Volume IV of VIII 747
1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS 2 AMARILLO DIVISION
3 ABRAHAM & VENEKLASEN JOINT § 4 VENTURE, ABRAHAM EQUINE, § INC., and JASON ABRAHAM, § 5 § Plaintiffs, § 6 § VS. § CASE NO. 2:12-CV-103-J 7 § AMERICAN QUARTER HORSE § 8 ASSOCIATION, § § 9 Defendant. §
10 ======11 CIVIL TRIAL BY JURY 12
13 JULY 22, 2013
14 VOLUME IV OF VIII 15
16 (Pages 747 - 995)
17 ======
18
19 On the 16th, 17th, 18th, 19th, 22nd, 23rd, 24th, 25th,
20 26th, 29th, and 30th days of July 2013, a Civil Trial by Jury
21 in the above-entitled and numbered cause came on to be heard
22 before the Honorable Mary Lou Robinson, United States District
23 Judge for the Northern District of Texas, presiding and a jury.
24
25 Proceedings reported by mechanical stenography; transcript produced by computer.
Stacy Mayes Morrison Official Court Reporter T r i a l I n d e x 748
1 VOLUME IV (PAGES 747 - 995)
2 PROCEEDINGS FOR JULY 22, 2013
3 PAGE
4 CAPTION...... 747
5 TRIAL INDEX...... 748
6 EXHIBIT INDEX...... 749
7 APPEARANCES...... 750
8 PROCEEDINGS FOR JULY 22, 2013...... 751
9
10 PLAINTIFFS' EVIDENCE (CONTINUED)
11 WITNESSES: DIRECT CROSS REDIRECT RECROSS VOIR DIRE
12 DON TREADWAY (CONTINUED) 751 753 754 13 BUTCH WISE (BY DEPOSITION) 757 14 GLENN BLODGETT 777 15 (BY DEPOSITION)
16 CAROL ROSE (BY DEPOSITION) 783
17 JEFF TEBOW (BY DEPOSITION) 789
18 MIKE JENNINGS 795 (BY DEPOSITION) 19 GEORGE SEIDEL 806 20 (BY DEPOSITION)
21 TAMMY CANIDA 814 822 827 828 828 22 DAVID BROWN 830 859 873 23 CHRISTOPHER PFLAUM 875 973 24
25 REPORTER'S CERTIFICATE...... 995
Stacy Mayes Morrison Official Court Reporter E x h i b i t I n d e x 749
1 IDENTIFICATION OF PLAINTIFFS' EXHIBITS
2
3 NO. DESCRIPTION OFFERED ADMITTED
4 92 SLIDESHOW PRESENTATION, GEOGRAPHIC MARKET:THE UNITED STATES AND CANADA 889 889 5 112 TABLE 2 FROM CHRIS PFLAUM REBUTTAL REPORT DATED 6 FEBRUARY 14, 2013 908 908
7 127 TABLE 11 ("UGONE'S EXCESS CAPACITY ANALYSIS") FROM CHRIS PFLAUM REBUTTAL REPORT DATED 8 FEBRUARY 14, 2013 949 949
9 137 PLAINTIFFS' DAMAGE CHART NO. 1 969 970
10 138 PLAINTIFFS' DAMAGE CHART NO. 2 971 971
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Stacy Mayes Morrison Official Court Reporter Appearances 750
1 A-P-P-E-A-R-A-N-C-E-S
2
3 FOR PLAINTIFF, ABRAHAM & MS. NANCY J. STONE VENEKLASEN JOINT VENTURE: Law Office of Nancy J. Stone 4 Attorney at Law 320 S. Polk St., Suite 820 5 Amarillo, Texas 79101
6 FOR PLAINTIFF, ABRAHAM MR. SAMUEL L. STEIN 7 EQUINE, INC.: Law Office of Sam L. Stein, PLLC Attorney at Law 8 305 S. Grand Avenue P.O. Box 223 9 Cherokee, Oklahoma 73728
10 FOR PLAINTIFF, JASON MR. RONALD D. NICKUM 11 ABRAHAM: Law Office of Ronald D. Nickum Attorney at Law 12 P.O. Box 1889 Amarillo, Texas 79105-1889 13 AND 14 MR. BRIAN E. ROBISON 15 GIBSON, DUNN & CRUTCHER, LLP Attorneys at Law 16 2100 McKinney Ave., Suite 1100 Dallas, Texas 75201 17
18 FOR THE DEFENDANT: MR. W. WADE ARNOLD and 19 MR. MICHAEL H. LOFTIN and MS. AUTUM LEIGH WHITE 20 Underwood Law Firm Attorneys at Law 21 500 S. Taylor, Suite 1200 Amarillo, Texas 79101 22
23 COURT REPORTER: MS. STACY MAYES MORRISON 24 Official Court Reporter 205 E. 5th, LB #F13263 25 Amarillo, Texas 79101 (806) 672-6219
Stacy Mayes Morrison Official Court Reporter Don Treadway (Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 751
1 PROCEEDINGS FOR JULY 22, 2013
2 (The following took place in open court with the jury and
3 all parties present.)
4 THE COURT: You may proceed.
5 MR. ARNOLD: Your Honor, at this time, Defendant
6 passes the witness.
7 DON TREADWAY (CONTINUED),
8 having been previously duly sworn, testified as follows:
9 REDIRECT EXAMINATION
10 BY MS. STONE:
11 Q. Good morning, Mr. Treadway.
12 A. Good morning.
13 Q. I have just very few questions for you. You still have
14 your deposition in front of you; is that correct?
15 A. Yes, ma'am.
16 Q. Okay. And, at the time that you gave that deposition, as
17 you did here before the clerk, you raised your hand and the
18 court reporter swore you in, and you promised to tell the
19 truth, correct?
20 A. Yes, ma'am.
21 Q. Okay. And, following the deposition after it was
22 transcribed -- and your deposition was taken on October 19th,
23 2012; is that correct?
24 A. I believe so, yes.
25 Q. And, after the deposition was transcribed and put into
Stacy Mayes Morrison Official Court Reporter Don Treadway (Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 752
1 the little booklet, you had an opportunity to read it; is that
2 correct?
3 A. Read the deposition?
4 Q. Yes, sir.
5 A. Yes, ma'am.
6 Q. And you read the deposition, and you, again, with a few
7 exceptions -- corrections, you made a few corrections, but
8 none of them had anything to do with any of the questions that
9 I asked you about on Friday. Would you agree with that?
10 A. Correct.
11 Q. Okay. And you, again -- when you read your deposition,
12 you, again -- on November the 7th, 2012, you, again, in front
13 of a notary public, signed your deposition and swore that the
14 statements contained therein were true and correct, right?
15 A. Yes.
16 Q. Now, the Task Force, the Cloning Task Force, it never
17 actually met in person, did it?
18 A. I don't recall that they met in person.
19 Q. And do you recall that following -- do you recall that we
20 talked on Friday about Exhibit No. 142? And that was the
21 document -- the e-mails between you and Mr. Cofrancesco where
22 he was asking you in December of 2011 to set up a meeting with
23 the Executive Committee and certain members of the Stud Book
24 and Registration Committee. Do you recall that?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Don Treadway (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 753
1 Q. Okay. And there was, in fact, a meeting held in January
2 of 2012, correct?
3 A. That is correct.
4 Q. And that meeting -- that meeting, that session was
5 referred to as a strategic planning session, wasn't it?
6 A. Yes, ma'am.
7 MS. STONE: No further questions.
8 MR. STEIN: May I?
9 THE COURT: Yes, sir.
10 MR. STEIN: Thank you.
11 DIRECT EXAMINATION
12 BY MR. STEIN:
13 Q. Mr. Treadway, you were in this courtroom when Frank
14 Merrill's testimony was read to the jury?
15 A. Yes, sir.
16 Q. And it was, in fact, the procedure at AQHA that, when an
17 agenda item was discussed at the Stud Book and Registrations
18 Committee and no action was taken by the committee, that
19 decision-making process of no action doesn't go to the
20 membership or to the board, correct?
21 A. Technically, it goes to the board.
22 MR. STEIN: Exhibit 31, please.
23 A. And let me explain, if I could.
24 Q. (By Mr. Stein) You've also been in the courtroom, sir,
25 where we have seen Dan Schaap, counsel for AQHA, advising Mr.
Stacy Mayes Morrison Official Court Reporter Don Treadway (Cross--Mr. Arnold) (Defendant AQHA) 754
1 Holley, one of the rule-change proponents, of this very same
2 procedure, that if, in fact, affirmative action is not taken
3 by the Stud Book and Registrations Committee, that decision,
4 that nonaction, that denial doesn't make it into the
5 recommendation to the membership.
6 You've seen that in this courtroom as well, haven't you?
7 A. Yes, sir.
8 MR. STEIN: All right. No further questions.
9 MS. STONE: Nothing further.
10 CROSS EXAMINATION
11 BY MR. ARNOLD:
12 Q. Don, how are you doing this morning?
13 A. I'm good. Thank you.
14 Q. Let me just ask you a couple of questions. You were here
15 for the testimony of Mr. Topliff, Professor Topliff, were --
16 A. Yes.
17 Q. -- you not?
18 A. Yes, sir.
19 Q. And do you recall his testimony that, other than his
20 abstention and John Pipkins vote "no," that the entire Board
21 of Directors in 2013 voted against the rule-change proposal
22 presented by Jason Abraham? Were you here for that testimony?
23 A. Yes, sir.
24 Q. And was that your recollection of what occurred at that
25 board meeting as well?
Stacy Mayes Morrison Official Court Reporter Don Treadway (Cross--Mr. Arnold) (Defendant AQHA) 755
1 A. Yes, sir.
2 Q. And have you been present at every convention since 2008
3 to the present through 2013?
4 A. Yes, sir.
5 Q. And was the recommendation of the Stud Book Committee in
6 2008, which was to study the proposal further, was that passed
7 by the board in 2008?
8 A. Yes, sir.
9 Q. And was the recommendation of the Stud Book Committee in
10 2009 to form a Task Force, was that passed by the Board of
11 Directors in 2009?
12 A. Yes, sir.
13 Q. And was the Stud Book Committee recommendation in 2010 to
14 deny the Holley/Cannon rule proposal, was that accepted by the
15 Board of Directors in 2010?
16 A. Yes, sir.
17 Q. And was the recommendation of the Stud Book Committee in
18 2011 to deny the proposal of Dr. Veneklasen -- or, excuse me,
19 of Blake Russell, was that recommendation to deny the proposal
20 passed by the Board of Directors in 2011?
21 A. To deny, yes.
22 Q. I want to ask you real quickly about the Task Force
23 meetings that, I believe, Ms. Stone asked you about.
24 Tell the jury again real quickly, are -- are all the Stud
25 Book members located in the same state or the same town or the
Stacy Mayes Morrison Official Court Reporter Don Treadway (Cross--Mr. Arnold) (Defendant AQHA) 756
1 same area?
2 A. Actually, they're from all over the world.
3 Q. Some are from -- there's one from Germany, correct?
4 A. Yes, sir.
5 Q. There's one or two from Canada, correct?
6 A. Yes, sir.
7 Q. They're from all over the country, correct?
8 A. Yes.
9 Q. Would it be practical for them to get together for
10 face-to-face meetings as opposed to phone conferences among
11 each of the four subcommittees?
12 A. I think we would have had a face-to-face if necessary, if
13 they would have asked for it, but there were numerous
14 conference calls between the various Task Forces during the
15 course of the year.
16 Q. And do you believe, based on what you know of the Task
17 Force, based upon their findings, based upon their
18 presentation of their findings to the Stud Book Committee in
19 2010, do you think they did a thorough job of examining the
20 four issues that the Stud Book Committee in 2009 wanted to
21 look at further?
22 A. I would agree with that, yes.
23 MR. ARNOLD: Pass the witness. No further
24 questions, Your Honor.
25 MS. STONE: Nothing further.
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 757
1 THE COURT: You may stand down.
2 THE WITNESS: Thank you.
3 (Witness leaves the stand.)
4 THE COURT: Call your next witness.
5 MR. STEIN: Your Honor, at this time, we would like
6 to call Butch Wise by deposition. And if I could, I've got
7 extra copies, and I could have Mr. Nickum read the answers.
8 THE COURT: You may proceed.
9 MR. STEIN: May I approach and give the Court a
10 copy?
11 THE COURT: Yes, sir.
12 PLAINTIFFS' READING OF BUTCH WISE DEPOSITION
13 (Whereupon, portions of the oral deposition of Butch Wise
14 are read as follows, with questions being read by Mr. Stein
15 and answers being read by Mr. Nickum:
16 BUTCH WISE (BY DEPOSITION),
17 having been first duly sworn, testified as follows:
18 DIRECT EXAMINATION
19 BY MR. STEIN:
20 Q. "Mr. Wise, could you give us your full name, please.
21 A. "Floyd Edmond Wise --
22 Q. "Floyd?
23 A. "-- better known as Butch.
24 Q. "Sir, where do you live?
25 A. "El Reno, Oklahoma.
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 758
1 Q. "When did you first develop your interest in horses?
2 A. "Very young age.
3 Q. "When did you first own your first horse?
4 A. "Also at a very young age.
5 Q. "Did you show horses or compete with them in any events
6 growing up?
7 A. "No, we were strictly racehorse people."
8 MR. STEIN: We're now going to Page 9.
9 MR. ARNOLD: Thank you.
10 Q. "(By Mr. Stein) Approximately when that you went to work
11 for the AQHA?
12 A. "Probably '76 or seven, I'm going to guess.
13 Q. "Okay. And how long were you with the AQHA?
14 A. "Two years."
15 MR. STEIN: Page 13.
16 Q. "(By Mr. Stein) Then how did your employment change?
17 A. "Well, then I opened up my own -- my own brokerage
18 business at that point, had an opportunity to start brokering
19 horses, and I've done that ever since.
20 Q. "So what was the nature of the business of Wise Sales
21 Company?
22 A. "Selling horses.
23 Q. "Did you concentrate your brokerage business within the
24 race -- racing industry?
25 A. "I did.
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 759
1 Q. "Tell me how that would work. When you say selling
2 horses, were you hired by potential buyers who were looking
3 for horses, or were you hired by people who had horses to sell
4 and they hired you as their sales agent? How did that work?
5 A. "Both.
6 Q. "Now, tell me what Stone Chase Stables is.
7 A. "It's -- it's just a holding company, basically that --
8 it's the company that I have that is contracted to manage the
9 Lazy E properties.
10 Q. "What do you mean Lazy E properties; what does that
11 encompass?
12 A. "It's a breeding operation/sales operation in Guthrie,
13 Oklahoma.
14 Q. "Does Stone Chase Stables contract with anyone else to
15 manage any other horse operation?
16 A. "No.
17 Q. "Does it own -- as the holding company, does it own the
18 business of Wise Sales?
19 A. "Wise Sales Company owns Stone Chase.
20 Q. "Okay. Does Stone Chase Stables own any horses?
21 A. "Yes.
22 Q. "So when I asked you a minute ago, does Stone Chase
23 Stables own horses, were you including in that answer those
24 that you have a syndicate interest in?
25 A. "Correct.
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 760
1 Q. "You make no distinction between those that are owned
2 outright versus those in which you have a syndicate interest,
3 correct?
4 A. "No. You actually own a piece of the horse.
5 Q. "Explain to me and explain to the jury who might hear
6 this testimony what you mean by syndicating a horse.
7 A. "It's partial ownership of a horse by a group. It can
8 take all forms, any amount of numbers, but they actually own a
9 percentage of the horse. Usually there is someone designated
10 as the syndicate manager that makes the day-to-day decisions
11 about the horse.
12 Q. "So, if I understand the nature of a syndicate, it could
13 be that the owners of the horse are truly co-owners, and they
14 elect to govern themselves by way -- by way of a syndicate
15 agreement, and they each own a piece of the horse, right?
16 A. "Correct.
17 Q. "Does Stone Chase Stables own horses outright, separate
18 and apart from a syndicate?
19 A. "They do, or it does.
20 Q. "Does Stone Chase Stables own any mares?
21 A. "Yes.
22 Q. "Broodmares?
23 A. "Yes.
24 Q. "Are these broodmares that you own, are they race-bred
25 mares?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 761
1 A. "They are.
2 Q. "How many broodmares does Stone Chase Stables currently
3 have?
4 A. "According to my wife, too many, but I'm going to say
5 probably twenty.
6 Q. "How many stallions does Stone Chase Stables have an
7 interest in, interest in outside of a syndicate arrangement?
8 A. "One.
9 Q. "And his name?
10 A. "Afrashad.
11 Q. "Where does the horse stand?
12 A. "Lazy E Ranch.
13 Q. "All right. Now, how many stallions does Stone Chase
14 Stables have an interest in, an interest in through a
15 syndicate arrangement?
16 A. "Two.
17 Q. "And what are their names?
18 A. "Teller Cartel and Valiant Hero.
19 Q. "So where does Teller Cartel stand for stud?
20 A. "Lazy E.
21 Q. "And where does Valiant Hero stand for stud?
22 A. "Lazy E.
23 Q. "Approximately, when did Stone Chase Stables first enter
24 into this contractual agreement to manage the Lazy E
25 properties?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 762
1 A. "1996.
2 Q. "Now, over the years, has Stone Chase Stables
3 continuously been in a management relationship with the Lazy E
4 properties?
5 A. "We have."
6 MR. STEIN: Page 27.
7 Q. "(By Mr. Stein) Are the horses that the Lazy E Ranch is
8 dedicated to raising and caring for, are they all racehorses?"
9 MR. NICKUM: You've lost me. I'm sorry. What line?
10 MR. STEIN: Page 27.
11 MR. NICKUM: What line?
12 MR. STEIN: 14 to 17.
13 A. "They all have a connection to racehorses."
14 MR. STEIN: Okay. Now, if you'll flip over to
15 Page 37.
16 Q. "(By Mr. Stein) Do the veterinarians that you employ
17 utilize advanced breeding techniques such as embryo transfer?
18 A. "We do.
19 Q. "Do you have the facilities there at the Lazy E to do
20 that?
21 A. "We do the flushes there.
22 Q. "Do you have the facilities at the Lazy E to collect
23 semen from the stallions?
24 A. "We do.
25 Q. "Do you ship cooled semen from Lazy E to locations off
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 763
1 the Lazy E Ranch?
2 A. "We do.
3 Q. "Do you utilize the freezing technique to preserve or
4 store semen on any of the stallions that are stood at stud at
5 the Lazy E Ranch?
6 A. "We do.
7 Q. "Does the Lazy E store semen -- store frozen semen
8 collected at Lazy E?
9 A. "Some."
10 MR. STEIN: Page 43.
11 Q. "(By Mr. Stein) Do you engage in the embryo transfer
12 procedure with mares to allow them to flush multiple embryos
13 during a given breeding season?
14 A. "We do.
15 Q. "Do you allow a mare to produce embryos, multiple
16 embryos, during the breeding season, bred to the same
17 stallion?
18 A. "Yes."
19 MR. STEIN: Go to Page 51.
20 Q. "(By Mr. Stein) Okay. Currently, are you on any of the
21 standing committees at the AQHA?
