Judge Kimberly Bunnell has dismissed the New York-based lending firm MGG’s attempt to place a lien on the stud fees and progeny of Solomini, to claim nine breeding rights to American Pharoah and the broodmare American Cleopatra, according to Gregory Parsons of States & Harbison, who represented the owners of Solomini in MGG’s suit.
The ruling was issued June 10 in Fayette, Kentucky Circuit Court.
Solomini stands at McMahon of Saratoga Thoroughbreds, where he has bred 127 mares in his initial season at stud.
In January, MGG filed a $23 million lawsuit against Ahmed Zayat and his financially troubled Zayat Stables.
“This has been a real headache,” said Raymond DeStefano, one of the owners of Solomini. “We were concerned that with this cloud hanging over him, we would be lucky to have gotten 60 mares. We ended up with 127 mares as of Saturday, but it still cost him. I know quite a few people who wanted to breed to him, including one breeder with three mares, and he said, `I just couldn’t take a chance.’ This was supposed to be over in April but because of the virus, it was postponed.”
Ahmed Zayat raced Solomini, a four-time GI stakes-placed son of Curlin, and Coolmore Stud bought into the colt. He is now owned by McMahon, Hidden Lake Farm, DeStefano, Coolmore and shareholders, having been syndicated when he went to stud. “McMahon, Hidden Lake and I bought into him in December,” said DeStefano, “and then this bombshell hit. Coolmore stayed in for a piece because they liked him so much. We syndicated him, selling 25 shares, but after this situation, people backed away, and we ended up only selling 17 or 18.”
DeStefano said that the opportunity cost was hard to swallow. “There were a few people who I knew who were going to buy shares, and didn’t, and others backed out,” he said. “That worked out fine because now we own more of him, and realize just how popular he is, even under this circumstances. But the seasons are lost forever. I think he could have bred at least 140 mares. He’s very popular. He’s a Curlin. He bred many stakes-winning and stakes-producing mares, and mares by Tapit, Bernardini, etc.-huge numbers and an incredible quality of mares. I would safely say that there’s never been a better book of mares to a first-year stallion in New York.”
MGG was seeking a lien on any stud fees and the people who bred to Solomini were “at risk” that they wouldn’t be able to register their foals, DeStefano said. DeStefano and Lou Salerno were involved in the early success of Belong To Me, who ended up at Lane’s End Farm after his first three seasons in New York.
Parsons said that Burrell ruled that MGG did not have a valid claim due to the clear title provisions in the Federal Food Security Act of 1985, which provides that a purchaser of farm products takes free of a security interest unless the secured party has observed certain conditions. Specifically, MGG in this case would have had to provide notice to the buyer. This notice comes with specific formal requirements. The second provision is if the lender has filed what is called an “effective financing statement” in a “central filing” system certified by the USDA. If the lender complied with these, filing an effective financing statement in a central filing system certified by the USDA, the horses would be sold with the security attached. This system has been enacted in 13 states. Kentucky is not one of them.
“She ruled that the Food Security Act applies to these transactions and because of that, all of these buyers purchased these assets free and clear of their security interests,” said Parsons. “When MGG sued McMahon Thoroughbreds, they were asking the court that the stallion be returned to MGG, the plaintiff and the lender. And they asked the court to establish a trust for the proceeds of the stallion. Both of those claims were based on there being a valid security interest. The judge clearly followed the law and ruled there was no interest. It was a very solid ruling based on a clear interpretation.”
MGG was seeking a lien on any stud fees and the people who bred to Solomini were “at risk” that they wouldn’t be able to register their foals, DeStefano said.
The judge also ruled that MGG’s motion for summary judgment against Zayat Stables on breach of contract was granted, and that judgment was entered in favor of MGG against Zayat Stables in the amount of $24,534,166.13, but added, “MGG, however, shall not take any further action at this time to collect or enforce this Judgment as it is not final and appealable.”