Charging a commission for expertise and time to help buy or sell a horse is a common and accepted industry practice by trainers. There is nothing fundamentally wrong with paying a commission. It goes without saying that it takes a huge amount of effort to ensure that a horse is sold for the right price and to the right owner. For that reason, many people rely on their trainers for their knowledge, expertise and efforts in getting the deal done. However, some trainers are finding ways to bring in extra profits from buying and selling horses without disclosing the practice to their customers. This is unethical and illegal.

You’ve heard it before. A well-known show horse is sold to a new owner at price that would give most of us sticker shock. People start gossiping. How much did that horse really sell for? You hear many different numbers thrown around. However, you may not be the only one who doesn’t know the “true” selling price of that Congress Champion show horse. Both the buyer and seller may also be in the dark due to secret and undisclosed commission fees.

When a client engages the services of his or her trainer to buy or sell a horse, the trainer becomes the client’s agent. As the agent, the trainer owes a fiduciary duty to the client. The law imposes, among other things, an obligation of fair dealing, honesty, loyalty and candor. A trainer is responsible for fully disclosing material and relevant information on the sale and they must act in their client’s best interest. If the trainer fails to act in such a way, then he has breached his fiduciary duty to a client and is subject to legal action.

Here, in the Quarter Horse industry, the buying and selling environment is often casual and deals are sealed with verbal agreements and handshakes. In fact, clients are sometimes completely left out of the negotiation process – meaning the trainers are free to disclose as little or as much detail as they choose. As you can see, this can lead to misunderstanding and potentially illegal or unethical practices, including “secret commissions,” misrepresenting the true selling price or acting as a “dual agent” for both buyer and seller of a particular horse and earning commissions from both.

Some states have specifically addressed the practice and have laws on the books making it unlawful to act as an undisclosed “dual agent” in the sale of a horse. Those states include California, Florida and Kentucky. These state laws forbid dual agency without prior, written consent of both buyer and seller, set limits on commission fees and may require written bills of sale depending on the purchase price.

However, engaging in deceptive and fraudulent commission practices can land you on the wrong side of the law regardless of where you live.

In 2007 a lawsuit was settled for $3.5 million against a group of trainers who were accused of collaborating to defraud billionaire Jess Jackson (founder of the Kendall Jackson vineyards), including the purchase of horses. It was alleged that the trainers overcharged him for the purchase of 30 horses and took undisclosed payments from thoroughbred sellers. In one instance, the trainers had requested $850,000 for the purchase of a colt, but the seller received only $675,000. No bill of sale was drafted reflecting the price and details of the transaction. The trainers inflated the sale prices and pocketed the rest.

Additionally, in 2004, the federal government criminally prosecuted two hunter/jumper trainers for deceptive horse sale schemes. The allegations against trainer, Kenneth Berlin and Joshua Cardine, included various horse sale schemes where the trainers sold horses on behalf of their clients and then remitted none or only a portion of the proceeds to those clients. Both Berlin and Cardine plead guilty to commit fraud and swindle of livestock in interstate commerce. The trainers were sentenced to nearly two years in federal prison and ordered to pay restitution to their victims in the amount of $94,300.

So can a trainer legally make a profit? Yes, as long as the trainer discloses the terms of the deal and the client agrees to it, then trainer can legally profit from the sale. Trainers provide a valuable service by helping clients buy and sell horses and most clients are willing to pay for the trainer’s service. The trainer should have a clear, written commission agreement with clients to help avoid any misunderstandings.

Katherine Jarve is a partner at the Marlton, New Jersey law firm of Jarve Granato Starr, LLC. She is licensed in New Jersey and Pennsylvania and maintains a practice in personal injury and civil litigation, including equine related issues. Katherine spent her childhood competing on the national AQHA show circuit. This article is for informational purposes only and is not intended to be legal advice. If you have a specific legal question or problem, consult with an experienced equine law attorney. E-mail  questions to kjarve@nj-triallawyers.com.