22 A. "Stud Book Committee."
23 MR. STEIN: Next, Page 56.
24 Q. "(By Mr. Stein) Did your subcommittee meet in person
25 during the existence of the Cloning Task Force?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 764
1 A. "I think we did it via conference call, as I remember."
2 MR. STEIN: Go to Page 61.
3 Q. "(By Mr. Stein) I'm trying to find out if there was any
4 actual meetings of the Cloning Task Force where you all met
5 and studied any of the issues assigned to the Task Force.
6 A. "Not that I remember."
7 MR. STEIN: Page 66.
8 Q. "(By Mr. Stein) I'm going to hand you what has been
9 previously marked as Exhibit 99 to Mr. Merrill's deposition.
10 That is a listing of the Stud Book and Registration Committee
11 members at various years from 2008 through 2012.
12 A. "Uh-huh.
13 Q. "I -- I want to -- I want to go through these with you.
14 I want to find out if you know any of the members that are
15 listed as Stud Book and Registration Committee members who
16 were on the committee in 2008, and then we're going to do the
17 same thing for each year. Are you with me?
18 A. "Yes.
19 Q. "All right. The first name listed on Exhibit 99 is Gus
20 Barakis. Do you know Mr. Barakis?
21 A. "I do.
22 Q. "Do you know if he actually is a breeder of American
23 Quarter Horses?
24 A. "He is.
25 Q. "And I'm going to use that phrase loosely, but clearly a
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 765
1 breeder would be one who owns mares and that are bred or --"
2 MR. STEIN: I'm going to start that over again. I
3 flubbed it.
4 Q. "(By Mr. Stein) And I'm going to use that phrase
5 loosely, but clearly a breeder would be one who owns mares
6 that are bred or conceived a foal, and they would be the
7 record owner of the mare at the time that foal was conceived.
8 Are you with me?
9 A. "Yes.
10 Q. "And you know Gus Barakis to be one who owns mares and
11 breeds them?
12 A. "I do.
13 Q. "The next one is Robert Blakeman. Do you know Mr.
14 Blakeman?
15 A. "I do.
16 Q. "Do you know whether he is one who would be termed a
17 breeder of American Quarter Horses?
18 A. "He has been.
19 Q. "You know Dr. Glenn Blodgett?
20 A. "I do.
21 Q. "And he, in 2008, would have actually been an employee at
22 The Four Sixes, right?
23 A. "He would.
24 Q. "Would you characterize him as a breeder of American
25 Quarter Horses?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 766
1 A. "Yes.
2 Q. "And how about Rob Brown; is that from R.A. Brown Ranch?
3 A. "Yes.
4 Q. "Would you consider Rob Brown to be a breeder of American
5 Quarter Horses?
6 A. "I would.
7 Q. "The next one is Vaughn Cook. Do you know Mr. Cook?
8 A. "I would. I do.
9 Q. "Do you understand him to be a breeder of American
10 Quarter Horses?
11 A. "I do.
12 Q. "The next one is Bill Englund. Do you know Mr. Englund?
13 A. "I do.
14 Q. "Would you understand him -- do you understand him to be
15 a breeder of American Quarter Horses?
16 A. "I do."
17 MR. STEIN: Page 69.
18 Q. "(By Mr. Stein) Do you know Ginger Hyland?
19 A. "I do.
20 Q. "Do you understand her to be a breeder of American
21 Quarter Horses?
22 A. "At one time, yes.
23 Q. "Do you know -- do you know Calvyn Loree?
24 A. "Yes.
25 Q. "Do you have an understanding whether Mr. Loree is -- can
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 767
1 be characterized as a breeder of American Quarter Horses?
2 A. "Yes.
3 Q. "Do you know Gretchen Mathes?
4 A. "Yes.
5 Q. "Do you understand her to be a breeder of American
6 Quarter Horses?
7 A. "I do.
8 Q. "Do you know Tom McBeath?
9 A. "Met him.
10 Q. "Do you know him?
11 A. "I do.
12 Q. "Do you understand him to be a breeder of American
13 Quarter Horses?
14 A. "I do.
15 Q. "Do you know C.O. McKerley?
16 A. "I do.
17 Q. "Do you understand Mr. McKerley to be a breeder of
18 American Quarter Horses?
19 A. "I do.
20 Q. "Do you know Bob Moorhouse?
21 A. "I do.
22 Q. "Do you understand Mr. Moorhouse to be a breeder of
23 American Quarter Horses?
24 A. "Yes.
25 Q. "And do you know who Carol Rose is?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 768
1 A. "Yes.
2 Q. "Do you understand her to be a breeder of American
3 Quarter Horses?
4 A. "I do.
5 Q. "So do you know Ed Murray?
6 A. "I do.
7 Q. "Do you understand Mr. Murray to be a breeder of American
8 Quarter Horses?
9 A. "I do.
10 Q. "Now, do you know Benham Stewart?
11 A. "I do.
12 Q. "Do you understand Mr. Stewart to be a breeder of
13 American Quarter Horses?
14 A. "I do.
15 Q. "Do you know Brad Tate?
16 A. "Yes.
17 Q. "Do you understand him to be a breeder of American
18 Quarter Horses?
19 A. "I do.
20 Q. "And, of course, you know Johnny Trotter?
21 A. "I do.
22 Q. "And you understand that he is a breeder of American
23 Quarter Horses?
24 A. "Yes.
25 Q. "Did you know the late Scoop Vessels?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 769
1 A. "I did.
2 Q. "And you understood that he was, at this time in 2008, a
3 breeder of American Quarter Horses?
4 A. "He was.
5 Q. "Do you know Duane Walker?
6 A. "I do.
7 Q. "And do you understand he is to be -- that he -- he to be
8 a breeder of American Quarter Horses?
9 A. "Yes.
10 Q. "And, of course, your name is there, and you would
11 understand yourself to be a breeder of American Quarter
12 Horses?
13 A. "I would.
14 Q. "Can you look at the names listed for the committee
15 members of the Stud Book and Registration Committee that we
16 identified under the year 2009. Do you know them or know of
17 them?"
18 MR. STEIN: Line 22.
19 A. "Know of them. I think I know of everyone.
20 Q. "(By Mr. Stein) Are there any there that you would not
21 characterize as breeders of American Quarter Horses?
22 A. "Ed Squires. I don't know if he is a breeder.
23 Q. "And you also weren't sure of Jim Fleming?
24 A. "Yes.
25 Q. "And Leslie Lange?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 770
1 A. "Jim Fleming and Leslie Lange.
2 Q. "Anyone else that you would -- that you would verify for
3 us -- no, strike that.
4 "Is there anyone else under the 2009 list that you cannot
5 put in the category of being a breeder of American Quarter
6 Horses?
7 A. "No.
8 Q. "All right. In the list under the year 2010, is there
9 anyone listed there that you are unable to put into the
10 category of breeder of American Quarter Horses?
11 A. "We have Leslie. We have Ed Murray.
12 Q. "Well, now, Ed Murray --
13 A. "I mean, Ed Squires.
14 Q. "Ed Squires.
15 A. "I get those guys mixed up.
16 Q. "Mr. Fleming has apparently dropped off the list.
17 A. "Fleming's off the list, and it looks like Jodi Sullivan
18 was replaced.
19 Q. "Mr. Sullivan, to your knowledge, a breeder of American
20 Quarter Horses?
21 A. "Yes.
22 Q. "Anyone else in 2010 who you cannot classify as a breeder
23 of American Quarter Horses?
24 A. "No.
25 Q. "Now, then, let's go to the list under 2011. In 2011, it
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 771
1 would be your testimony that every member of the Stud Book and
2 Registration Committee were characterized or can be
3 characterized as a breeder of American Quarter Horses,
4 correct?
5 A. "To my knowledge, yes.
6 Q. "All right. How about in the year 2012? Is there anyone
7 listed under the year 2012 as a member of the Stud Book and
8 Registration Committee that you cannot identify as a breeder
9 of American Quarter Horse?
10 A. "The only one that I would have -- that I would not have
11 knowledge of would be Dickson Varner.
12 Q. "Well, now, Dickson Varner is a faculty member at Texas
13 A&M University?
14 A. "That's correct.
15 Q. "Now, as we sit here today, are you for or against the
16 registration of clones within the American Quarter Horse
17 Association?
18 A. "I personally am not in favor of it.
19 Q. "What reasons can you give me from your personal
20 viewpoint as to why you are not in favor of the registration
21 of clones within the American Quarter Horse Association?"
22 MR. STEIN: Page 78, Line 8.
23 MR. NICKUM: Can we go outside the deposition? I'm
24 lost.
25 MR. STEIN: We're at Page 78, Line 4. I'll read the
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 772
1 question again. Page 78, Line 4.
2 MR. NICKUM: All right. I see it.
3 Q. "(By Mr. Stein) What reasons can you give me from your
4 personal viewpoint as to why you are not in favor of the
5 registration of clones within the American Quarter Horse
6 Association?
7 A. "Exactly that, it's not the product of a sire and a dam.
8 Q. "All right. Are there any other reasons that you
9 personally are against the registration of horses that are
10 clones or the offspring of clones?
11 A. "No."
12 MR. STEIN: Turn over to Page 82.
13 Q. "(By Mr. Stein) When the proposal to amend or modify
14 Rule 227(a) came before the Stud Book and Registrations
15 Committee in 2011, your belief is that every member sitting on
16 the committee who would have considered that second proposal
17 were actually breeders of American Quarter Horses, correct?
18 A. "In what year?
19 Q. "2011.
20 A. "2011. That is my belief."
21 MR. STEIN: All right. Page 84.
22 Q. "(By Mr. Stein) We took a short break to make a copy so
23 that we can have a document to refresh our thinking here.
24 "Is there something that you need to correct from a prior
25 answer?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 773
1 A. "On a timeline, I need to correct. In talking to Trent,
2 I was actually put on the Stud Book Committee at the -- after
3 the convention in 2007. So I would have gone on in 2008, but
4 I didn't attend that convention, so that kind of got me off a
5 year.
6 "My actual first involvement in the Stud Book came in
7 that fall, when we had that Stud Book meeting in Amarillo."
8 MR. STEIN: Page 85.
9 Q. "(By Mr. Stein) So I want to make sure I've got it
10 straight, that you went on in '07?
11 A. "Correct.
12 Q. "You went on the Stud Book and Registrations Committee
13 following the convention in '07, so it would have been at the
14 first -- the appointment would have come when the Executive
15 Committee met in April of 2007?
16 A. "That's correct.
17 Q. "So you're saying you didn't actually make the convention
18 in '08?
19 A. "I didn't go to San Francisco, yeah.
20 Q. "And that's when -- that's where the AQHA convention was
21 in 2008?
22 A. "That's correct."
23 MR. STEIN: Go to Page 120, Line 24.
24 Q. "(By Mr. Stein) So horses that are the result of the
25 ICSI procedure can race, correct?
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 774
1 A. "Because they're registered, yes.
2 Q. "Horses that are the result of embryo transfer can race?
3 A. "Because they're registered, right.
4 Q. "And horses that are the result of either natural or
5 embryo twinning can race, correct?
6 A. "Once again, because they're registered, right."
7 MR. STEIN: Page 128.
8 Q. "(By Mr. Stein) Did you solicit or secure the efforts of
9 John Andreini to make comments immediately following any of
10 Blake Russell's presentations to the Stud Book and
11 Registration Committee at any of their meetings at the
12 conventions?
13 A. "I do not remember that, no.
14 Q. "Do you recall whether John Andreini addressed the Stud
15 Book and Registrations Committee following any of Blake
16 Russell's presentations at any of the conventions where Blake
17 Russell made presentations?
18 A. "I believe he did."
19 MR. STEIN: Page 130.
20 Q. "(By Mr. Stein) What do you recall Mr. John Andreini
21 addressing the Stud Book and Registrations Committee about?
22 A. "About the fact that he was not for the procedure."
23 MR. STEIN: Page 136.
24 Q. "(By Mr. Stein) Mr. Wise, what is the -- what was the
25 highest stud fee charged for any stallion that stood at Lazy E
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 775
1 for the 2012 breeding season?
2 A. "35,000."
3 MR. STEIN: Page 138.
4 Q. "(By Mr. Stein) What is the name of the horse that you
5 were -- that Lazy E was charging, or that the owner was
6 charging the $35,000 that was being charged for the stud fee
7 in 2012?
8 A. "Corona Cartel.
9 Q. "And how many mares were bred to Corona Cartel in 2012
10 approximately?
11 A. "Eighty-eight.
12 Q. "What is the -- was the next highest price charged for
13 stud fees for a stallion stood at Lazy E in 2012?
14 A. "We had some Valiant Hero breedings that brought 10,000.
15 Q. "And how many mares were bred to Valiant Hero in 2012?
16 A. "Eighty-seven.
17 Q. "What was the highest sales price of any horse owned,
18 bred, prepped or marketed by Lazy E or Stone Chase?
19 A. "This year, 350,000.
20 Q. "Has there ever been a yearling that was owned, bred,
21 prepped or marketed by Lazy E or Stone Chase that sold for
22 more than $350,000?
23 A. "Yes.
24 Q. "Which ones and when were those?
25 A. "Oh, gosh, I'd have to go back and look, but we've had
Stacy Mayes Morrison Official Court Reporter Butch Wise Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 776
1 some as high as 550,000.
2 Q. "As yearlings?
3 A. "As yearlings.
4 Q. "Did you know that you were going to be appointed to the
5 Stud Book and Registrations Committee prior to your
6 appointment?
7 A. "I did not.
8 Q. "What is your understanding of who nominated you? Who
9 from the Executive Committee nominated you for the Stud Book
10 and Registrations Committee?
11 A. "I have no knowledge of that.
12 Q. "Are you aware -- you do not know that Frank Merrill was
13 the president of AQHA in 2007 when you were nominated --
14 A. "Yes.
15 Q. "-- correct?
16 A. "Yes."
17 MR. STEIN: Your Honor, that completes the reading
18 of our designations from this deposition.
19 THE COURT: Do you have --
20 MR. ARNOLD: We have none from this deposition, Your
21 Honor.
22 THE COURT: All right. Does anyone else have
23 something from the deposition?
24 MS. STONE: Nothing further.
25 (Plaintiffs' reading of deposition concluded.)
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 777
1 MR. STEIN: Your Honor, at this time, we would also
2 call by deposition Dr. Glenn Blodgett.
3 MR. NICKUM: Your Honor, I'll have to get the
4 deposition.
5 MR. STEIN: I'll bring you a copy. Your Honor, may
6 I approach, so I --
7 THE COURT: Yes.
8 MR. STEIN: -- can bring you a copy.
9 PLAINTIFFS' READING OF GLENN BLODGETT DEPOSITION
10 (Whereupon, portions of the oral deposition of Glenn
11 Blodgett are read as follows, with questions being read by Mr.
12 Stein and answers being read by Mr. Nickum:
13 GLENN BLODGETT (BY DEPOSITION),
14 having been first duly sworn, testified as follows:
15 DIRECT EXAMINATION
16 BY MR. STEIN:
17 Q. "What is your full name, full legal name, sir?
18 A. "Glenn Paul Blodgett.
19 Q. "Have you given your deposition in a lawsuit before?
20 A. "Yes, sir.
21 Q. "What is your profession or occupation, sir?
22 A. "I'm a veterinarian.
23 Q. "Where did you go to school to get your degree?
24 A. "Texas A&M.
25 Q. "How long ago?
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 778
1 A. "I graduated in 1974.
2 Q. "Can you give me a brief summary of your work history.
3 A. "Upon graduation from veterinary school, I worked in
4 Spur, Texas for Dr. Ed Murray for two years. And then I moved
5 home to my hometown of Spearman, Texas, and I practiced there
6 in private practice for six years.
7 "And then I moved -- I went to work for The Four Sixes,
8 Burnett Ranches in August of 1982 and moved my family down
9 there in March of 1983.
10 Q. "I see.
11 A. "And I've been there since.
12 Q. "I see."
13 MR. STEIN: Line 16.
14 A. "I'm veterinarian, horse division manager there at The
15 Four Sixes Ranch in Guthrie.
16 Q. "(By Mr. Stein) Okay. Since you've been down there at
17 The Sixes, what are your primary duties, Dr. Blodgett?
18 A. "Well, you know, I'm the resident veterinarian for the
19 ranch, and I also have responsibilities just overseeing the
20 management of the horse operation. And that includes making
21 breeding decisions, buying and selling of horses, marketing,
22 you know, just overall marketing of our services there,
23 whether they be veterinarian services or selling breeders
24 [sic] to stallions.
25 Q. "How would you characterize the size of your horse
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 779
1 operation at Guthrie?
2 A. "Well, I'd say it's fairly large, you know, comparatively
3 to other operations.
4 Q. "How many stallions are you standing there now?
5 A. "Well, we usually wind up in the -- you know, before the
6 breeding season starts, it's usually in the mid-twenty range.
7 We're trying to reduce that some, but I expect this year we
8 could wind up with around twenty head.
9 Q. "Twenty stallions? Are all of those owned by the ranch,
10 or are some of those outside stallions?
11 A. "Some of them are outside stallions. Some are owned
12 totally by the ranch. Some are owned partially by the ranch."
13 MR. STEIN: Page 11.
14 Q. "(By Mr. Stein) All right. You were on the Stud Book
15 and Registrations Committee last year when the issue of
16 cloning came up, were you not, or this year? I guess it was
17 this year, wasn't it?
18 A. "Yes.
19 Q. "At the last convention?
20 A. "Yes.
21 Q. "That issue came up. Looking back at your history with
22 AQHA, how long have you been on the Stud Book and
23 Registrations Committee?
24 A. "I don't recall the year I became a director, but I've
25 been on that committee ever since I've been a director, and
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 780
1 that's the only committee I've ever served on.
2 Q. "The Stud Book and Registrations Committee?
3 A. "Yes, sir.
4 Q. "Can you give me an estimate of how long you've been a
5 member of that committee?
6 A. "I guess it's twenty-five, twenty, twenty-five years.
7 Q. "A long time then?
8 A. "Yes."
9 MR. STEIN: Page 18.
10 Q. "(By Mr. Stein) All right. Well, then, we'll go on to
11 my next question, which is this: Is cloning something that,
12 in your opinion, can help get rid of genetic diseases?
13 A. "It may be.
14 Q. "Well -- okay. We'll discuss that in a minute , but my
15 question really focused on the scientific way that cloning is
16 accomplished and how it can be a powerful tool for getting rid
17 of genetic diseases.
18 "Would you agree that cloning can do that?
19 A. "Based on my knowledge, I'd say, yes, it could be one of
20 the tools."
21 MR. STEIN: Page 60.
22 Q. "(By Mr. Stein) As you sit here today, you can't name
23 any top performing cutting horses that are not registered
24 Quarter Horses, can you?
25 A. "No, ma'am.
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 781
1 Q. "Now, let me ask you to assume that there are two
2 registered Quarter Horse stallions that are identical twins
3 and that those registered Quarter Horse identical twin
4 stallions have had 162 to 163 offspring.
5 A. "Between the two of them?
6 Q. "Yes. Assuming that to be true, you would agree with me,
7 would you not, that you would not be able to differentiate who
8 their daddy was as between those 162 or 163 offspring of those
9 two identical twin stallions?
10 A. "Yes.
11 Q. "I'll ask you to assume that they were identical twins,
12 please, Dr. Blodgett. In fact, I'll represent to you that
13 AQHA has represented to us that they were identical twins, and
14 ask you the question.
