Crestwood Farm Bloodstock, LLC v. Everest Stables, Inc.
864 F. Supp. 2d 629
E.D. Ky.2012Background
- Crestwood Farm Bloodstock LLC (Crestwood) is a Kentucky LLC; Everest Stables (Everest) is a Minnesota corporation.
- Everest began boarding mares at Crestwood in 1993; Petionville stood at Crestwood since 1997; no formal stallion management contract existed, but a 1996 protocol letter required Crestwood to obtain Everest's approval before breeding.
- Everest contends Crestwood was Everest's agent/fiduciary for Petionville based on extensive correspondence and telephone communications; Crestwood contends Everest retained ownership and control and Crestwood's role was boarding/breeding at Everton's direction.
- In November 2008, the parties entered the Purchase and Sale Agreement (the November 4 Agreement) under which Crestwood would board, manage, and sell over 100 subjects horses, including Island Fashion and the Island Fashion filly (IF filly).
- Everest transferred title to Crestwood for most horses but retained Island Fashion and the Island Fashion filly; the Agreement required selling all horses with no reserve, RNA, or buyback; Crestwood would receive a percentage of net sale proceeds; Everest could set reserves only for its own horses under the Agreement.
- Everest caused the Island Fashion filly to be RNA’d at Keeneland 2009, which nullified the sale; Crestwood claimed breach of the November 4 Agreement and sought to retain a $219,513.89 disputed amount as commission offset by Everest’s RNA action,
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Everest breached the November 4 Agreement by RNA’ing the Island Fashion filly | Everest, as owner, had right to RNA; Crestwood breached by not protecting value | Agreement required no reserves on Subject Horses and Everest’s RNA action prevented payment | Everest’s RNA action breached the Agreement and Crestwood’s entitlement to commission; Crestwood’s motion granted on this issue |
| Whether Crestwood breached expressed contract by managing Petionville and by handling the November 4 Agreement | Everest claims Crestwood managed Petionville and breached the November 4 Agreement | No definite/certain terms showed an express management contract; Crestwood fulfilled its duties under the Agreement | No express contract to manage Petionville; Crestwood’s motion granted on express breach claims; for Island Fashion, Crestwood also held not liable under November 4 Agreement |
| Whether Crestwood breached implied contracts regarding Petionville | Everest asserts implied contracts to manage Petionville and to take it to the next level | No definite terms; protocol letter complied with; vague implied obligation unsupported | Crestwood’s motion granted; no viable implied contract claims |
| Whether Crestwood breached fiduciary or agency duties | Everest alleges Crestwood breached fiduciary/agency duties, including Keeneland rules and records of expenses | No fiduciary relationship or breach; agency duties limited to contract; records not required by the agreement | Summary judgment for Crestwood; Everest’s fiduciary/agency claims denied |
| Whether other claimed breaches (conspiracy, fraud, unjust enrichment) survive | Everest asserts civil conspiracy, fraud, unjust enrichment based on improper conduct | No evidence of outsider actions; no fraud or unjust enrichment under contract terms; conspiracy doctrine not satisfied | Crestwood’s motion granted; conspiracy, fraud, and unjust enrichment claims dismissed |
Key Cases Cited
- Kovacs v. Freeman, 957 S.W.2d 251 (Ky.1997) (definite and certain terms required in contract formation)
- Fisher v. Long, 294 Ky. 751, 172 S.W.2d 545 (Ky.1943) (requires definite terms for express contracts)
- Quadrille Bus. Sys. v. Kentucky Cattlemen’s Ass’n, 242 S.W.3d 359 (Ky.App. 2007) (evidence of contract terms must be clear and convincing)
- Slater v. Pearle Vision Ctr., Inc., 376 Pa. Super. 580, 546 A.2d 676 (Pa. Super. Ct. 1988) (implied covenant principles may apply to contract duties)
- In re Regal Cinemas, Inc., 213 Fed. Appx. 369 (6th Cir. 2006) (cited for related implications of contract duties in limited contexts)
- Estate of Riddle ex rel. Riddle v. S. Farm Bureau Life Ins. Co., 421 F.3d 400 (6th Cir. 2005) (anti-harm and condition-based defenses in contract standing)
- Abney v. Amgen, Inc., 443 F.3d 540 (6th Cir. 2006) (fiduciary duty in business relationships requires extraordinary facts to override self-interest)
- Sallee v. In re Sallee, 286 F.3d 878 (6th Cir. 2002) (elements of fiduciary duty test; reliance must be reasonable)