James T. Scatuorchio Racing Stable, LLC v. Walmac Stud Management, LLC
941 F. Supp. 2d 807
E.D. Ky.2013Background
- This action concerns ownership and management of the Thoroughbred stallion Ready’s Image, co-owned by the plaintiffs and several defendants.
- The Walmac entities and Lincoln-Walmac allegedly mismanaged Ready’s Image and breached multiple agreements governing its stud career.
- The Southern Hemisphere Agreements (SHCOA, SHLA) designate Lincoln-Walmac as lessee and stallion manager for Southern Hemisphere operations, with Walmac Stud as stallion manager in some contexts.
- The Mare Agreement (Jan 2010) required Mare Plaintiffs to deliver mares and entitled them to proceeds from breeding Ready’s Image; plaintiffs allege improper distributions and accounting.
- Plaintiffs allege fraud, breach of contract and fiduciary duties, and seek accounting, consumer protection relief, and rescission/reformation related to arbitration provisions; several counts were referred to arbitration prior to this ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Counts Five and Six state viable independent breach-of-good-faith claims under Kentucky law? | Counts Five and Six present independent breaches of the implied covenant of good faith and fair dealing. | Kentucky recognizes good-faith claims only in limited contexts; implied covenant cannot create a separate tort. | Counts Five and Six survive as contract-based claims. |
| Does Count Seven properly plead a fiduciary-duty claim against Lincoln-Walmac? | Co-ownership and management create a fiduciary-like relationship. | Lincoln-Walmac’s role does not alone establish a fiduciary relationship; reliance on SHLA is insufficient. | Count Seven survives against Lincoln-Walmac at this stage. |
| Is Count Eight (fraudulent inducement) adequately pled with specificity? | Walmacs misrepresented intentions to remit Mare Agreement proceeds; misrepresentations were willful and induced the contract. | Fraud pleadings fail to identify which defendant made which misrepresentation; no injury pleaded. | Count Eight dismissed for lack of particularity and injury specificity. |
| Is Count Nine (Accounting) properly pleaded against the named parties? | A contractual/fiduciary relationship exists, warranting an accounting. | Accounting requires a contractual or fiduciary relationship and proper basis for the accounting; Saybrook lacks such a relationship. | Count Nine survives against Walmac Farm and Lincoln-Walmac; dismissed as to Saybrook. |
| Is Count Twelve (NJCFA) properly pleaded and applicable here? | NJCFA applies to defendant’s allegedly deceptive services in a consumer-like transaction. | This is not a consumer sale; NJCFA requires public offering of merchandise; pleading inadequate under Rule 9(b). | Count Twelve dismissed for failure to plead NJCFA elements and applicability. |
Key Cases Cited
- Gresh v. Waste Servs. of Am., 311 F. App’x 766 (6th Cir. 2009) (fiduciary relationship requires more than arm’s-length contract)
- Ranier v. Mt. Sterling Nat’l Bank, 812 S.W.2d 154 (Ky. 1991) (implicit covenant of good faith; ordinary business relations not fiduciaries)
- KNC Investments, LLC v. Lane’s End Stallions, Inc., 504 F. App’x 467 (6th Cir. 2012) (tenants in common may create fiduciary duties in co-ownership contexts)
- St. Auto. Mutual Ins. Co. v. Chrysler Credit Corp., 792 S.W.2d 626 (Ky. Ct. App. 1990) (conversion requires intentional dominion over property)
- Caudill v. Salyersville Nat’l Bank, No. 2008-CA-017-MR, 2010 WL 45882 (Ky. Ct. App. 2010) (fiduciary duties depend on trust/confidence; varied factors)