15 "Assuming that to be true, would you agree that, with
16 regard to these 162 offspring of Royal Blue Quixote and CGOS
17 Pepto Quixote, that the question remains, who's your daddy?
18 A. "Yes."
19 MR. STEIN: Page 75.
20 Q. "(By Mr. Stein) Have you ever stood at stud to the
21 public a horse that was unregistered with any breed
22 association?
23 A. "No.
24 Q. "Would you agree with me that having registration papers
25 issued through a breed registry enhances the value of the
Stacy Mayes Morrison Official Court Reporter Glenn Blodgett Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 782
1 horses that you stand at stud to the public?
2 A. "Yes, I would agree with that."
3 MR. STEIN: Page 78.
4 Q. "(By Mr. Stein) All right. So ICSI was done without any
5 kind of additional vetting procedure or Task Force to
6 investigate the use of the technique; is that correct?
7 A. "There was no Task Force formed."
8 MR. STEIN: Page 82.
9 Q. "(By Mr. Stein) Assuming that you're correct, that in
10 your instance, if Jason Abraham had a mare and a stallion that
11 were pasture-bred and had twins, those twins could be
12 identical then, and we simply wouldn't know if they weren't
13 DNA-tested, correct?
14 A. "That's possible."
15 MR. STEIN: Your Honor, that concludes the reading
16 of our designations from this witness.
17 MR. ARNOLD: No questions at this time, Your Honor.
18 (Plaintiffs' reading of deposition concluded.)
19 MR. STEIN: Your Honor, at this time, we're going to
20 call by deposition Carol Rose, and I was going to have Ms.
21 Stone read those questions -- or those answers. May she take
22 the stand and bring you a copy?
23 THE COURT: Yes. And I'm not seeing that on the
24 witness list, but anyway --
25 MR. STEIN: She was one of the designated witnesses,
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 783
1 Your Honor, on the deposition designations.
2 PLAINTIFFS' READING OF CAROL ROSE DEPOSITION
3 (Whereupon, portions of the oral deposition of Carol Rose
4 are read as follows, with questions being read by Mr. Stein
5 and answers being read by Ms. Stone:
6 MR. STEIN: May I proceed?
7 THE COURT: Yes, sir.
8 MR. STEIN: Thank you. Ms. Stone.
9 CAROL ROSE (BY DEPOSITION),
10 having been first duly sworn, testified as follows:
11 DIRECT EXAMINATION
12 BY MR. STEIN:
13 Q. "Would you please give us your full name.
14 A. "Carol Alison Rose.
15 Q. "Thank you. Where do you live, ma'am?
16 A. "I live in Gainesville, Texas.
17 Q. "And could you tell us, please, how you are employed or
18 make your living.
19 A. "I'm self-employed. I own Carol Rose Quarter Horses."
20 MR. STEIN: Page 7.
21 Q. "(By Mr. Stein) Your web page describes you as being
22 AQHA's All-Time Leading Breeder of performance horses. Did I
23 get that correctly?
24 A. "Yes, sir.
25 Q. "Okay. Tell me what your understanding is of the
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 784
1 designation of being All-Time Leading Breeder of performance
2 horses. What does that phrase 'performance horse' encompass?
3 A. "Horses that perform in the events that are approved by
4 the AQHA. And my -- what I do is, we raise reining horses,
5 reining cow horses. And a lot of our horses have been in
6 roping events and some in the cutting events.
7 Q. "But your description of what a performance horse is, is
8 a function of being a horse competing in events approved by
9 the AQHA?
10 A. "Yes.
11 Q. "So your horses might compete outside of AQHA events,
12 such as through the NRHA or the NRCA or whatever those various
13 organizations are?
14 A. "Yes.
15 Q. "But you would agree with me that, in order for you to
16 hold the designation of All-Time Leading Breeder of
17 performance horses, your horses have to carry AQHA
18 registration papers, correct?
19 A. "Yes, sir.
20 Q. "And the value of your horse as performance horses is
21 enhanced by their being registered American Quarter Horses
22 through the AQHA, correct?
23 A. "Yes.
24 Q. "So, for example, the twelve crops sired by your stud
25 horse, Zan Parr Bar, were accepted within the performance
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 785
1 horse registry [sic] because they too were AQHA registered
2 through the American Quarter Horse Association, correct?
3 A. "Yes."
4 MR. STEIN: Page 9, Line 11.
5 Q. "(By Mr. Stein) Well, the fact of the matter is, you
6 would agree with me, ma'am, that the value of your horses,
7 whether they be these notable sires that are mentioned on your
8 web page or the offspring of those notable horses, the value
9 of those horses are enhanced greatly because they carry
10 registration certificates issued by the American Quarter Horse
11 Association, correct?
12 A. "Yes."
13 MR. STEIN: Page 18.
14 Q. "(By Mr. Stein) Now, tell me how long you've been on the
15 American Quarter Horse Association's Stud Book and
16 Registration Committee?
17 A. "Since 2000.
18 Q. "During your tenure as an AQHA member attending
19 conventions, can you ever remember a time when the general
20 membership didn't follow the recommendation of the Stud Book
21 and Registration Committee when it made recommendations to the
22 membership?
23 A. "I can't.
24 Q. "Are you aware of any time when the AQHA Board of
25 Directors didn't follow the recommendation of the Stud Book
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 786
1 and Registrations Committee when it made recommendations
2 regarding rules or proposed rules or rule changes?
3 A. "You're asking about the Stud Book, if the Board of
4 Directors did not follow the Stud Book and Registration
5 Committee?
6 Q. "Correct.
7 A. "I'm trying to think about the white rule. The board
8 went with -- no, I can't."
9 MR. STEIN: Page 25.
10 Q. "(By Mr. Stein) Fair enough. And you were a member of
11 the Cloning Task Force?
12 A. "Yes.
13 Q. "Now, in order to be appointed to the Cloning Task Force,
14 any committee member of the Stud Book and Registrations
15 Committee could be asked to join that Task Force, correct?
16 A. "I think the way it was is, we volunteered. They asked
17 if anybody wanted to be on it.
18 Q. "And you volunteered?
19 A. "Yes.
20 Q. "At the time that you asked to be on the Task Force in
21 2009, had you formed an opinion as to whether the registration
22 of clones or offspring of clones should be approved?
23 A. "I had formed an opinion.
24 Q. "What was the opinion at that time?
25 A. "My opinion at that time was that the registration of
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 787
1 clones should not -- the registration of the offspring of
2 clones should not be allowed.
3 Q. "What about the clones themselves?
4 A. "The clones themselves also should not be allowed.
5 Q. "So, at the time you asked to be on the Task Force, you
6 had already made up your mind that registration shouldn't take
7 place, correct?
8 A. "With the knowledge that I had at the time, I did not
9 want the registration of clones or their offspring."
10 MR. STEIN: Flip over to Page 40.
11 Q. "(By Mr. Stein) Have you ever harvested tissue from
12 Shining Spark or any other of your horses to preserve it in
13 case you want to attempt cloning in the future?
14 A. "Yes, sir. Shining Spark.
15 Q. "When did you -- well, let me strike that.
16 "When I refer to gene-banking, I'm referring to the
17 harvesting of tissue to preserve it.
18 A. "They harvested tissue from under his lip at Texas A&M,
19 and I don't remember when.
20 Q. "So Shining Spark has been gene-banked by Texas A&M?
21 A. "Yes."
22 MR. STEIN: Page 42.
23 Q. "(By Mr. Stein) And my question is: Do you have an
24 expectation or a belief that the AQHA may, in fact, change its
25 ban against the registration of clones or the offspring of
Stacy Mayes Morrison Official Court Reporter Carol Rose Deposition (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 788
1 clones?
2 A. "I have no expectation, but change is the only thing in
3 -- but change is the only thing that's constant in life.
4 Q. "So you want to be ready?
5 A. "Yes, sir."
6 MR. STEIN: Page 68, Line 22.
7 Q. "(By Mr. Stein) Do you have an opinion on whether
8 cloning in general will increase an incidence of genetic
9 disease in the horse population?
10 A. "It could if it was used improperly.
11 Q. "All right. Conversely, do you agree that it could
12 reduce the incidence of genetic disease in the horse
13 population?
14 A. "Possibly."
15 MR. STEIN: I believe, Your Honor, that concludes
16 the reading of the designations from this witness.
17 MR. ARNOLD: No questions, Your Honor.
18 (Plaintiffs' reading of deposition concluded.)
19 MR. STEIN: We have just a few more depositions,
20 Your Honor.
21 MS. STONE: We call Jeff Tebow by deposition, and
22 I'd ask that Mr. Stein be allowed to read the responses.
23 MR. STEIN: Your Honor, may I take the stand?
24 THE COURT: Yes.
25 MR. STEIN: And provide the clerk with a copy for
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 789
1 you?
2 PLAINTIFFS' READING OF JEFF TEBOW DEPOSITION
3 (Whereupon, portions of the oral deposition of Jeff Tebow
4 are read as follows, with questions being read by Ms. Stone
5 and answers being read by Mr. Stein:
6 JEFF TEBOW (BY DEPOSITION),
7 having been first duly sworn, testified as follows:
8 DIRECT EXAMINATION
9 BY MS. STONE:
10 Q. "State your name, please.
11 A. "Jeff Tebow.
12 Q. "And, Mr. Tebow, where do you reside?
13 A. "In Piedmont, Oklahoma.
14 Q. "How are you employed?
15 A. "I have several areas of employment. I am employed with
16 Heritage Place, a horse sale company in Oklahoma City, as well
17 as Andreini & Company of Oklahoma City.
18 Q. "Heritage Place horse sale company, that is a business --
19 excuse me, that business is involved in the business of
20 selling primarily Quarter Horses to the general public; is
21 that correct?
22 A. "Yes, ma'am.
23 Q. "In fact, it's one of the world's largest, if not the
24 world's largest, seller of American Quarter Horses,
25 particularly racing Quarter Horses; would that be true?
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 790
1 A. "Yes, ma'am.
2 Q. "And what is your position with Heritage Place?
3 A. "I am the general manager and chief financial officer.
4 Q. "Is there any other -- is there any other business of
5 Heritage other than operating the horse sale?
6 A. "No, ma'am.
7 Q. "Let me show you what's been marked as Exhibit No. 124,
8 and ask if you can identify that, please?
9 A. "Yes, ma'am. That appears to be the sales results that
10 show the top twenty horses based on selling price that were
11 sold at the January 2013 Winter Mixed Sale.
12 Q. "So I'll ask you again if you can identify anybody on
13 Exhibit 124 that was a buyer of the top twenty horses at the
14 Heritage Winter Mixed Sale held January 17th through 19th that
15 is not a member of the continental -- that is not a resident
16 of the continental United States?
17 A. "No, ma'am, I cannot based on this list.
18 Q. "My question is: Isn't it true that all of the
19 purchasers identified in Exhibit No. 124 are, in fact,
20 residents of the continental United States, at least according
21 to the records of Heritage Place?
22 A. "Yes, ma'am.
23 Q. "And so that would be approximately 1,073 head of horses
24 that went through the sale, correct?
25 A. "Yes, ma'am.
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 791
1 Q. "And while we're on Exhibit -- and while we're on
2 Exhibit 124, isn't it true that the top nine prices paid for
3 horses at the Heritage Winter Mixed Sale were paid for mares?
4 A. "Yes, ma'am.
5 Q. "So the top nine, the highest prices --"
6 THE COURT: Where are you? Where are you?
7 MS. STONE: Page 122 [sic], Line 17.
8 MR. STEIN: Page 22.
9 MS. STONE: Page 22, Line 17, my apology.
10 THE COURT: All right.
11 Q. "(By Ms. Stone) And while we're on Exhibit No. 122
12 [sic], isn't it true that the top nine prices paid for horses
13 at the Heritage Winter Mixed Sale were paid for mares?
14 A. "Yes, ma'am.
15 Q. "So the top nine, the highest prices -- the nine highest-
16 selling horses that were sold were mares, correct?
17 A. "Yes, ma'am.
18 Q. "And at least eight of those, the primary purpose of
19 those, because of their age, would be for broodmares, correct?
20 A. "I would believe that would be correct.
21 Q. "And of the top twenty selling horses, I identify fifteen
22 of the twenty as being mares; is that correct?
23 A. "How many did you say, ma'am?
24 Q. "Fifteen.
25 A. "Yes, ma'am, that's correct.
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 792
1 Q. "And of the fifteen mares that were part -- that were
2 part of the top twenty highest prices paid at the Winter Mixed
3 Sale, of those, it would appear that all but two of them, the
4 primary purpose of them would have been for broodmares based
5 on their age; would you agree with that?
6 A. "Yes, ma'am."
7 MS. STONE: Page 25, Line 23.
8 Q. "(By Ms. Stone) Mr. Tebow, does Heritage Place
9 specialize in selling racehorses, racing-bred horses?"
10 MR. STEIN: That's Page 28.
11 MS. STONE: Page 28, Line 23.
12 MR. STEIN: You want to read that again, please.
13 Q. "(By Ms. Stone) Mr. Tebow, does Heritage Place
14 specialize in selling racehorses, racing-bred horses?
15 A. "Yes, ma'am.
16 Q. "And it's racing-bred Quarter Horses, correct?
17 A. "Yes, ma'am.
18 Q. "And they range in price, at least according to the
19 documentation I've seen, I've looked at, the highest price
20 horse that you folks have ever sold was last year, and it sold
21 for -- it was a mare that sold for a million dollars, correct?
22 A. "Yes, ma'am.
23 Q. "And would you agree that, as a general rule, the higher-
24 quality horses sell for more money than the lower-quality
25 horses?
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 793
1 A. "Well, yes, ma'am.
2 Q. "And, on your website, I notice it says: 'Where
3 champions are sold.' Define a champion, please, sir.
4 A. "I believe a champion -- a champion horse could be
5 defined as one that was successful competing or one that has
6 been successful in breeding.
7 Q. "All right. So successful in competing would translate
8 to money earning, correct, at least in racing?
9 A. "Well, in racing, yes, ma'am.
10 Q. "So if they have been a high money-earner or, if they're
11 stallions, have sired a lot of horses that have good records
12 and good earnings, or, if they're mares, they have produced
13 offspring that have earnings, correct?
14 A. "Yes, ma'am.
15 Q. "Isn't it true that there are bloodlines, certain
16 bloodlines that currently dominate the top earning racehorses?
17 A. "Yes, ma'am.
18 Q. "And some of those would be Mr. Jess Perry, correct?
19 A. "Yes, ma'am.
20 Q. "Corona Cartel?
21 A. "Yes, ma'am.
22 Q. "Walk Thru Fire?
23 A. "Yes, ma'am.
24 Q. "And First Down Dash?
25 A. "Yes, ma'am.
Stacy Mayes Morrison Official Court Reporter Jeff Tebow Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 794
1 Q. "Are you aware -- and are you aware of what the stud fees
2 were last year for those horses, or this year?
3 A. "No, ma'am.
4 Q. "Would you be surprised to learn that they were in the
5 neighborhood of twenty-five to thirty-five thousand dollars?
6 A. "I would not be surprised to learn that.
7 Q. "In fact, that is a typical range for a horse that is
8 comparable to Mr. Jess Perry, Corona Cartel, Walk Thru Fire,
9 or First Down Dash, correct?
10 A. "Yes, ma'am.
11 Q. "Horses of that -- stallions of that quality can command
12 stud fees of twenty-five and thirty-five thousand dollars?
13 A. "Yes, ma'am.
14 Q. "In other words, wouldn't you agree that stud fees, the
15 stud fees of a horse's sire can affect the sales price of a
16 horse that goes through your sale?
17 A. "Yes, ma'am.
18 Q. "And, in fact -- and, in fact, she has -- breeds and owns
19 such high-quality horses that she purchased the most expensive
20 horse that has ever gone through a Heritage Place sale last
21 fall for a million dollars, correct?
22 A. "Yeah. I don't believe that to be the most expensive
23 horse to ever go through our sale, but, yes, ma'am, she was
24 the purchaser of that mare for a million dollars.
25 Q. "Would you agree that the likelihood of producing a
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 795
1 champion is increased by the breeding of two high-quality
2 horses?
3 A. "I believe it to be increased, yes."
4 MS. STONE: Nothing further from this witness.
5 MR. ARNOLD: Defendant has no questions, Your Honor.
6 MS. STONE: We'd call Mike Jennings by deposition.
7 May I take it to --
8 THE COURT: You may.
9 PLAINTIFFS' READING OF MIKE JENNINGS DEPOSITION
10 (Whereupon, portions of the oral deposition of Mike
11 Jennings are read as follows, with questions being read by Ms.
12 Stone and answers being read by Mr. Stein:
13 MIKE JENNINGS (BY DEPOSITION),
14 having been first duly sworn, testified as follows:
15 DIRECT EXAMINATION
16 BY MS. STONE:
17 Q. "State your name, please.
18 A. "I'm Mike Jennings, or William Michael Jennings.
19 Q. "Do you -- are you also breeding -- involved in owning
20 and showing performance Quarter Horses?
21 A. "Yes, ma'am.
22 Q. "What -- in what disciplines, please?
23 A. "I show primarily in reining, cutting, and working cow
24 horse. And my wife shows in the English events, the jumping
25 and the hunter under saddle.
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 796
1 Q. "Do you now or have you ever owned any World Champions?
2 A. "Yes, I have.
3 Q. "And which World Champions do you or have you owned?
4 A. "Well, in 1987, my wife was NRHA World Champion Limited
5 Non-Pro Reining Horse Rider, and I was the Reserve World
6 Champion on horses that we owned.
7 "And then, in partnership with my brother and his wife,
8 we owned a horse called The Last Captive, which we purchased
9 as a yearling and developed him. He was a Reserve Champion of
10 the Congress, Hunter Under Saddle Futurity, Congress Champion
11 the next year and AQHA World Champion the following year, and
12 bred -- I was breeding 150 mares a year until we had some
13 health problems and had to castrate him.
14 Q. "Do you own any horses that are not registered Quarter
15 Horses?
16 A. "Do not own any, no.
17 Q. "Okay. The horses that you own and have owned that were
18 reining horses, were they all registered Quarter Horses?
19 A. "Yes, they were.
20 Q. "Okay. The horses that you have owned and ridden that
21 were cutting horses were all registered Quarter Horses?
22 A. "Yes, they were.
23 Q. "And would the same be true for working cow horse; all of
24 the horses that you have owned and ridden in working cow horse
25 events have been registered Quarter Horses?
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 797
1 A. "Yes, they have.
2 Q. "Have all of the horses that you have owned and ridden in
3 your adult life been registered Quarter Horses regardless of
4 their discipline?
5 A. "Yes, they have.
6 Q. "You're also a director in AQHA; is that correct?
7 A. "Yes, ma'am.
8 Q. "And how long have you been a director in AQHA?
9 A. "I became a director in 1995.
10 Q. "Have you served on any committees at AQHA?
11 A. "Yes, I have.
12 Q. "What committees?
13 A. "Marketing, Show, and I'm currently on the International
14 Committee.
15 Q. "You were also somehow involved, based on my research, in
16 the auction of Rita Crundwell's horses?
17 A. "We did sell those horses and their horse-related
18 equipment for the U.S. Marshals Service last year.
19 Q. "And, for purposes of anybody that may not know, Rita
20 Crundwell was the controller for Dixon, Illinois. Is that
21 your understanding?
22 A. "Yes, it is.
23 Q. "And she was convicted and has recently been sentenced in
24 connection with her defrauding the town of Dixon out of
25 approximately fifty-three million dollars?
