(3)(a).
49 F.A.C.R. 5H-26.001(1) states: “Dual agent” means a person who knowingly agrees with the [o]wner and the [p]urchaser of a horse, either individually or jointly, to act in a fiduciary capacity on behalf of both the [o]wner and the [p]urchaser in exchange for the promise of compensation. Auction companies or persons licensed to conduct public sales of thoroughbred horses under Chapter 535, F.S., shall not be deemed to be dual agents under this rule chapter.” Further, F.A.C. 5H-26.003 provides, in relevant part: “(2) A person shall not act as a dual agent in a transaction involving the sale or purchase of an interest in a horse without: (a) The prior knowledge of both the [p]urchaser and the [o]wner; and (b) written consent of both the [p]urchaser and the [o]wner. (3) No person acting as an agent for a [p]urchaser or an [o]wner, or acting as a dual agent, in a transaction involving the sale or purchase of a horse or any interest therein, may receive consideration, compensation, fees, a gratuity, or any other item of value in excess of five hundred dollars ($500), related directly or indirectly to such transaction, from an individual or entity, including any consignor involved in the transaction, other than the agent’s principal, unless: (a) The agent receiving, and the person or entity making, the payment disclose in writing the payment to both the purchaser and [o]wner; and (b) each principal for whom the agent is acting consents in writing to the payment.”
50 F.A.C.R. 5H-26.003(10)(a) and (12) provide in relevant part: “(10)(a) An [o]wner or its agent that has subjected a horse to one or more of the following treatments within [seven] days prior to the private sale of the horse or any interest therein shall disclose this fact to the [p]urchaser prior to the sale: 1. Extra-corporal shockwave therapy or radio pulse-wave therapy. 2. Acupuncture, electro-stimulation, or both, with the intent or effect of altering laryngeal function of the horse. 3. Internal blister or other injections behind the knee, which are intended to or which have the effect of concealing the true conformation of the horse….(12) When an [o]wner or its agent provides any medical information in response to an inquiry from a Purchaser or its agent about the medical history of a horse, the [o]wner or its agent shall accurately disclose all information within its knowledge that is responsive to the inquiry.”
51 Laxson v. Giddens , 48 S.W.3d 408, 411 (Tx. Ct. App. 2001).
52 Id.
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.).
58 Johnson v. Davis, 480 So. 2d 625, 628 (1985) (“One should not be able to stand behind the impervious shield of caveat emptor and take advantage of another’s ignorance.”).
59 F.A.C.R. 5H-26.001 (emphasis added). “The purpose of this rule chapter 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.”
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 ., Fla. Stat. §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.”).
64 F.A.C.R. 5H-26.003(13).
65 F.A.C.R. 5H-26.001.
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 .
68 U.S. Equestrian Federation Communications Dep’t, USEF Announces Formation of Two Major Task Forces to Address Industry Changes (Apr. 23, 2018), available at http://links.usef.mkt7856.com/servlet/MailView?ms=MTMzNjkzOTUS1&r=MTMyMTYwNTg3NTU1S0&j=MTM4MjAyOTE2MQS2&mt=1&rt=0.
AVERY S. CHAPMAN has practiced equine law nationally and internationally since 1991. He is the founding chair of The Florida Bar Equine Law Committee, a multi-term member of the Palm Beach County Bar Professionalism Committee, and has been general counsel to a national equestrian sport governing body. Chapman’s equine law and business litigation practice covers the diverse areas of fraud and other business torts, contract law, liens, agency, disciplinary proceedings, land use, and other law relevant to the equine industry.
