Cloning case doesn’t end with jury ruling

Lew Stevens

Special to the Business Press

A closely watched U.S. District Court case dealing with cloned horses resulted in a 10-member federal jury in Amarillo finding unanimously against the American Quarter Horse Association and holding that the AQHA’s refusal to register cloned horses and their foals violated federal and state antitrust laws. The jury did not award the $6 million in damages requested by the rancher and the veterinarian who were plaintiffs in the case. Had the jury awarded damages, the amount would have been trebled under antitrust statutes. The verdict does not automatically result in registration of the clones, and the association has said it will appeal. The plaintiffs are likely to seek an injunction that would prevent the AQHA from barring the registration of clones.

The case followed the prestigious Stud Book and Registration Committee’s denial of clone registration for a second time at the 2012 annual AQHA convention. The AQHA argued during the trial that it is a voluntary association whose members are free to adopt and enforce rules of their choosing. The core of the plaintiffs’ antitrust argument was that the registration process is controlled by a limited number of breeders who are motivated to enhance the value of their horses by rules limiting registration. The likely next steps will be the routine filing of a motion by the AQHA asking the judge to enter a verdict for the defense despite the jury verdict, and a possible appeal. Appeals of a jury verdict typically focus on errors of law, such as judicial rulings on admissibility of evidence and jury instructions. The facts found by the jury are given great weight by the appellate court.

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The case has been followed by virtually all horse breed associations. Like the AQHA, most breed associations register foals that result from innovative breeding techniques, including artificial insemination and use of frozen semen and frozen embryos. Following a 2001 trial in Amarillo that resulted in a judge’s verdict against the AQHA, the association changed its rules to register foals in which an embryo from one mare is transplanted into another mare that then gestates and gives birth to the foal. Standing alone among the breeding associations is The Jockey Club, which registers thoroughbreds. The Jockey Club has stayed with the requirement that a foal can be registered as a thoroughbred only if it is the result of direct breeding of a mare by the stallion. Owners of thoroughbred mares have long argued that this requirement greatly diminishes the value of an outstanding mare by limiting the number of foals she can have, while stallions can breed numerous mares.

The jury ruling in Amarillo does not have an impact on performance associations such as the National Cutting Horse Association or the National Barrel Horse Association, which allow clones to compete in their events. Clones also are eligible for Olympic events, polo events and other disciplines such as endurance and jumping. By far, the largest potential impact of the jury’s decision is on events sponsored by the AQHA, which limits participation to registered quarter horses. The AQHA has more than 280,000 members and has registered 2.5 million horses. In 2012, the AQHA sponsored more than 3,000 events with nearly 950,000 entries.

As a breeding issue, cloning will be subject to the same harsh economic realities as any other horse program. The economics start with the cost of producing the clone, currently about $150,000. The open question is whether the clone will return that investment. One source of return is the sale of the clone itself. Two clones of the cutting horse sire Smart Little Lena sold for $27,000 and $28,000. At the other end of the spectrum, a clone of the polo mare Cuartetera brought $800,000 at an auction in Buenos Aires. Breeding fees are another source of return to the clone’s owner, as are sales of the foals of the clone. It may take several years of producing and training foals to demonstrate the value of the program. If the jury verdict results in the registration of clones and their foals by the AQHA, it will expose cloning to the harsh light of economic viability.

Lew Stevens is a Fort Worth attorney.