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 798
1 A. "That's correct.
2 Q. "Okay. What kind of sale was the Rita Crundwell sale?
3 What kind of -- first of all, what kind of horses did Rita
4 Crundwell own?
5 A. "Her horses were -- covered two disciplines, the halter,
6 which is our conformation class, and the western pleasure and
7 hunter under saddle events. So she had two types of horses
8 she sold -- or that we sold for her.
9 Q. "And what was your involvement in the sale of her horses?
10 I think you've testified that you auctioned the horses for the
11 U.S. Marshals Office, but I want to make sure I don't
12 mischaracterize it.
13 A. "I was actually the auction manager in terms of making
14 the arrangements for the auction and compiling the information
15 and handling the paperwork and that sort of thing.
16 Q. "Were you also the person that was responsible for any
17 public relations and promotions prior to the sale?
18 A. "Yes, ma'am.
19 Q. "All right. Let me show you what I've marked -- asked
20 the court reporter to mark as Exhibit No. 130.
21 A. "Okay.
22 Q. "Can you identify that as a publication that you've seen
23 before?
24 A. "Yes.
25 Q. "Okay. And were you interviewed in GoHorseShow.com?
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 799
1 A. "Yes, by Laura Gilmer with GoHorseShow.com.
2 Q. "And at least the second sentence of Exhibit -- Exhibit
3 No. 130 reads: 'Jennings says that he is impressed by the
4 high-quality horses that will be available for sale, including
5 twenty-nine World Champions.'
6 "Did I read that correctly?
7 A. "That is correct.
8 Q. "And, again, here you're talking about the horses that
9 had belonged to Rita Crundwell that were being auctioned?
10 A. "Yes.
11 Q. "That were halter and performance horses?
12 A. "Right.
13 Q. "And explain to us what you mean by high-quality horses
14 there.
15 A. "These horses -- twenty-nine World Champions is a large
16 concentration of World Champions in any program, and the
17 resulting offspring from those World Champions were nice
18 quality individuals.
19 "They had raised some of their own that went on to win
20 championships, and even most of the unshown ones had very good
21 individual quality and conformation, and it looked like they
22 had potential to go show.
23 Q. "So, by high quality, you're not -- you're looking not
24 only at their performance, but also -- but also as their
25 production as either dams or sires?
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 800
1 A. "Yes.
2 Q. "At that sale, the highest-selling horse, according to
3 the information that I have, was a horse named Good I Will Be;
4 is that correct?
5 A. "Yes.
6 Q. "And that horse sold for $775,000?
7 A. "Yes, he did.
8 Q. "Do you recall that all of the highest-selling horses --
9 on both September 23rd and the September 24th sale, that the
10 highest-selling horses were all sold to residents of the
11 United States and Canada?
12 A. "Yes.
13 Q. "Okay. So all of the horses noted here as notable
14 sellers in Exhibit 129, all of the purchasers were from the
15 United States and Canada?
16 A. "Yes.
17 Q. "And then Exhibit No. 131. And this, likewise, is a
18 listing that lists some notable horses of the Rita Crundwell
19 horses that were sold on September 24th. And there were six
20 horses listed there, correct?
21 A. "Yes.
22 Q. "Would you consider these to be -- to include some
23 high-quality horses?
24 A. "Yes.
25 Q. "And were each of these horses sold to someone located in
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 801
1 the United States?
2 A. "Yes, ma'am.
3 Q. "And this auction, the sale of Good I Will Be, that was
4 one of the highest prices on record paid for a Quarter Horse
5 at auction, correct?
6 A. "One of them, yes. In our particular performance horse
7 industry, for sure."
8 MS. STONE: Page 23, Line 25.
9 Q. "(By Ms. Stone) How about proven producers? Can you
10 identify any proven producers cutting horses that are not
11 registered Quarter Horses?
12 A. "Not at this time.
13 Q. "Okay. And what about proven producers in the reining
14 discipline; are you aware of, or can you identify any proven
15 producers in the reining horse discipline that are not
16 registered Quarter Horses?
17 A. "No, I can't.
18 Q. "Okay. What about working cow horse; can you identify
19 any proven producers in the working cow horse discipline that
20 are not registered Quarter Horses?
21 A. "No, I can't.
22 Q. "How about proven producers in the working cow horse
23 discipline that are not registered Quarter Horses?
24 A. "No, I don't.
25 Q. "When you're breeding a horse, registration is a strong
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 802
1 consideration, isn't it?
2 A. "Yes.
3 Q. "And one of the things that you want —— and I believe
4 this is in your report —— if you are going to breed a horse
5 is, you're looking to produce a foal who will go out and win,
6 correct?
7 A. "Correct.
8 Q. "And pedigree is one of the things that you look at when
9 you're breeding to produce a foal that will go out and win,
10 correct?
11 A. "Yes.
12 Q. "As is performance, and, also, the capabilities of a
13 horse as a sire or a mare, sire or a dam when you're breeding?
14 A. "When you're breeding, yes.
15 Q. "If I understand, from looking at your CV, you sat on the
16 AQHA board, you currently sit on one of the standing
17 committees, and you've sat on other previous committees?
18 A. "Yes, sir.
19 Q. "You've sat on -- are you currently a board member?
20 A. "Yes, sir.
21 Q. "Were you a board member in March of 2012?
22 A. "Yes.
23 Q. "Were you a board member in March 2011?
24 A. "Yes.
25 Q. "Were you a board member in March of 2010?
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 803
1 A. "Yes.
2 Q. "Okay. As a member of the AQHA board, can you tell me if
3 you can recall voting on any proposals to register clones or
4 offspring of clones brought to the board in the 2010 AQHA
5 convention?
6 A. "I do know that there was not a recommendation brought
7 before the board to register clones during those years.
8 Q. "Well, I'm going to start -- I'm going to do each one of
9 them at a time.
10 "But, in 2010, you're telling me that there was not a
11 recommendation brought to the board to register clones or
12 offspring of clones?
13 A. "As I remember, yes.
14 Q. "Do you recall the issue even being brought to the board?
15 A. "I would have to say I don't recall. I do not remember
16 that being an issue that was discussed or proposed at that
17 point.
18 Q. "Well, I understand that the Stud Book and Registration
19 Committee is the standing committee within AQHA that -- maybe
20 I should say first considers rules of registration and whether
21 to adopt or amend or change any existing rules.
22 "Tell me what your understanding of the Stud Book and
23 Registration Committee is with respect to rules governing
24 registration.
25 A. "Well, I think your previous question would be along the
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 804
1 lines of my understanding of what the committee does.
2 Q. "If a rule is to be adopted or if an existing rule is to
3 be changed, it first comes to the Stud Book and Registration
4 Committee, right?
5 A. "Yes.
6 Q. "Now, then, if a rule proposal is made and the Stud Book
7 and Registration Committee does not recommend a change, what
8 is your understanding of the procedure as it comes out of
9 committee and heads to the AQHA board?
10 A. "We are asked to approve the recommendation to the
11 committee, and the committee recommends the rule changes
12 coming out of that committee.
13 "We are -- we are not -- we at this point don't discuss
14 the points on the agenda that either were denied or had no
15 action, which we've used interchangeably in the committees
16 I've been on.
17 Q. "But what I'm hearing you say is that the Stud Book and
18 Registration Committee makes a recommendation. Then you guys
19 will consider the recommendation if it's for a change, but
20 you're not reviewing it if it's a no action or denial. And
21 that's what I thought I heard you say.
22 A. "Yeah. We do not review the ones that have been denied
23 or no action in the Board of Directors' meeting.
24 Q. "And that would hold true for 2011?
25 A. "To my recollection, yes.
Stacy Mayes Morrison Official Court Reporter Mike Jennings Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 805
1 Q. "And would that also hold true for 2012?
2 A. "Also, to my recollection, yes.
3 Q. "How long have -- how long have -- how long have you sat
4 on the AQHA board?
5 A. "Since 1995.
6 Q. "Can you specifically remember the board action in
7 agreeing with the Stud Book and Registration Committee's
8 proposal to deny the rule change in 2010?
9 A. "I don't remember that being presented as a proposed rule
10 change at that point.
11 Q. "What -- really? What do you recall about it?
12 A. "I don't recall it being presented in the Board of
13 Directors' meeting or the general membership meeting.
14 Q. "In 2010?
15 A. "Right.
16 Q. "Do you even remember it being presented to the general
17 membership or the board in 2011?
18 A. "No, not specifically.
19 Q. "Do you remember it being presented in the general
20 membership or to the board in 2012?
21 A. "No, I do not."
22 MS. STONE: That's all the questions I have.
23 MR. ARNOLD: No questions at this time, Your Honor.
24 MR. STEIN: Are we through?
25 MS. STONE: We'd call George Seidel by deposition.
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 806
1 May I approach?
2 THE COURT: Yes.
3 (Pause.)
4 PLAINTIFFS' READING OF GEORGE SEIDEL DEPOSITION
5 (Whereupon, portions of the oral deposition of George
6 Seidel are read as follows, with questions being read by Ms.
7 Stone and answers being read by Mr. Stein:
8 GEORGE SEIDEL (BY DEPOSITION),
9 having been first duly sworn, testified as follows:
10 DIRECT EXAMINATION
11 BY MS. STONE:
12 Q. "Could you give us your full name, please.
13 A. "It's George Elias Seidel, Jr.
14 Q. "Are you affiliated with Colorado State University
15 currently?
16 A. "Yes.
17 Q. "What do you do at Colorado State University currently?"
18 THE COURT: Just a moment, please. I think you've
19 given me the deposition of Carol Rose.
20 MS. STONE: I apologize.
21 (Pause.)
22 THE COURT: Okay. Go ahead.
23 Q. "(By Ms. Stone) Could you give us your full name,
24 please.
25 A. "It's George Elias Seidel, Jr.
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 807
1 Q. "Are you affiliated with Colorado State University
2 currently?
3 A. "Yes.
4 Q. "What do you do at Colorado State University currently?
5 A. "Okay. Well, my official position is professor emeritus.
6 In some senses, I'm retired. So, from the standpoint of the
7 State of Colorado that pays me, I'm retired, but I'm hired
8 back by the university on a contractual basis.
9 Q. "You state in your report that you have assisted the
10 American Quarter Horse Association as a consulting expert over
11 the past four years. Now, you say that in Paragraph 1 [sic].
12 "Do you recall stating that?
13 A. "Yes."
14 MS. STONE: Paragraph 3. Thank you. Let me reread
15 that.
16 Q. "(By Ms. Stone) You state in your report that you have
17 assisted the American Quarter Horse Association as a
18 consulting expert over the past four years. Now, you say that
19 in Paragraph 3.
20 "Do you recall stating that?
21 A. "Yes."
22 MS. STONE: And then to Page 21.
23 Q. "(By Ms. Stone) If you were to give us a definition, as
24 you understand cloning in this lawsuit, what would your
25 definition be?
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 808
1 A. "So, in the context of this lawsuit, it would be a
2 nuclear transfer to an oocyte, the nucleus coming from a
3 somatic cell.
4 Q. "And the end purpose being to duplicate the donor of the
5 somatic cell genetically speaking?
6 A. "Correct.
7 Q. "I just pulled the registration rules off the website.
8 Is this what's been marked as an exhibit already? It's
9 Exhibit P --"
10 MS. STONE: It's now Plaintiffs' 78.
11 A. "Okay.
12 Q. "(By Ms. Stone) But there's 227(a). Will you just take
13 a look -- take a moment and review that just to verify that
14 you actually have read that before.
15 A. "I've read that somewhere along the lines.
16 Q. "And would you agree with me that the definition of Rule
17 20 -- of 227(a), as written, actually covers situations
18 broader than and more inclusive than just somatic cell nuclear
19 transfer?
20 A. "Yeah. It -- it certainly could in some context."
21 MS. STONE: Page 25, Line 7 -- Line 8.
22 Q. "(By Ms. Stone) You have also written extensively on the
23 use of intracytoplasmic sperm injection in various species,
24 correct?
25 A. "Yes.
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 809
1 Q. "Would you agree with me that, through the use of the
2 ICSI procedure, the genetic material of an unfertilized egg or
3 embryo was added to or with genetic material from another
4 organism?
5 A. "Yes.
6 Q. "Will you agree with me, as we sit here today now, that
7 the definition that AQHA uses to define cloning, the
8 definition of cloning in Rule 227(a) is broader than just
9 defining the technique for somatic cell nuclear transfer?
10 A. "Certainly, theoretically, it is."
11 MS. STONE: Page 48, Line 11.
12 Q. "(By Ms. Stone) But you would agree with me that
13 naturally-occurring identical twins are really naturally-
14 occurring clones; they're identical genetic copies. The twin
15 is the genetic copy of the one that started off as the sperm
16 and egg. Right?
17 A. "Yes.
18 Q. "And that's what we're dealing with with a clone
19 resulting from somatic cell nuclear transfer; it's a genetic
20 copy of the original?
21 A. "Close.
22 Q. "Yeah.
23 A. "Not exactly."
24 MS. STONE: Page 56, Line 21.
25 Q. "(By Ms. Stone) All right. Clones are genetic copies,
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 810
1 and genetics will be greater -- will be greater than
2 99.99 percent identical among most clones, and we're talking
3 about clones created through nuclear transfer, right?
4 A. "Yes."
5 MS. STONE: Page 83, Line 20.
6 Q. "(By Ms. Stone) You would agree with me that, with
7 respect to offspring of cloned stallions, parentage
8 verification issues with respect to identifying offspring of
9 cloned stallions is the identical problem in identifying
10 offspring of identical twins, correct?
11 A. "That appears to be correct to me."
12 MS. STONE: Page 98, Line 2.
13 Q. "(By Ms. Stone) We've talked about the ICSI procedure,
14 and the fact that what we're doing in the ICSI procedure is
15 the term intracytoplasmic sperm injection. Did I get that
16 right?
17 A. "Yes.
18 Q. "We're taking a single sperm cell, and we're injecting
19 that essentially through the cytoplasm into the egg that we're
20 fertilizing, right?
21 A. "Yes.
22 Q. "So, based on what you told me with these diagrams,
23 especially with nuclear cell transfer, with SCNT, you're
24 actually taking like the donor's cell mitochondria and
25 infusing it with the egg that has its own mitochondria. So
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 811
1 we're mixing the two, right?
2 A. "Yes."
3 MS. STONE: Page 138, Line 5.
4 Q. "(By Ms. Stone) Your Ph.D. is in reproductive
5 physiology; is that right?
6 A. "Yes.
7 Q. "And I understand that you are somehow affiliated with
8 the Department of Biomedical Science within the College of
9 Veterinary Medicine; is that correct?
10 A. "Yes.
11 Q. "Okay. You understand that Dr. Veneklasen attended
12 Colorado State University for his veterinary education?
13 A. "Yes.
14 Q. "And he graduated with a DVM degree from Colorado State
15 University. You understand that?
16 A. "Yes."
17 MS. STONE: Page 141, Line 8.
18 Q. "(By Ms. Stone) You know him professionally, by
19 reputation?
20 A. "Yes.
21 Q. "Are you aware of anything that would lead you to
22 conclude that Dr. Veneklasen is not a good veterinarian?
23 A. "The information I have is that he's an excellent
24 veterinarian.
25 Q. "And you would agree with me that the information that
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 812
1 you have is that he is an aboveboard, honest and reputable
2 professional within the veterinary medical sciences?
3 A. "Yes.
4 Q. "And you know that he's been doing a lot of work for
5 ViaGen in connection with somatic cell nuclear transfer?
6 A. "Yes.
7 Q. "You state that your stallions are genetically
8 superior -- you state that genetic -- that stallions that are
9 genetically superior rarely will need to be copied to make
10 more sperm, as plenty of sperm can be collected and frozen to
11 produce as many offspring as desired, especially if in vitro
12 fertilization is used.
13 "Did you see where I read that?
14 A. "Yes.
15 Q. "But you differ with your opinions as to mares. You say:
16 Mares represent a different situation. Do you --
17 A. "That's the next paragraph.
18 Q. "Yes.
19 A. "Okay.
20 Q. "Is it because that there are fewer elite mares compared
21 to elite stallions?
22 A. "No.
23 Q. "What is the basis of your statement in Paragraph 22?
24 A. "It's more difficult to get lots of offspring from a
25 mare. It's difficult to freeze oocytes. It's difficult to
Stacy Mayes Morrison Official Court Reporter George Seidel Deposition (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 813
1 collect hundreds of embryos.
2 Q. "With respect to identifying numbers of offsprings from
3 elite parents, we have fewer offspring being capable of
4 produce -- being produced from mares than from elite
5 stallions; would you agree to that?
6 A. "In a practical sense. Theoretically, you can get an
7 infinite number.
8 Q. "And sometimes it might take the mare's reproductive
9 lifetime before we determine whether or not she was one of
10 the, what you categorize, as a genetically superior
11 individual.
12 A. "With current tools.
13 Q. "Yeah. And you would agree with me then that, after a
14 lifetime of reproductive efforts, the use of cloning to extend
15 the reproductive life of those elite mares is possible through
16 the SCNT technology, correct?
17 A. "Yes, it is possible to -- yes, to do that."
18 MS. STONE: That's all the questions I have from
19 this deposition.
20 MR. ARNOLD: No questions at this time, Your Honor.
21 MS. STONE: I have nothing further from this --
22 MR. STEIN: May I step down, Your Honor?
23 THE COURT: Yes.
24 (Plaintiffs' reading of deposition concluded.)
25 THE COURT: Call your next witness.
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 814
1 MS. STONE: Call Tammy Canida.
2 (Pause.)
3 THE COURT: The clerk will administer the oath.
4 (The witness was sworn by the courtroom clerk.)
5 TAMMY CANIDA,
6 having been first duly sworn, testified as follows:
7 DIRECT EXAMINATION
8 BY MS. STONE:
9 Q. State your name, please.
10 A. Tammy Canida.
11 Q. And, Mrs. Canida, you're employed by AQHA?
12 A. Yes.
13 Q. And you are, or at least you were when your deposition
14 was taken, the director of registration operations; is that
15 correct?
16 A. Yes.
17 Q. And is that still your job at AQHA?
18 A. Yes.
19 Q. I'm going to -- in front of you, there is a notebook that
20 has Plaintiffs' Exhibit No. 22. It's already in evidence.
21 You can look at it up on the screen.
22 And can you identify this, Mrs. Canida, as a document
23 that you had prepared and produced in this lawsuit?
24 A. Yes.
25 Q. And it is a document that lists horses that have been
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 815
1 registered with AQHA from what years to what years, please?
2 A. Can you tell me where it's at in this book?
3 Q. It's 22. If it's not in that book, it's in the book down
4 on the floor. It's in Volume 1.
5 A. It starts with foals of 1999 through 2011.
6 Q. Okay. So it covers a period of approximately twelve
7 years; is that right?
8 A. Yes.
9 Q. Okay. And, on this list, are all of the horses that are
10 reported to AQHA as being twins, correct?
11 A. Yes.
12 Q. During that period of 1999 through 2011?
13 A. That's correct.
14 Q. Okay. It might not reflect all the twins that occurred
15 in the real world that didn't get submitted to AQHA as twins,
16 correct?
17 A. These would have been reported to AQHA on the
18 applications.
19 Q. Okay. And those that weren't reported as twins on the
20 application might, in fact, exist?
21 A. We wouldn't know that.
22 Q. Okay. So it would be true then that there could be
23 additional twins that aren't reported to AQHA?
24 A. If they're not reported to us, we wouldn't know that.
25 Q. All right. And you prepared this document. In preparing
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 816
1 this document, it not only lists all the twins that were
2 registered from '99 to 2011; it also tells whether or not they
3 were DNA-tested, correct?
4 A. Yes.
5 Q. Okay. And it shows whether or not they are same-sex
6 twins, correct?
7 A. Yes.
8 Q. Okay. Now, would you agree with me that there have --
9 that there are 188 pairs or sets of same-gender twins that
10 have been reported?
11 A. Without counting them, I couldn't tell you that off the
12 top of my head, but --
13 MS. STONE: May I approach?
14 Q. (By Ms. Stone) The numbers are on there, correct? You
15 could add the --
16 A. I would have to add them up, yes.
17 MS. STONE: May I approach the witness? May I
18 approach the witness?
19 THE COURT: You may.
20 (Ms. Stone gives witness a calculator.)
21 Q. (By Ms. Stone) I will represent to you that Mr. Stein
22 and I have counted numerous times, and we get 188 pairs of
23 same-sex twins.
24 Will you accept that, or do you want to count them?
25 A. I mean, I don't -- I can't answer that "yes" or "no"
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 817
1 without counting them myself.
2 Q. Okay. Would you do so?
3 A. Okay.
4 THE COURT: All right. We'll be in recess for
5 fifteen minutes.
6 COURT SECURITY OFFICER: All rise.
7 (There was a recess taken; after which, the following
8 took place in open court with the jury and all parties
9 present.)
10 Q. (By Ms. Stone) Now, Mrs. Canida, you got a different
11 number than Mr. Stein and I got. You got that there are 171
12 of same-sex twins, so a pair of them, so -- is that right,
13 171?
14 A. Yes.
15 Q. Same-sex twins registered by AQHA from 1990 through 2011,
16 correct?
17 A. 1999.
18 Q. 1999, excuse me. 1999 until 2011. Or 342 horses that
19 were identified as same-sex twins, correct?
20 A. Yes.
21 Q. Okay. And how many of those were DNA-tested?
22 A. Okay. I didn't have a chance to finish that list, but
23 let me just do a quick one.
24 (Pause.)
25 A. Approximately thirty-one sets.
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 818
1 MS. STONE: May I use the easel, Your Honor?
2 THE COURT: You may.
3 Q. (By Ms. Stone) So we have 171 sets, correct?
4 A. Yes.
5 Q. Same sex, right?
6 A. Yes.
7 Q. Of those, approximately thirty-one sets were DNA-tested,
8 correct?
9 A. Yes.
10 Q. Meaning that 140 same-sex twins from 1999 to 2011 were
11 not DNA-tested, correct?
12 A. Correct.
13 Q. And, because they were not DNA-tested, we don't know
14 whether or not these are identical twins or not, correct?
15 A. Correct.
16 Q. And, of those that were DNA-tested, two sets of them have
17 been identified as identical twins, true?
18 A. One set has been confirmed as identical twins.
19 Q. Doesn't your sheet that's in front of you, doesn't it
20 show that both of them to be -- doesn't it show "yes" as to
21 two sets, a set of mares and a set of stallions?
22 A. The set of mares was never able to be retested. The
23 owner reported them deceased before we could confirm that they
24 were, in fact, tested correctly.
25 Q. Okay. But, as tested, assuming that the testing of them
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 819
1 was done correctly, they were confirmed to be identical twins,
2 correct?
3 A. They were confirmed that their DNA's matched.
4 THE COURT: Would you go back to the podium, please.
5 Q. (By Ms. Stone) Would you agree with me that of the -- if
6 thirty-one sets were tested out of 171, that it's
7 approximately eighteen percent of the same-sex twins that have
8 been registered by AQHA from 1999 to 2011 that were
9 DNA-tested?
10 A. Can you say that again?
11 Q. Sure. Wouldn't that be about eighteen percent of the
12 twins -- given the numbers that you came up with, in other
13 words, we have 171 same-sex twins registered, correct?
14 A. Yes.
15 Q. And, of those, thirty-one sets were DNA-tested?
16 A. Yes.
17 Q. And would you agree with me that that's about
18 eighteen percent?
19 A. Sure.
20 Q. Okay. And so, with the remaining ninety-one percent, we
21 don't know for sure whether they are identical twins or not,
22 true?
23 A. Eighty-one --
24 MR. ARNOLD: Object --
25 A. -- percent.
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 820
1 MR. ARNOLD: -- only to the extent that Ms. Stone's
2 math isn't quite right. That would --
3 A. That was --
4 MR. ARNOLD: -- not leave --
5 A. -- eighty-one.
6 MR. ARNOLD: -- ninety-one percent. That would
7 leave --
8 THE WITNESS: Eighty-one.
9 THE COURT: I -- Counsel, you need to repeat what
10 you've said.
11 MR. ARNOLD: I object, because Ms. Stone's math is
12 not good, Your Honor.
13 MS. STONE: I will stipulate to that, and I'll
14 restate my question.
15 Q. (By Ms. Stone) It would be -- wouldn't it be -- if it
16 were eighteen percent that had been DNA-tested, it would be
17 eighty-two percent that had not been DNA-tested, correct?
18 A. Yes.
19 Q. And, of those eighty-two percent, we don't know whether
20 they are identical twins or not; isn't that true?
21 A. Yes.
22 Q. All right. And -- now, with regard to the one -- one of
23 the sets of twins that has been registered and confirmed as
24 identical is a set of stallions, correct?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 821
1 Q. And those stallions, between the two of them, have sired
2 166 horses; is that right?
3 A. According to this report, it says 162.
4 Q. Well, would you look at Plaintiffs' Exhibit No. 136.
5 It's in a notebook there in front of you, possibly down on the
6 floor.
7 A. Did you say 36?
8 Q. 136.
9 A. Okay.
10 Q. And, according to 136, Royal Blue Quixote has 100
11 offspring registered; is that correct?
12 A. Yes.
13 Q. So we've increased. This horse now has 100 rather than
14 the 96 shown on Exhibit No. 22, correct?
15 A. Yes.
16 Q. So we have 166 offspring from two identical twin
17 stallions, correct?
18 A. Yes.
19 Q. Okay. And isn't it true that the way that AQHA -- the
20 way you know which daddy those offspring came from, you being
21 AQHA, is based on the application that the donor submitted?
22 A. That the application that the owner of the mare submitted
23 for registration.
24 Q. And AQHA relies on the representations of the owner of
25 the mare as to which of these two sires was the proper sire --
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Cross--Mr. Arnold) (Defendant AQHA) 822
1 was the sire of the foal that's being registered, correct?
2 A. In addition to the application for registration, we also
3 require a stallion breeding report and breeder certificates
4 signed by the stallion owner.
5 Q. The same thing you -- the same kind of documents that
6 AQHA has required for years, regardless of which breeding
7 technique was used, correct?
8 A. Yes.
9 Q. And these 166 offspring of these two identical twins, you
10 cannot confirm through DNA-testing which of the two identical
11 twin sires were their father, correct?
12 A. That would be correct.
13 MS. STONE: I have no further questions.
14 CROSS EXAMINATION
15 BY MR. ARNOLD:
16 Q. Good morning. How are you doing, Tammy?
17 A. Good. Thank you.
18 Q. Go ahead and tell the jury a little more of your
19 background at AQHA in terms of when you started and the jobs
20 you've held there.
21 A. I've been with AQHA for twenty-seven years and have
22 worked in registration, the registration department primarily
23 the whole time that I've been there in different positions,
24 and have been the director of registration since 2009.
25 Q. And what is the director of registration in charge of?
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Cross--Mr. Arnold) (Defendant AQHA) 823
1 Is it just that, registration?
2 A. The -- I oversee the daily operations of the registration
3 department and the employees of the registration department,
4 yes.
5 Q. Who would your direct supervisor be?
6 A. La Donna Wilkinson.
7 Q. And then who would be above that?
8 A. Trent Taylor.
9 Q. Okay. Can it be stressful in that department sometimes?
10 A. Occasionally, yes.
11 Q. Tell the jury about that.
12 A. Well, we -- as with any type of job, you have peak
13 seasons, and you have stressful moments as you work through
14 that. And we continue to work through it and try to make
15 things well for our members as well as our employees.
16 Q. Do you like your job?
17 A. I love my job.
18 Q. Why?
19 A. I -- the people I get to work with, both at the employee
20 level and the member level, it's an honor to be able to do
21 that and get to know those people, and how the horse affects
22 their life.
23 Q. I want to go back to some of the questions Ms. Stone was
24 asking. Ms. Stone indicated, after doing the math, that there
25 were apparently 140 sets of same-sex twins that had not been
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Cross--Mr. Arnold) (Defendant AQHA) 824
1 DNA-tested.
2 Was that your understanding of the testimony you gave?
3 A. Yes.
4 Q. All right. Tell the jury why they haven't been
5 DNA-tested yet.
6 A. They were not required to be DNA-tested under the rules
7 of registration, and they're not breeding, so they have not
8 been required to be DNA-tested for that either.
9 Q. If they do breed and if somebody wants to register an
10 offspring of one of these 140 sets of twins, will those 140
11 sets of twins, or whichever one of them is going to breed, are
12 they going to have to be DNA-tested?
13 A. Yes. And in some cases of those 140 that are not
14 DNA-tested, one of those horses may be DNA-tested. It's --
15 they're both not tested.
16 Q. So, if any offspring are ever -- I'm not going to be near
17 as good a horse person as you are, so you let me know if I use
18 this wrong, this term, but if there's any get from any of
19 these 140 sets of twins, will you be able to parent-verify if,
20 in fact, they were not identical twins?
21 A. Yes.
22 Q. And, again, those 140 sets of twins, even in this time
23 period, '99 to 2011, the reason they haven't been DNA-tested
24 yet is because no one has tried to breed them or register any
25 offspring from them?
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Cross--Mr. Arnold) (Defendant AQHA) 825
1 A. That's correct.
2 Q. But, as soon as somebody does, will they have to be
3 DNA-tested?
4 A. Yes, they will.
5 Q. And is that a requirement that AQHA has of all horses
6 that breed?
7 A. All breeding stock must be DNA-tested before any
8 offspring can be registered.
9 Q. Why is that?
10 A. So that we have the ability to parentage-verify an
11 offspring if the need should ever come up --
12 Q. And --
13 A. -- at some point --
14 Q. Okay.
15 A. -- in its future.
16 Q. And, in the entire history of the American Quarter Horse
17 Association, I know you're not going to get this exact, but
18 how many horses has the association registered over -- since
19 1940?
20 A. Over six million.
21 Q. It's over six million now?
22 A. Yes.
23 Q. And, out of those six million registered Quarter Horses,
24 how many identical twins has AQHA confirmed during the
25 registry?
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Cross--Mr. Arnold) (Defendant AQHA) 826
1 A. One.
2 Q. And that would be the stallions that Ms. Stone spoke to
3 you about?
4 A. Yes.
5 Q. And do you know, are those stallions located in the same
6 state?
7 A. No, they're not.
8 Q. Do you know where -- just off chance, where they're
9 located, or --
10 A. I don't recall right off.
11 Q. But they're owned by different people?
12 A. They're owned by different people, that's correct.
13 Q. In different states?
14 A. That's correct.
15 Q. And has any owner, to your knowledge, of any of the -- I
16 believe Ms. Stone indicated the math was 166 offspring from
17 those two identical twin stallions. Have any of those owners
18 of the 166 offspring ever raised a question of parent
19 verification with respect to where their offspring came from?
20 A. No.
21 Q. And, if they did, it's true that AQHA would not be able
22 to verify one stallion as to the other?
23 A. That's correct. We could -- we could prove that it was
24 out of the mare and the stallion reported on the application,
25 but if it was compared to the other stallion, we wouldn't be
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 827
1 able to differentiate between the two stallions, other than
2 they're separated by state and haven't been in the same
3 location --
4 Q. And would that --
5 A. -- to be bred.
6 Q. I'm sorry. And would that be the same with respect to a
7 clone; would you be able to identify the offspring of a clone
8 versus a second or third or fourth clone?
9 A. No.
10 MR. ARNOLD: No further questions, Your Honor.
11 Thank you.
12 REDIRECT EXAMINATION
13 BY MS. STONE:
14 Q. In the absence of both of the twins in the 140 pairs or
15 sets of twins that haven't been tested, in absence -- in the
16 absence of testing each of those 280 horses, you cannot say
17 for sure that there are not other -- more than one or two sets
18 of identical twins that have been registered with AQHA from
19 1999 to 2011, can you?
20 A. No, I can't.
21 Q. And, if you would look, please, again, this is Exhibit
22 No. 22. In fact, the document that you created and that you
23 produced in this case identifies Jackie Sue Watstow and Jackie
24 Pon Watsone as having matching DNA, correct?
25 A. Are those the mares?
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Recross/Further Redirect) 828
1 Q. Yes.
2 A. Okay. Yes.
3 Q. And so, on this document, the DNA report that you had on
4 them was that they -- they did have matching DNA?
5 A. That's correct.
6 Q. And you simply -- they simply died before you could
7 retest them for their DNA a second time?
8 A. Which would be our normal protocol, yes. We would retest
9 them to make sure that the animals were -- the DNA submitted
10 were from the correct animals.
11 Q. But, again, on this document that you prepared,
12 Plaintiffs' Exhibit No. 22, you identified them with a "yes"
13 exactly like you did the two stallions, correct?
14 A. That's correct.
15 MS. STONE: No further questions.
16 RECROSS EXAMINATION
17 BY MR. ARNOLD:
18 Q. Just one question, Tammy. Going back to this 140 number,
19 do you even know how many of those horses are still alive?
20 A. Not off the top of my head, no, sir.
21 MR. ARNOLD: Okay. Thank you.
22 THE WITNESS: Uh-huh.
23 FURTHER REDIRECT EXAMINATION
24 BY MS. STONE:
25 Q. If they were born in 1999 and a horse's life expectancy,
Stacy Mayes Morrison Official Court Reporter Tammy Canida (Further Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 829
1 average life expectancy is twenty-five years old, you would
2 expect most of them to still be alive, wouldn't you?
3 A. I couldn't make that speculation.
4 Q. Well, they're not particularly old horses, are they,
5 ma'am?
6 A. No.
7 MS. STONE: No further questions.
8 MR. ARNOLD: No questions, Your Honor.
9 THE COURT: May this witness be excused altogether?
10 MS. STONE: Yes, Your Honor.
11 MR. ARNOLD: Yes, Your Honor.
12 THE COURT: You're excused altogether as a witness.
13 You can go about your own business.
14 THE WITNESS: Thank you.
15 (Witness excused.)
16 THE COURT: Call your next witness.
17 MS. STONE: Call David Brown.
18 (Pause.)
19 THE COURT: The clerk will administer the oath.
20 (The witness was sworn by the courtroom clerk.)
21 THE COURT: You may proceed.
22
23
24
25
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 830
1 DAVID BROWN,
2 having been first duly sworn, testified as follows:
3 DIRECT EXAMINATION
4 BY MS. STONE:
5 Q. State your name, please.
6 A. David Warren Brown.
7 Q. Mr. Brown, where do you currently reside?
8 A. I live in Gainesville, Texas.
9 Q. And how old a man are you?
10 A. Seventy-two.
11 Q. How old were you when the American Quarter Horse
12 Association was formed?
13 A. I was born in '41. I think it was formed in '40.
14 Q. Was your family involved in the Quarter Horse breed from
15 the time you were born?
16 A. Shortly thereafter. I would say in the late '40s.
17 Q. So you had your first horse at approximately what age,
18 please, sir?
19 A. Oh, I don't remember when we didn't have a horse.
20 Q. Okay. How was your family involved in the Quarter Horse
21 breed?
22 A. My father and his uncle, the uncle especially, were very
23 good horsemen, and my father's uncle bought a horse named John
24 or Johnny Nixon, which one of -- was one of the early Quarter
25 Horses. I'd never -- I didn't know what a Quarter Horse was,
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 831
1 and I thought it was the strangest name.
2 And, in the late '40s, I remember that horse as a little
3 boy. And the first colt my father ever gave me was by this
4 John or Johnny Nixon out of a grade mare.
5 Q. And are you a member of AQHA?
6 A. Yes, I am.
7 Q. For how many years have you been a member of AQHA?
8 A. Oh, thirty something, I would guess.
9 Q. Do you compete in the market for elite registered Quarter
10 Horses?
11 A. Yes, I do.
12 Q. How long have you competed in the market for elite
13 registered Quarter Horses?
14 A. Oh, since the '70s.
15 Q. So --
16 A. Early '70s.
17 Q. Okay. So more than thirty years?
18 A. Yes.
19 Q. During his lifetime, did you know a horse named Doc Bar?
20 A. Oh, I did.
21 Q. Tell the jury about Doc Bar.
22 A. Well, Doc Bar is the progenitor of all modern cutting
23 horses. I think that's a fair statement. I doubt that
24 there's a horse that will be shown at the futurity in Fort
25 Worth in December out of 800 or 1,000 that can't directly
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 832
1 trace to Doc Bar.
2 Q. And is it your understanding that these two -- two of the
3 mares that are the subject of this lawsuit, Playboys Ruby and
4 Lynx Melody, also trace to Doc Bar?
5 A. Well, yes, they do.
6 Q. In fact, Lynx Melody is a granddaughter of Doc Bar and
7 Playboys Ruby is a great-granddaughter, correct?
8 A. I'd have to think about that. Lynx Melody is by Doc's
9 Lynx by Doc Bar, and Playboys Ruby is by Freckles Playboy out
10 of a daughter of Doc O'Lena by Doc Bar.
11 Q. All right. Now, what were the offspring -- well, is Doc
12 Bar then a very famous horse in the Quarter Horse breed?
13 A. Oh, yes, he is.
14 Q. In the AQHA Hall of Fame?
15 A. I believe that's correct.
16 Q. Okay. And what is he known for in terms of the horses
17 that he sires?
18 A. The ability to win, trainability and athletic ability,
19 and most of them were beautiful.
20 Q. Did you have an opportunity to breed a mare to Doc Bar
21 during his lifetime?
22 A. I bred two mares to Doc Bar, yes.
23 Q. Okay. And tell the jury how you got the opportunity and
24 what you did to have your first mare bred to Doc Bar.
25 A. I was on a ranch in Hollister, California, and I met a
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 833
1 fellow who was riding one of the early famous daughters of Doc
2 Bar, and I learned about him. And I learned about a man named
3 Charley Araujo at Coalinga, California that stood him. He was
4 owned by a family in Arizona named Finleys at that time.
5 And I never forgot how nice this horse was. And, as time
6 went on, these other offspring became more and more famous,
7 and I wound up buying a mare that had won the Nebraska
8 Futurity. And I thought it was a wonderful horse. I didn't
9 know any better.
10 And I called up the Jensens and the Wards that owned Doc
11 Bar and asked if they would breed this mare. And Charlie Ward
12 who stood him, the son-of-law of the Jensens, said, "If you
13 can get her out here, I'll breed her."
14 Well, this was winter, and I'm in Minnesota, and I'm
15 trying to figure out how to do this. I put her in a trailer,
16 and I drove her to Paicines, California, and then I drove
17 home. And when she was in foal, I got back and I drove out
18 there and got her and took her home.
19 Q. Approximately, how many miles did you drive to get that
20 mare bred?
21 A. It's a good 10,000. It's probably twenty-two,
22 twenty-four hundred miles from where I lived to Paicines.
23 Q. And this was in 1973?
24 A. '73, the first one, yes.
25 Q. Okay. And tell the jury, please, what you paid as a stud
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 834
1 fee to Doc Bar in 1993 [sic].
2 A. It was $3,000.
3 Q. That was a lot of money in 1973, wasn't it?
4 A. I didn't have it, but yes.
5 Q. All right. So you kind of went out on a limb and --
6 A. Oh, yeah. I borrowed some money from my father.
7 Q. Now, after you bred the -- other than driving the 10,000
8 miles and paying the $3,000 stud fee, did you do anything to
9 express to the owner or manager of Doc Bar your appreciation
10 for allowing them to have your mare bred?
11 A. They treated me very well. They had me stay with them,
12 and they were very kind to me. And I sent them a thank-you
13 note for doing what they did, and a little footnote to it, I
14 said, "I just want you to know I've owned what I thought were
15 some nice horses, but I've never spent $3,000 for a horse,
16 much less for a stud fee in my life, but this is the stuff
17 dreams are made of."
18 Q. This is the stuff dreams are made of; is that what you
19 said?
20 A. And then I just thanked them and signed it and sent it
21 off and forgot about it.
22 Q. Okay. What was the result of that 1973 breeding of your
23 mare that won the Nebraska Futurity to Doc Bar?
24 A. A filly was born, I think, in April of the following
25 year.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 835
1 Q. Okay. And tell the jury about that filly and what her
2 accomplishments were.
3 A. Her name was Doc Seren -- excuse me, her name was Doc's
4 Serendipity, and I started her. I broke her in Minnesota in
5 the winter in a little alleyway in a barn in bitterly cold
6 weather.
7 And after I had her broke, I sent her to California, and
8 a fellow named Joe Heim rode her. He -- no one knew who he
9 was at that point, but I liked him, and he was a good hand.
10 Long story short, we went to Fort Worth to the National
11 Cutting Horse Futurity in her three-year-old year, and I think
12 810 horses showed up. And, you know, when the smoke cleared,
13 a King Ranch horse named Little Peppy won it with a score of
14 220 and a half, and Serendipity marked 220.
15 Q. Okay. So you showed -- this mare missed out on winning
16 the futurity by half a point?
17 A. Yeah. She was the Reserve Champion.
18 Q. She was the Reserve Champion. Okay. After she made --
19 became the Reserve Companion -- and the results of those
20 futurities is pretty well known amongst people in the horse
21 industry, particularly the cutting horse industry, correct?
22 A. Yes.
23 Q. Okay. What, if anything, did you hear from the
24 owner/manager of Doc Bar after Doc's Serendipity was the
25 Reserve Champion at the futurity in Fort Worth?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 836
1 A. Well, they sent my letter back. "And the stuff that
2 dreams are made of" was circled in red ink.
3 Q. So was Doc's Serendipity an elite registered Quarter
4 Horse?
5 A. Oh, I think so.
6 Q. Okay. Tell the jury what made her elite.
7 A. Well, genetics made her elite, and no one screwed her up
8 in the training. She was physically very good. She was
9 beautiful, highly trainable, highly intelligent.
10 Q. And she performed well and --
11 A. Oh, yes.
12 Q. -- earned some money at the -- as the Reserve Champion at
13 the futurity; is that correct?
14 A. Oh, yes.
15 Q. How much did she -- how much was paid in 19 -- was this
16 in 19 --
17 A. '77, I think.
18 Q. 1977. Okay. In 1977, what was being paid to the
19 Reserve -- or what was paid to her or to her owner as the
20 Reserve Champion at the Fort Worth Futurity?
21 A. I remember very -- very well, $27,500.
22 Q. Okay. And, Mr. Brown, there is some cups up there and
23 some water, if you want some.
24 A. Thank you very much.
25 THE COURT: I can hear fine, but can you?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 837
1 (Jurors nodding heads.)
2 A. That's peanuts by today's numbers, but it was a lot of
3 money to us.
4 Q. (By Ms. Stone) Okay. So, in 1977, the mare won $27,500.
5 Did that put you in a profit situation with that mare?
6 A. No.
7 Q. Why not?
8 A. Well, half of that went to Joe Heim. That was our
9 agreement.
10 Q. Okay. So that's --
11 A. Now we're down to 13,000. And I'd spent 3,000 to breed.
12 And I don't know what it cost to keep a mare at that time for
13 a year, and then keep the offspring for almost two years, and
14 pay -- I think the entry fee was $2100 at that time at the
15 futurity. I'm not sure of that, but it was a lot of money to
16 me.
17 And, at the very kindest, I might have washed.
18 Q. All right. And that's consistent with what the jury has
19 heard here already in this case, and that is that, even if you
20 put a lot of money into a horse, training a horse and you win,
21 in most instances, you're lucky to break even. Would that be
22 your experience?
23 A. I think that's correct. Certainly, at that time, that
24 was the case, and I -- it pays a lot more money today, but the
25 costs are a lot higher also. And I think that probably holds
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 838
1 true.
2 Q. All right. And then what the jury has also heard, is
3 that the real money in these horses, these elite registered
4 Quarter Horses is to be made in breeding. Do you agree with
5 that?
6 A. I think that's quite correct.
7 Q. All right. Now, did you subsequently breed Doc's
8 Serendipity?
9 A. Yes, I did.
10 Q. Okay. And what did you -- did she have a filly or a
11 colt?
12 A. I bred her to a horse named Peppy San that Matlock Rose
13 owned, and that was $20,000. And I broke her, and I sent her
14 to California. She showed and won some money. She didn't win
15 20,000, but her offspring put me in the horse business.
16 Q. All right. And tell the jury -- were there circumstances
17 that arose in your life that caused you to have to sell Doc's
18 Serendipity?
19 A. Yes. I went through a divorce in about 1978, and I had
20 two children to raise, and I had to sell her.
21 Q. And tell the jury what the terms of the sale were. What
22 did you sell her for? What was the amount of money that you
23 received as consideration for Doc's Serendipity?
24 A. I sold her and her full sister two years younger and a
25 son of Doc Bar who was a year older than her to Robert Shelton
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 839
1 from King Ranch on a three-year note, and he paid me $456,000.
2 Q. $456,000. What percentage of that consideration was
3 attributable, or would you attribute, to Doc's Serendipity?
4 A. Oh, the vast majority of it.
5 Q. Okay. At least 300,000, if not more?
6 A. Oh, I would think so.
7 Q. Okay. 350,000?
8 A. Who knows? Yes.
9 Q. Okay. But she was by --
10 A. She was the deal. And the reason I got that, I wouldn't
11 sell her unless I sold the others, and I gambled and I won. I
12 didn't know if he would do it.
13 I said, "I won't, but I will sell you a package." I'll
14 sell you a half interest in the stallion, and these two
15 mares." And he sat there for the longest time, and, finally,
16 he said, "Hell, I'll do that." And I almost fainted.
17 Q. You weren't looking to sell her; you had to sell her?
18 A. Oh, I had to. I had $4100 to my name.
19 Q. And two kids to raise?
20 A. Yes.
21 Q. All right. Did you sometime in the not-so-distant future
22 come to learn that Doc's Serendipity had been cloned?
23 A. Yes, I did.
24 Q. Okay. Who had cloned her?
25 A. I believe Texas A&M did that.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 840
1 Q. Where was she cloned; do you know?
2 A. I think at Texas A&M.
3 Q. Do you know who owned her at the time that she was
4 cloned?
5 A. I'm not sure. Either a man named Jim Dunn or a
6 veterinarian named Lane Easter, or perhaps both of them owned
7 her at that time, but I'm not sure of that.
8 Q. And when was she born, the clone of Doc's Serendipity?
9 A. Oh, she must have been born in -- she's seven years old
10 now.
11 Q. So 2006?
12 A. 2006, that's right, if my math is right.
13 Q. Okay. And did you know -- when she was a baby, say, a
14 yearling or so, did you know where she lived?
15 A. Oh, I did, and it wasn't very far from my house.
16 Q. Okay. Did that cause you any --
17 A. I didn't dare go look at her.
18 Q. Why not?
19 A. I figured I'd try and buy her (chokes up).
20 Q. All right. And so did you try to stay away from her?
21 A. Yep.
22 Q. Okay. While you weren't the one that actually cloned
23 her, do you agree that she was -- that Doc's Serendipity was
24 the type of horse that should have been cloned?
25 A. Oh, if you can get another Serendipity, absolutely.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 841
1 Q. Did you subsequently learn that the Doc -- that the clone
2 of Doc's Serendipity was for sale?
3 A. Yes, I did.
4 Q. What did you learn?
5 A. Well, I learned she was going through the Futurity
6 Yearling Sale at the National Cutting Horse Futurity in
7 December of her yearling year.
8 Q. December of 2007?
9 A. I think that's right.
10 Q. What did you do when you learned that?
11 A. Oh, I decided I would make a run at her.
12 Q. Okay. Did you go look at her?
13 A. Yes, I did.
14 Q. You went and looked at her where she lived down the road
15 from you?
16 A. That's right, at this Lane Easter's Veterinary Clinic.
17 I'd never seen her.
18 Q. Tell the jury about the first time that you saw the clone
19 of Doc's Serendipity.
20 A. Well, the original one had a conformation flaw. She was
21 over at her knees. Instead of being straight down, they came
22 out forward. And I always assumed that that was my fault. I
23 didn't feed her right, or I rode her too early, and I felt
24 badly about it. It didn't hurt her, but it was one of those
25 things that I should have done differently.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 842
1 Well, I walked in the stall. And this beautiful creature
2 that looked exactly like the original is over at her knees.
3 The original one would walk up to me and put her nose on my
4 shoulder (chokes up) and make little noises in my ear. This
5 one did the same thing.
6 Q. Okay. And the original one did that because what did you
7 carry in your pocket?
8 A. I had little treats in my pocket, and I assumed that's
9 why she did it. But, certainly, the clone didn't do that. It
10 was just something she did. I just was dumbstruck.
11 Q. Now, when you saw the knees of this mare and they --
12 that's just a minor conformational thing, correct?
13 A. And, understand, none of the offspring of the original or
14 this one have ever had that. I don't know where it came from.
15 Q. So, when you saw the clone's knees, it confirmed to you
16 that this minor problem with the -- with Doc's Serendipity --
17 A. It was genetic.
18 Q. -- was genetic?
19 A. It was there. It had nothing to do with me.
20 Q. Okay. It alleviated your conscience?
21 A. Well, yes.
22 Q. All right. Did you go to the sale when the clone of
23 Doc's Serendipity was sold?
24 A. Yes, I did.
25 Q. Why did you go?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 843
1 A. I decided I was going to make a run at her.
2 Q. What were you prepared to pay for her?
3 A. Well, I wasn't completely candid with my wife. I told
4 her that -- she said, "What are you going (chokes up) -- what
5 are you going to give?" And I said, "I'll give 40,000." And
6 on the way down, I changed my mind, and I doubled it.
7 Q. So when you went to the sale, you were willing to give --
8 A. I'd have given 80,000. And I have no idea how I got that
9 number.
10 Q. Okay. Were you aware at the time that AQHA had a rule
11 banning clones from their registration?
12 A. I was.
13 Q. Okay. Then why would you have been willing to pay
14 $80,000 for a clone that couldn't be registered?
15 A. Two things. I was enormously curious of what it would be
16 like to ride her. Frankly, I could afford it. And I was
17 knowledgeable enough to know that there had been a series of
18 changes in registrations in American Quarter Horse
19 Association. And I thought that, if these clones take off and
20 do well —— understand, this was the first one ever sold ——
21 that there was a fair chance that this mare would be
22 registrable as an American Quarter Horse.
23 MS. STONE: May I approach the easel, Your Honor?
24 THE COURT: You may.
25 Q. (By Ms. Stone) Are the changes that you're referring to,
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 844
1 Mr. Brown, in the AQHA registration rules those listed on the
2 chart that I've shown you that has been marked into -- that
3 has been admitted into evidence as Exhibit 140?
4 A. Are the changes I was referring to?
5 Q. The changes that AQHA made that you were aware of in
6 terms of accepting advanced breeding techniques as they became
7 available.
8 MR. ARNOLD: Objection, leading, Your Honor.
9 THE COURT: Sustained.
10 Q. (By Ms. Stone) Mr. Brown, you testified that you were
11 aware that AQHA had changed their rules; is that correct?
12 A. Yes.
13 Q. And tell the jury what you meant by that, please.
14 A. Well, I -- I realized that initially we couldn't use
15 artificial insemination; that was okayed. We couldn't use
16 embryo transfers; that was okayed. We couldn't use frozen
17 semen —— I'm just going down your list —— that was okayed. We
18 couldn't have multiple embryos; that was okayed. ICSI doses
19 were okayed.
20 Frozen semen, I didn't know that, after the death of a
21 stallion. I was unaware of that.
22 And I knew about frozen embryos after -- but I didn't
23 know about it after the death of a mare. I was unaware of
24 after death.
25 Q. Okay. Now, tell the jury what happened at the sale when
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 845
1 you went to the sale. It was an auction, correct?
2 A. It was an auction.
3 Q. Tell the jury what happened.
4 A. I sat down perhaps as far as I am from the jury in the
5 first row, and she came in, and the bidding started. My wife
6 was sitting next to me. And I've been to a lot of horse sales
7 in my life. And the bidding stopped at $13,000, and I knew
8 that it was going to -- in the vernacular, to run. I knew
9 that, all of a sudden, somebody was going to start to bid, and
10 it was going to fly.
11 And my wife said, "You better get on this; they're going
12 to sell her." I said, "Naw, they're going to run her now."
13 Well, the auctioneer had his hammer up and he said, "13,000
14 once, 13,000 twice," and I pointed and popped her. And he
15 said, "14,000, 14,000 once, 14,000 twice, 14,000 done," and he
16 hit the hammer.
17 Q. And so you bought the clone of Doc's Serendipity for
18 $14,000?
19 A. Yeah. It went so fast I wondered what happened. I still
20 don't know why they did that.
21 Q. What would you have been willing to pay for the clone of
22 Doc's Serendipity if she could be registered with AQHA?
23 A. Oh, I think would have been -- I think that was a
24 six-figure horse.
25 Q. And you paid 14,000?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 846
1 A. $14,000.
2 Q. Did you have the clone of Doc's Serendipity then home for
3 Christmas in --
4 A. I had her on that day.
5 Q. What did you do with her the first couple of months after
6 you got her home?
7 A. I broke her to ride.
8 Q. How old was she at the time?
9 A. She was in the latter part -- I would guess she was
10 twenty months.
11 Q. Okay. And the jury has already heard testified that
12 horses, Quarter Horses have their birthday on January 1st?
13 A. Yes.
14 Q. So she was going to turn two?
15 A. She would be two years old on the 1st of January, but not
16 really. She was born, I think, in April.
17 Q. Tell the jury about the first three times that you rode
18 the clone of Doc's Serendipity.
19 A. I saddled her, and I taught her to give to a bit and a
20 halter and turn around from the ground. I don't drive them.
21 I just do it with a halter.
22 And I thought it's time to get on her, and I loaded her
23 in a trailer, and I took her to a friend of mine, a very good
24 horse trainer by the name of Martin Black. And he had a pen,
25 and I saddled her, and I'd never been on her. And I tossed
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 847
1 him a lead rope. He was on another horse, and he took hold of
2 her and took her up tight close to his horse, and I just
3 stepped on her. And he led her around the arena with me for,
4 I don't know, eight, ten minutes, and I petted her, and she
5 was quiet.
6 And I said, "Just give me the lead rope." And I rode her
7 with that, and I could turn her around and stop her and get
8 her to back a couple of steps within twenty minutes, something
9 like that. And I'm pretty sure that's the first time anyone
10 ever rode a clone.
11 And I stepped off of her, and I asked my friend, I said,
12 "Would you like to be the second guy that ever rode a clone?"
13 And he said, "Yep." And he stepped on her, rode her for maybe
14 five minutes. And that was it. Took the saddle off of her,
15 tied her up and took her home.
16 The next day, I saddled her up again, and this time
17 without a lead pony, and I put a snaffle bit in her mouth
18 instead of just a halter, and I was alone, and I rode her
19 around in my round pen, and it was amazing. I mean, by the
20 time I was done, in a half hour or less, she had walked, trot,
21 I could get her into a lope, and she'd stop when I'd ask her
22 to, not slam it on, but she'd stop, and she'd take a couple of
23 steps backwards.
24 The next day, I saddled her up again, and I rode her
25 perhaps twenty or thirty minutes, and I knew she was all
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 848
1 right. And I asked my wife, I said, "Open the gate." And I
2 was gone for two hours.
3 Q. So you had ridden this mare -- the mare had been
4 ridden --
5 A. Maybe an hour.
6 Q. -- for maybe an hour, and you just went for a ride?
7 A. Yep, yep.
8 Q. That's kind of unheard of, isn't it?
9 A. No, the original one was like that.
10 Q. All right.
11 A. I took her down ravines and over logs and into water.
12 She didn't like it a few times, but if I'd kid with her and
13 fool with her and take my time, she'd say, that's all right,
14 and then we'd just -- and when we came back, she was like an
15 old horse. Her reins were swinging, and she was just relaxed,
16 and I just stepped off her. And I didn't ride her for a week.
17 I just let her think about it.
18 Q. Pretty unusual for most horses, correct?
19 A. Yes. I was very impressed.
20 Q. What do you use the clone -- and, let's see, she was born
21 in 2006, so you've testified she's seven years old now; is
22 that correct?
23 A. Uh-huh.
24 Q. What do you use her for today?
25 A. Reproduction.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 849
1 Q. Okay. Why is that?
2 A. Well, it's about the only option. She cut her eye, and
3 an ulcer grew on it. And she had a spot in her eye which
4 causes her a peripheral blindness, and I -- she just wasn't
5 capable of staying on a cow on her right side, so I stopped.
6 I mean, I believe she was a big-time horse. She had some
7 time spent on her with a very good horse trainer after I was
8 done, but she'd lose a cow on this side, and she'd raise up
9 and try and see it, and I thought no sense getting her beat
10 because of this. So my only option was to go breed her.
11 Q. And what makes her the kind of horse that you -- a
12 gentleman who has competed in the market for, and participated
13 in the market for, elite registered Quarter Horses since 1977
14 anyway, what makes her the kind of horse that you would want
15 to breed?
16 A. Genetics, conformation.
17 Q. And, by genetics, what do you mean?
18 A. She's an extraordinarily well-bred horse.
19 Q. Because she's an exact duplicate --
20 A. That's right.
21 Q. -- of the horse that --
22 A. That's right.
23 Q. -- was the Reserve Champion?
24 A. Yes.
25 Q. Did -- have you since bred her?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 850
1 A. Yes, I have.
2 Q. Okay. And tell the jury why you would breed her if you
3 knew that her offspring could not be registered.
4 A. Well, the name of the game was to get some winnings on
5 these offspring, and, in the event that they were registered
6 at some time in the future, those offspring and future
7 offspring would be worth a lot of money.
8 So I had to gamble. What am I going to do? Stand her in
9 a pasture and do nothing with her, or do we see what we have
10 here? First of all, we better discover if these are good
11 offspring, and if they are, they should be quite valuable if
12 they're registrable.
13 Q. And, again, you believed that, because AQHA had continued
14 to allow registration of advanced breeding techniques, that
15 cloning would be the next on the list, correct?
16 A. I thought it was --
17 MR. ARNOLD: Objection, leading, Your Honor.
18 THE COURT: Sustained.
19 Q. (By Ms. Stone) Tell the jury again why -- what -- one of
20 the reasons why you bred this mare and had offspring when you
21 knew that AQHA at the time would not allow the offspring to be
22 registered.
23 A. I thought, based on precedent, it was entirely possible
24 that these in time would be registrable.
25 Q. Now, these offspring, the offspring of the clone of
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 851
1 Serendipity, have they been bred using methods here that are
2 approved by AQHA?
3 A. Yes.
4 Q. And which methods have been used to produce the offspring
5 of the clone of Doc's Serendipity?
6 A. The first three. She was artificially inseminated, there
7 were embryo transfers, and cooled semen.
8 Q. All right. Now, have you bred the clone of Doc's
9 Serendipity to Metallic Cat, the stallion that Dr. Veneklasen
10 does the breeding for that's owned by Alvin Fults?
11 A. Yes, I have.
12 Q. How many breedings have you had to Doc's Serendipity from
13 Metallic Cat?
14 A. Three colts on the ground, and two that were conceived
15 this year and now are in recipient mares, so that -- if
16 everything goes well in the spring, there will be a total of
17 five.
18 Q. And what is the stud fee for Metallic Cat?
19 A. I think it's 6,000 and a $500 chute fee.
20 Q. How much did you pay?
21 A. I didn't pay anything for it.
22 Q. Why not?
23 A. Because Gregg Veneklasen was kind enough to give them to
24 me, and Alvin Fults was kind enough to do that.
25 Q. And why would a stallion owner, such as Alvin -- or let
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 852
1 me withdraw and start over.
2 How do the genetics of Metallic Cat and the genetics of
3 the clone of Doc's Serendipity or of Doc's Serendipity
4 herself, what have you seen in terms of the offspring?
5 A. Very nice horses. I've started all three of the Metallic
6 Cat colts. One is a three-year-old, two are two-year-olds,
7 and I did the initial training on all of them.
8 Q. What have you done with the three foals out of the clone
9 of Doc's Serendipity that are by Metallic Cat?
10 A. I've sold them.
11 Q. Have you made any money --
12 A. Oh, I've lost money.
13 Q. Why would you continue to breed the clone of Doc's
14 Serendipity if you knew that her foals, her offspring, would
15 not be registered by AQHA or were not currently registrable by
16 AQHA?
17 A. If I knew they wouldn't be registered, I wouldn't have
18 done it. But if I knew that there was a possibility they
19 would be registered, I would do it, and I would continue to
20 put the money into training them or whatever to get a record
21 on them and prove that these are good horses.
22 Q. Tell the jury, please, who are the only kinds of people
23 that are training and spending any sort of money on the
24 offspring of clones.
25 A. Owners of clones or trainers or people who will buy an
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 853
1 offspring of a clone for minimal amounts, extraordinarily
2 well-bred horses, making the gamble that they can win and/or
3 have a registered horse.
4 Q. Why are the owners of clones and those few that get the
5 offspring for very cheap prices the only ones training the
6 offsprings of clones?
7 MR. ARNOLD: Object, calls for speculation.
8 Certainly, this witness can speak for himself, but, as to
9 other unnamed people, I think it calls for speculation, Your
10 Honor.
11 THE COURT: Overruled.
12 A. Would you repeat that, please?
13 Q. (By Ms. Stone) Sure. Why are owners of clones and those
14 few that get the offspring cheap enough the only ones that are
15 training and spending any money on offspring of clones?
16 A. Oh, I think there's a stigma on offspring of clones,
17 because they can't be registered; they can't be shown in AQHA
18 shows. I think that's very difficult, and their offspring
19 won't be registered.
20 Q. What about for breeding purposes; are these worth
21 anything for breeding purposes if they can't be --
22 A. Not at this point. Very little.
23 Q. Let me show you --
24 MS. STONE: May I approach the easel again, Your
25 Honor?
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 854
1 THE COURT: You may.
2 (Witness trying to get water out of pitcher.)
3 THE WITNESS: I haven't figured out how to run this
4 thing yet, or maybe it's empty. No, there we go.
5 THE COURT: Did you get your -- do you need help
6 with that?
7 THE WITNESS: Oh, I'm fine, I finally got it, even I
8 could figure that out, I guess.
9 Q. (By Ms. Stone) I've shown you here a -- on the chart
10 here, and it's admitted into evidence as Exhibit No. 141, and
11 it's titled "Benefits." And it's a document that Blake
12 Russell gave me the information for, and that Blake Russell,
13 Dr. Don Topliff from West Texas A&M University, Jason Abraham,
14 and Dr. Veneklasen have all testified are the benefits to the
15 Quarter Horse breed from allowing clones and their offspring
16 to be registered.
17 And ask you if you agree with their testimony?
18 A. Yes. The geldings took me a moment, but it's certainly
19 conceivable to reproduce a gelding as a breeding stallion, and
20 I had to think about that for a minute.
21 Yes, I would agree with that.
22 Q. During the past thirty-five years, have you bred, raised,
23 trained and sold elite registered Quarter Horses?
24 A. I think I have.
25 Q. What makes a registered -- a registered Quarter Horse
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 855
1 yearling elite?
2 A. Genetics, conformation, and potential.
3 Q. And, by genetics, is that the same thing as pedigree, who
4 the sire and dam is?
5 A. That's exactly right. It's all about genetics.
6 Q. So genetics, conformation?
7 A. Yep.
8 Q. Was there a third?
9 A. Past performance of parents.
10 Q. And what makes a registered Quarter Horse mare or
11 stallion elite?
12 A. Performance, genetics, conformation.
13 Q. What about their -- their offspring?
14 A. Ah, once that happens, of course.
15 Q. And so, once they have offspring, that's another thing
16 that we're looking at?
17 A. Once the offspring start to win money, the parents get to
18 be worth a lot of money if they're winning big time.
19 Q. What is the highest price that you have sold a yearling
20 or a two-year-old for in the last year or two?
21 A. Oh, I suppose within the last year or two, twenty-five,
22 thirty thousand, but a few years ago, four or five years ago,
23 I sold a colt, Whiskeynadirtyglass --
24 THE COURT: Can you pull that mike down.
25 A. I sold a colt in the Fort Worth Futurity Sale named
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 856
1 Whiskeynadirtyglass, a two-year-old that I'd started, and he
2 brought 99,000.
3 Q. (By Ms. Stone) If you had been buying that horse rather
4 than selling it, what effect would a price increase of
5 five percent or more have on your decision to buy that horse?
6 A. If I had the money in my pocket, it would make no
7 difference. No one knows what a horse is worth within five
8 percent.
9 Q. If you were a buyer wanting to buy that horse and you
10 were unable to buy that particular horse for some reason, what
11 would you -- what would you do?
12 A. If I still wanted to have a horse, I'd try and find one
13 at least as good as he was.
14 Q. If you still wanted to have an elite --
15 A. Yeah.
16 Q. -- registered Quarter Horse?
17 A. Yep.
18 Q. Would you have bought a lesser-quality horse as a
19 substitute?
20 A. No, I would not. I do not do that.
21 Q. Based on your experience as a breeder in the market for
22 elite registered Quarter Horses, do you think there is a
23 shortage of elite mares?
24 A. By definition, there must be.
25 Q. And why is that, please.
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 857
1 A. Well, if they're the very top few percent, there can't be
2 very many of them.
3 Q. And what about the way -- what about the way that the
4 relative number of babies that a mare can have compared to a
5 stallion?
6 A. Well, until relatively recently, you could breed a
7 relative, mediocre stallion and have fifty colts on the ground
8 every year, and one out of a great mare.
9 And now we can breed multiples, two, three, maybe four.
10 And what it does, is increase our genetic potential in this
11 particular line.
12 Q. But that doesn't necessarily mean you're going to get
13 more mares, correct?
14 A. Oh, no. I wouldn't -- if -- by the definition, as I
15 understand it, as you get more horses, some of them will fall
16 to a lower class or a lower grade, if you will, but the
17 elites -- the best will still be the best, and it's a very
18 small percentage.
19 Q. And the people that are competing in the market for the
20 elite registered Quarter Horses, they don't trade down, do
21 they, sir?
22 A. Generally not.
23 Q. Now, tell the jury, please, who benefits from the ban on
24 registering clones and their offspring.
25 A. I wondered that, and my best view would be people who
Stacy Mayes Morrison Official Court Reporter David Brown (Direct--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 858
1 don't want to compete with these horses.
2 Q. Other breeders and owners of elite registered Quarter
3 Horses?
4 A. Yes, I would think that's probably a fair statement.
5 Q. Do you know Frank Merrill?
6 A. I do.
7 Q. Did you have occasion to see him immediately after you
8 purchased the clone of Doc's Serendipity at the NCHA Futurity
9 Sale in December of 2007?
10 A. I did.
11 Q. Tell the jury what transpired.
12 A. An hour, perhaps two hours after I'd bought her, I was in
13 the Will Rogers Coliseum, which is adjacent to the sales
14 building. And I've known Frank a long time, and I admire him
15 and respect him.
16 And we were walking towards one another, and he
17 approached me, and there was something about his demeanor that
18 I picked up on immediately. And the opening statement was, "I
19 suppose you're going to sue us now?" And I was quite taken
20 back. I thought he meant sue himself and his wife, Robin, and
21 I couldn't figure out what he was talking about.
22 And I said, "Frank, I'm not going to sue you; why would I
23 sue you?" And he said, "Well, you bought that clone," and
24 then I knew.
25 Q. You have an interest -- because you own a clone and some
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 859
1 offspring of a clone, you would agree that you have an
2 interest in the outcome of this lawsuit?
3 A. Absolutely.
4 Q. Okay. And does your having an interest in the outcome of
5 this lawsuit, has it in any way affected the truthfulness of
6 your testimony here today?
7 A. Oh, no.
8 Q. And will it affect the truthfulness of your testimony in
9 response to the questions --
10 A. No, ma'am.
11 Q. -- by AQHA's lawyer?
12 A. No, ma'am.
13 Q. Okay. Did you come here voluntarily to testify?
14 A. Yes, I did. In fact, I offered to come. No one asked
15 me.
16 Q. And the reason that you offered is because, as you've
17 testified, you believe it's beneficial to the Quarter Horse
18 breed to have these clones and offsprings registered?
19 A. Yes, I think that's a true statement.
20 MS. STONE: No further questions.
21 CROSS EXAMINATION
22 BY MR. ARNOLD:
23 Q. Good morning, Mr. Brown. My name's Wade Arnold, and I
24 don't believe you and I have ever met before today, have we?
25 A. No, we haven't, Mr. Arnold. Good morning to you, sir.
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 860
1 Q. Thank you. You told this jury that you admire and
2 respect Frank Merrill. I want you to tell them why you admire
3 and respect Frank Merrill.
4 A. I think Frank Merrill is a journeyman horseman, and he's
5 a good horseman. I've done business with him. I've known him
6 a long time, but I've never known him well. I've bred mares
7 with him at his place, and I've never had a problem with him.
8 Q. Does he have a good reputation in the industry?
9 A. I think so.
10 Q. I want to go back to what -- well, first of all, let me
11 ask you this: Ms. Stone kept referring to the clone of Doc's
12 Serendipity. Does the clone have a name?
13 A. I think so, but she's just always called the clone.
14 There was a DNA registration, and it was -- I think the name
15 was Serendipity Again. I didn't name her.
16 Q. Okay. So it was named when it was still owned by A&M or
17 whoever bought it from A&M?
18 A. That's correct. I don't know who had the name, and I
19 think the name on -- they're not AQHA papers. There's a
20 certificate with a DNA proof of what she is, and the name of
21 the horse, I believe, was Serendipity Again. I had not
22 thought of that. I always just refer to her as the clone.
23 Q. So when you're out at your ranch or your stables, what do
24 you call her?
25 A. Well, go get the clone and bring her in.
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 861
1 Q. Okay. So the clone?
2 A. That's the clone, that's right.
3 Q. Okay. It doesn't have a snappy name like Doc's
4 Serendipity?
5 A. No, or Whiskeynadirtyglass. It wasn't my choice to name
6 it.
7 Q. Okay. You testified that one of the reasons you bought
8 the clone, even though you knew that it couldn't be registered
9 with the American Quarter Horse Association, was because you
10 thought that, if these clones take off and do well, then the
11 association will change their rule and allow clones. Did I
12 hear that right?
13 A. I thought that was possible.
14 Q. That was something that you were thinking at the time?
15 A. Yes.
16 Q. All right. Now, the clone -- since that's what you call
17 it, I'll call it that.
18 A. Uh-huh.
19 Q. The clone never had a chance to compete in any real
20 events during its so -- its lifetime thus far, correct?
21 A. That's correct.
22 Q. And I think you said that that was partly because the
23 clone had been injured?
24 A. Totally.
25 Q. All right. So we don't know how the clone would have
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 862
1 ever competed because it's never competed?
2 A. We know that it was highly athletic, highly trainable,
3 and had a lot of, they just call it, cow. It's like a
4 pointing instinct in dogs. No question about that. I knew
5 this was a big-time horse.
6 Q. And so how much money did it earn in competition?
7 A. Well, it never was shown. It couldn't be.
8 Q. How many events did it win?
9 A. Never went to a show.
10 Q. How many events did you enter it in?
11 A. Couldn't do any of the above.
12 Q. All right. Now, I think you said that -- let me get to
13 my notes here, Mr. Brown.
14 You also told us that one of the reasons you bred to the
15 clone was because the name of the game was to get some wins
16 with the offspring?
17 A. Correct.
18 Q. All right. And how many offspring does the clone have?
19 A. Five.
20 Q. All right. And what are the names of those five
21 offspring?
22 A. There's a four-year-old, and I think his name is Back To
23 The Future.
24 Q. Okay.
25 A. There is a three-year-old named Haywire Smith. There is
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 863
1 a two-year-old, and I don't know what the owner named it. And
2 there is another two-year-old named Dark Secrets.
3 Q. All right. Do you own any of those offspring? Well,
4 hold on. That's only four offspring. I thought there were
5 five.
6 A. Excuse me, there are four. I was wrong. There are four.
7 Q. Okay. So four offspring and the clone, not five?
8 A. That's correct. I was wrong.
9 Q. All right. Who owns the four-year-old Back To The
10 Future?
11 A. A woman in California. I sold this Back To The Future to
12 a woman in California, and he subsequently got hurt, and she
13 sold him. And I don't know who owns that horse now.
14 He was a nice colt. I broke him and liked him.
15 Q. Okay.
16 A. He won some money, and then he got hurt.
17 Q. If the records show that that horse won less than $7,000,
18 would that surprise you?
19 A. No, I would guess that that's right. He got hurt in his
20 three-year-old year, and he's a four-year-old now. I would
21 guess that's true.
22 Q. Certainly didn't prove himself in the competition arena,
23 did he?
24 A. Oh, he could have, absolutely. I mean, the
25 three-year-old horse just starting out in California -- I
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 864
1 don't know what he won, four or five thousand dollars, and no
2 question he was a horse that everyone was watching.
3 Q. Okay. So is Back To The Future, the four-year-old, is it
4 still competing?
5 A. He's hurt. He can't. He maybe being able to show in the
6 fall, as I understand it.
7 Q. But he's earned less than $7,000?
8 A. I believe that's -- I don't know that.
9 Q. All right. Now, what kind of horses are these? Are they
10 cutters or are they --
11 A. Yes.
12 Q. Cutting horses?
13 A. Yes.
14 Q. In -- typically, in the cutting horse world, I assume
15 that you have competed, or maybe you still do, with NCHA
16 events; is that right?
17 A. Yes, I have.
18 Q. Tell the jury what the NCHA is real briefly, sir.
19 A. National Cutting Horse Association is an organization
20 devoted to promoting, showing cutting horses.
21 Q. And there's a lot of big money in the NCHA to be won in
22 competition, is there not?
23 A. Yes, there is.
24 Q. I mean, millions and millions of dollars?
25 A. That's right.
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 865
1 Q. Every year?
2 A. That's right.
3 Q. All right. So we know the four-year-old, Back To The
4 Future, earned less than $7,000. And, typically, when does a
5 horse start competing in cutting?
6 A. In its three-year-old year.
7 Q. All right. So Back To The Future had its three-year-old
8 year and its four-year-old year to compete?
9 A. I don't know that he had his four-year-old year. He may
10 have been hurt by then, but I don't know that.
11 Q. All right. Now, the three-year-old, Haywire Smith, who
12 owns that horse?
13 A. Tim Smith, a horse trainer in California that trained
14 Back To The Future.
15 Q. And how much money has --
16 A. He hasn't been shown yet.
17 Q. He hasn't shown yet?
18 A. No, he's a three-year-old, and this is early in his
19 three-year-old year. He'll be showing probably the first time
20 in October if they elect to show him in California. If they
21 elect to go to the National Cutting Horse Futurity, he'll be
22 shown the first time in December --
23 Q. So we don't know --
24 A. -- if they elect to take --
25 Q. I'm sorry. Let me apologize to you, sir. I get going
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 866
1 fast, and sometimes I think you're done, and you're not, and I
2 apologize. I didn't mean to cut you off.
3 Do you know how -- so Haywire Smith has not yet competed?
4 A. No.
5 Q. So we don't know --
6 A. No.
7 Q. -- anything about it?
8 A. That's right.
9 Q. All right. And then you said there was a two-year-old
10 that you didn't know the name. And did you know who owned
11 that one?
12 A. A man named Roger Anderson in North Dakota, and the colt
13 is being trained in Weatherford, Texas now. I've seen it.
14 It's doing everything I would think a two-year-old should do
15 at this point, and I think they're quite happy with it.
16 Q. But we don't know anything about its competition record,
17 because it hasn't competed yet?
18 A. Yep. No one can know on any of these horses at that age.
19 Q. And then Dark Secrets, the same thing?
20 A. She's the same age -- she's in California, and Tim Smith
21 has her. He bought her from me.
22 Q. So Tim Smith, same one that has Haywire Smith has --
23 A. That's right. And he --
24 Q. -- Dark Secrets?
25 A. He liked her well enough to buy her sister.
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 867
1 Q. Dark Secrets being the sister of Haywire Smith?
2 A. That's correct.
3 Q. All right. But, again, as a two-year-old, it hasn't done
4 anything in the competition arena yet?
5 A. All we know is that she's trainable, and you can ride
6 her, and she's wanting to do her job.
7 Q. All right.
8 A. She's a fourteen-year-old kid in the vernacular, if you
9 will.
10 Q. You said that -- and I'm not going to get this exactly
11 right, because it's kind of hard to sit there and take notes
12 and get the exact testimony, so I want to make sure I
13 understood what you were saying.
14 Ms. Stone asked you a question about breeders in the
15 elite market not buying a horse outside the elite category.
16 Do you remember that testimony?
17 A. Something to that effect.
18 Q. Okay.
19 A. And that -- that is -- I don't think that was the
20 statement. There obviously are horses that are sold that are
21 not elite horses, or there wouldn't be any market for them.
22 Q. And they go on to become elite horses because they win
23 and compete and make lots of money?
24 A. Sometimes.
25 Q. As a matter of fact, the Heritage Place winner, the 2013
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 868
1 Heritage Place Derby winner was a mare that was purchased for
2 only $4,000, and it won the Heritage Place million-dollar
3 race. Were you aware of that?
4 A. That doesn't sur -- no, that's the racehorse business,
5 and I -- I'm wonderfully ignorant of it, but it doesn't
6 surprise me. Every once in awhile, there's a Cinderella that
7 comes along.
8 Q. And that's the same thing in cutting too, isn't it?
9 A. Yes, to some degree, but genetics tell in cutting on the
10 overall long run.
11 Q. You indicated in one of the questions with Ms. Stone that
12 you felt like the elite market of mares was something like the
13 top two percent?
14 A. I don't know that. I was -- I didn't know what an elite
15 horse was, and I assume that you're looking at the top few
16 percent of winners and producers.
17 Q. And you understand that, if we're measuring things based
18 on a percentage, one to a hundred percent --
19 A. Uh-huh.
20 Q. -- that having more mares, there's still only going to be
21 a top two percent if you're looking at the top two percent,
22 correct?
23 A. By definition, isn't it? Yes.
24 Q. So --
25 A. If there's 1,000, there's still only going to be that few
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 869
1 percent.
2 Q. Even with cloning?
3 A. That's true.
4 Q. I want to ask you a question. You said -- you indicated
5 you lived in Gainesville, and I get a chance to drive through
6 there every now and then, not -- not stop very often, but I
7 want to ask you if you know a couple of people.
8 Do you know Carol Rose?
9 A. Yes, I do. She's my neighbor.
10 Q. I assume you've known Carol for a long time?
11 A. Very long time.
12 Q. And she's liquidating her entire operation, isn't she?
13 A. Yes, she is.
14 Q. And, now, her operation was mostly reining horses and cow
15 reining horses?
16 A. That's correct.
17 Q. Not cutting or racing?
18 A. That's correct.
19 Q. And, to the extent that Ms. Rose was competing in any
20 elite market for reining horses or cow reining horses, she's
21 not doing that anymore, is she, with the liquidation?
22 A. She won't be doing that.
23 Q. That's what I mean.
24 A. Yes. She's told me that she's going to quit and just
25 keep a couple of horses.
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 870
1 Q. Just pleasure horses?
2 A. I don't know.
3 Q. Joan Schroeder. Do you know Ms. Schroeder?
4 A. I've met her, but I don't know her.
5 Q. Do you know anything about her operation out -- she's
6 also from Gainesville, right?
7 A. Very little. Different business. Pleasure horses,
8 halter horses, things that I have no knowledge of.
9 Q. I bet you have more knowledge than I do, so I'm going to
10 put you on the spot here.
11 Can you tell the difference -- tell the jury what western
12 pleasure discipline -- what does that mean? And if you can't,
13 that's fine. I shouldn't have put you on the spot.
14 A. Oh, it's a -- I have to be very careful with my views on
15 western pleasure horses. It's a performance event where
16 horses go through three gears around an arena —— walk, trot
17 and canter —— in odd motions to my eye, and I don't care for
18 it, and I know very little about it.
19 Q. Fair enough. And did you say, in your opinion, you are
20 still competing in the elite cutting market?
21 A. I have colts for sale as we sit.
22 Q. And how many do you have for sale right now?
23 A. I have about five.
24 Q. What are they selling for?
25 A. What do I want for them?
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 871
1 Q. Good point. What are you asking for them?
2 A. I have a four-year-old High Brow Cat in Weatherford, and
3 I think he's going to -- if everything goes right, he's going
4 to bring fifty to a hundred thousand.
5 Q. So he'd be an elite horse?
6 A. I would think so. Pretty nice horse.
7 Q. Okay. What else?
8 A. I have two yearlings by a horse named One Time Pepto, a
9 brother and sister a month apart, nice horses. They will go
10 through a sale in December. My guess is, they'll draw, on a
11 bad day, twenty to twenty-five, and on a good day, thirty to
12 forty, but --
13 Q. So those could --
14 A. -- just a guess. Nobody --
15 Q. You'd consider --
16 A. -- knows.
17 Q. -- those elite?
18 A. Pardon?
19 Q. You'd consider those elite then, in the elite market?
20 A. Maybe. There will be horses that sell for a lot more
21 money than that.
22 Q. Okay. Well, I'm asking you, what do you think? Are
23 those horses elite or are they not?
24 A. Those two might not be.
25 Q. Not elite? First one --
Stacy Mayes Morrison Official Court Reporter David Brown (Cross--Mr. Arnold) (Defendant AQHA) 872
1 A. Again, it's your definition. They'll certainly be well
2 above the average cost or price of a horse in that sale.
3 They'd better be.
4 Q. You ask a good question. You said, depending on your
5 definition, and let me just do this: What is your definition
6 of an elite horse?
7 A. I'd not thought of that until I came down here to
8 Amarillo, and I would think that's maybe the top five percent
9 of the horses.
10 Q. And why do you say that?
11 A. Just a guess. I have to pull something out of the air,
12 and I don't know where to start. I don't know what the
13 parameters are for that. That's a new term to me.
14 Q. All right. So we've talked about three of the other
15 horses that you've got for sale this year. What are the
16 others?
17 A. I have two Metallic Cat babies, this year colts, out of a
18 very good mare, and I would think that those are going to draw
19 twenty-five to fifty thousand dollars a year from now if the
20 market is no better or no worse than it is today.
21 Q. Elite or not elite?
22 A. Probably that's certainly going to be in the upper few
23 percent of the sales.
24 Q. So it sounds like the offspring that you have that are
25 capable of being -- well, first of all, those offspring are
Stacy Mayes Morrison Official Court Reporter David Brown (Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 873
1 already on the ground, right?
2 A. That's right.
3 Q. They already have AQHA papers, correct?
4 A. A couple of them don't yet.
5 Q. Okay. But they're eligible for registration?
6 A. That's correct.
7 Q. And all of those horses were created without the use of
8 clones or without the use of the offspring of clones, correct?
9 A. Correct.
10 Q. And they're all in the elite market, or right there?
11 A. I'd think so. They're very good horses, and they're
12 going to bring quite a bit of money.
13 MR. ARNOLD: Mr. Brown, thank you very much. That's
14 all the questions I have.
15 THE WITNESS: Thank you, sir.
16 REDIRECT EXAMINATION
17 BY MS. STONE:
18 Q. If you are in the market for an elite registered Quarter
19 Horse, will you buy one that is not elite?
20 A. It would have to be a horse that I thought I saw great
21 potential and that no one else did. Probably not.
22 My view is that I should own the smallest number of the
23 highest-quality horses that I can possibly afford, i.e., two
24 $100,000 mares rather than twenty $10,000 mares.
25 MS. STONE: No further questions.
Stacy Mayes Morrison Official Court Reporter David Brown (Redirect--Ms. Stone) (Plaintiff Abraham & Veneklasen Joint Venture) 874
1 MR. ARNOLD: No more questions, Your Honor.
2 THE COURT: May this witness be excused altogether?
3 MS. STONE: Yes, Your Honor.
4 MR. ARNOLD: Yes, Your Honor.
5 THE COURT: You're excused altogether as a witness.
6 (Witness excused.)
7 THE COURT: Now, Ladies and Gentlemen, we're going
8 to recess in a minute until 1:30, and I want you to be back in
9 the jury room ready to come in the courtroom at 1:30.
10 But I'll tell you that, during the noon hour, I'm
11 going to be taking care of a criminal matter that has to be
12 done today, so I'll be -- but I believe that I've scheduled it
13 so I won't have to keep you waiting.
14 If you are a little slow coming back down after
15 1:30, it won't be very long. So be back at 1:30, so that we
16 can move just as quickly as we can.
17 And we'll be in recess at this time.
18 COURT SECURITY OFFICER: All rise.
19 (There was a recess taken; after which, the following
20 took place in open court with the jury and all parties
21 present.)
22 AFTERNOON SESSION
23 MR. NICKUM: Your Honor, may I be allowed to present
24 and introduce a colleague who is going to participate now.
25 He's been counsel in this case for ten months. This is Mr.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 875
1 Brian Robison with the firm of Gibson, Dunn & Crutcher.
2 MR. ROBISON: Good afternoon, Your Honor.
3 THE COURT: Pardon me?
4 MR. LOFTIN: He's counsel of record. There's no
5 objection, Your Honor.
6 THE COURT: You may proceed.
7 MR. STEIN: Your Honor, at this time, Plaintiffs
8 will call Dr. Christopher Pflaum.
9 (The witness was sworn by the courtroom clerk.)
10 THE COURT: Would you take the stand, please.
11 CHRISTOPHER PFLAUM,
12 having been first duly sworn, testified as follows:
13 DIRECT EXAMINATION
14 BY MR. STEIN:
15 Q. Dr. Pflaum, would you please introduce yourself to the
16 jury.
17 A. Good afternoon. I'm Chris Pflaum.
18 Q. Where are you from?
19 A. My business is in Overland Park, Kansas.
20 Q. What do you do?
21 A. I'm president of Spectrum Economics.
22 Q. Tell the jury, please, what Spectrum Economics does.
23 A. It's a firm of economists and financial analysts. We
24 primarily work in litigation; although, we also do business
25 evaluations, a little business advisory, and some public
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 876
1 utility economics.
2 Q. Could you give us, please, the benefit of your
3 educational background.
4 A. I have an undergraduate degree in English. Then I went
5 on and got an MBA, Master of Business Administration, majored
6 in Finance. I then went on -- that was from the University of
7 Miami. I then went to the University of South Carolina where
8 I received my Ph.D. in Finance and Operations Management.
9 Q. When was that, sir?
10 A. I finished class work in '78, finished my dissertation in
11 '83, so that's when the degree was awarded.
12 Q. All right. Could you tell us the benefit of your
13 employment history since then, please.
14 A. Right out of graduate school, I taught college for four
15 years, first at a place in East -- East Tennessee State
16 University, and then later at Southern Illinois University at
17 Carbondale.
18 While I was on the faculty at Carbondale, I got to meet
19 one of the professors or former professors in the Econ
20 Department, who sat on the Illinois Commerce Commission, which
21 is the public utility commission for the State of Illinois,
22 and he offered me a job doing what I had actually written my
23 doctoral thesis on, which is utility regulation.
24 So I took it, and I was on the staff of the utility's
25 commission for two years. I started as a senior financial
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 877
1 analyst -- financial economist, excuse me, and was eventually
2 promoted to a director; though, I didn't take it, because I
3 knew I was -- I held the job, but I didn't take the salary,
4 because I knew I was going to leave shortly, and I didn't want
5 to tie up the line. It was a high-paying line. We needed it
6 to recruit my successor.
7 Q. So how long were you in the utility industry or within
8 that regulated industry prior to coming to Spectrum?
9 A. Well, I was born into it. My dad was a telephone company
10 manager, but I was actually a utility regulator for two years.
11 Q. Okay. And you started your work with Spectrum when?
12 A. Well, actually, I left the commission in '86, went to a
13 utility consulting firm in Kansas City, that's how I got
14 there, and then eventually eighty -- no, '84, I went to Lubow
15 McKay, the utility consulting firm.
16 And then, in '86, I joined a California-based firm
17 working out of the Midwest, and that -- if you know consulting
18 firms, egos get in the way, and they break up, and they break
19 up again. And, finally, Spectrum Economics resulted from the
20 succession of split-offs. And I bought the company in '92,
21 and I own it now.
22 Q. And you've owned it continuously since then?
23 A. Since '92, yes.
24 Q. Now, in science, what is a peer-review journal?
25 A. There's a -- there's two kinds of review. There's
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 878
1 editorial -- well, sometimes there's no review. But there's
2 editorial review, which is where you submit an article, and
3 the editor of the journal, or whatever it is, reviews it, and
4 maybe his editorial board reviews it, and decides whether or
5 not to publish it.
6 Then there's a higher standard of review, which is called
7 peer review. And that's when you submit the journal to the
8 editor, the editor strips out the identifying information like
9 your name and all that and sends it to three people who are
10 experts in the field you're writing in to do what's called a
11 blind review. They don't know who wrote the article. They
12 just read the article, check your math and the like, and then
13 they decide -- they tell the editor whether or not they
14 believe it should be not published, rejected, published, or
15 sent back for more work.
16 Q. So if it's not published, what does that -- what does
17 that tell you?
18 A. Well, it hurts your feelings (laughs).
19 Q. If you are published, is that a big deal to be
20 peer-reviewed and then published?
21 A. Yeah, it is. It's something that anyone who thinks of
22 themselves as a scholar wants to do. I mean, if you can't
23 write stuff that other people in your field want to read and
24 it's acceptable for them to read, then are you really a
25 scholar?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 879
1 Q. Have you ever been published on any articles that you've
2 authored on economic issues in respected peer-reviewed
3 journals?
4 A. Yes.
5 Q. How many times?
6 A. Four or -- no, six probably.
7 Q. Can you tell the jury the names of any of those respected
8 journals that you have been published in following a peer
9 review?
10 A. Sure. The Journal of Financial and Quantitative
11 Analysis, the Journal of Spinal Cord Medicine, the Journal of
12 Forensic Economics, the Journal of Legal Economics, the
13 Journal of Rail and Rapid Transit.
14 Q. All right. Now, have you ever served as an expert
15 witness in antitrust cases such as this before?
16 A. A number of times, yes.
17 Q. All right. Could you give us, please, kind of your
18 history. How -- when was the first time you ever actually
19 worked as an expert consulted in an antitrust case such as
20 what we're here on today?
21 A. My first one was in 1987, and it was a criminal case. It
22 was a Section 1 where it involved what's called market
23 splitting. Two competitors just decided to rig their bids so
24 they would split the market, and that was my first case. I
25 testified in court in that case.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 880
1 Q. Have you ever served as an expert in an antitrust case in
2 this court?
3 A. Yes.
4 Q. When?
5 A. 1990 maybe. Great Western Directories v. Southwestern
6 Bell.
7 Q. And was that Ms. Stone's case?
8 A. She was one of the lawyers on the file, yes.
9 Q. Now, over the course of the twenty or twenty-five years
10 that you've been involved in doing antitrust type work, have
11 you done work for Plaintiffs versus the Defendants, or have
12 you worked both sides of the cases?
13 A. I've worked both. Did a lot of cases in Yellow Pages
14 after Great Western. They were all for Plaintiffs, but then I
15 did some cases for Defendants in the medical industry and a
16 few other industries.
17 Q. In first being contacted on cases within the antitrust
18 arena, have you ever been hired as a consultant, looked at the
19 case and examined the facts, and then walked away from it?
20 A. Several times.
21 Q. Why would you do that?
22 A. To me, competition integrity in markets is really
23 important, and I think that competitive markets are critical
24 to the functioning of this economy, critical to consumers
25 getting a good deal. It's also critical that people don't
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 881
1 face lawsuits that are crummy and just cost them a lot of
2 money.
3 So if I don't think a case is a good case, I just won't
4 do it, because I'm not in the business of selling an opinion.
5 I'm in the business of being an expert who's supposed to serve
6 the finder of fact, the jury, and assist the finder of law,
7 the Court.
8 Q. Have you over the course -- now, you don't do just
9 exclusively antitrust work, do you?
10 A. No.
11 Q. Okay. Now, in the course of your experiences with
12 Spectrum, have you had occasion to work in other horse-related
13 or what we call equine type cases within the horse industry?
14 A. This is at least my fourth case in the equine industry.
15 Q. Okay. So the horse cases that you've dealt with would be
16 more than just antitrust cases?
17 A. Yes. I have had at least one non-antitrust case in
18 equine.
19 Q. So, I mean, I've had you -- I've had you help me with
20 damage cases in other horse-related cases?
21 A. You have.
22 Q. Yeah. Okay. Now, have any of your horse cases within
23 the antitrust arena dealt with breeding restrictions imposed
24 by breed registries?
25 A. All three of them.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 882
1 Q. Okay. Now, has any Court in any of these cases that
2 you've testified ever restricted, barred, or stricken your
3 testimony?
4 A. Not to the best of my knowledge, no.
5 Q. All right. So let's move into this case, and I will ask
6 you: What have you been asked to do in this case?
7 A. I was asked to -- I knew what the complaint said, so I
8 knew what the case was about. So the first thing that I was
9 asked to do was look at the Quarter Horse market, look at the
10 buying and selling of horses, familiarize myself with it. I
11 was already familiar with it, but familiarize myself more.
12 Q. Okay.
13 A. And then I needed to -- or I was asked to, I was required
14 in antitrust, to figure out what the product market was,
15 what's the product we're talking about here, and then what's
16 the geographic market. And those are two key elements of
17 antitrust.
18 Q. Now, let's stop right there. When we're talking about
19 the product market, are we talking about the thing that's
20 being bought or sold?
21 A. Yes, or the service.
22 Q. Or the service. And if we're talking about the
23 geographical area or the geographical market, are we talking
24 about the place where the thing is bought and sold?
25 A. Or places.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 883
1 Q. Or places. Okay. So that's what you're talking about
2 within this case when you mean relevant product or relevant
3 geographic area?
4 A. Correct.
5 Q. All right. What else did you do in this case?
6 A. Well, then I was asked to define -- all right. So I have
7 to define the markets.
8 Q. Okay.
9 A. And then having to figure out what the markets were, I
10 had to define, figure out what an elite registered Quarter
11 Horse was.
12 Q. Okay.
13 A. What is it that makes this animal elite?
14 Q. All right. Now, just generally, right there before we
15 move on into this, were you able to employ any type of
16 scientific methods in doing what you were asked to do with
17 respect to defining either the markets or what a horse was
18 called elite?
19 A. Yes. I did some graphical analysis, some simple
20 statistical analysis, and some pretty advanced statistical
21 analysis.
22 Q. We're going to get into that here in a minute, but I want
23 to keep moving forward. What else were you asked to do in
24 this case?
25 A. Determine whether or not the operation -- I think it's
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 884
1 Rule 227(a), the rule against registration of clones and their
2 offspring, was -- harmed competition. Did it somehow
3 interfere with the market?
4 And then, finally, I was asked to determine the economic
5 losses to the Plaintiffs in this case as a result of the AQHA
6 actions. In other words, as a result of the harm to
7 competition, the interference with the marketplace, how were
8 the Plaintiffs in this case specifically injured?
9 Q. All right. Is there a difference between harm to
10 competition and harm to actually the Plaintiffs?
11 A. Yeah. It's kind of an interesting theory. The harm to
12 competition is really what antitrust cares about. It cares
13 about people messing with markets so that consumers pay higher
14 prices. That's what it's all about.
15 But you've got to get people to file lawsuits so they can
16 collect damages, and that's the harm to them, but the harm to
17 them is really not what antitrust law is meant to cure.
18 Q. All right. So, in this case, did you also use any type
19 of scientific methods in analyzing and reaching any opinions
20 as to harm to competition?
21 A. I did.
22 Q. All right. Let's move on into what this case is about in
23 the order that you have given us. What have you done or what
24 can you tell us about a market?
25 A. Well, as we said, market is product and a place. And the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 885
1 first thing an economist has to do in an antitrust case is
2 figure out what's the product. In other words, what thing and
3 its substitutes are we talking about here?
4 And then we have to figure out what places and their
5 substitutes. You know, there's towns like all around
6 Amarillo. If you don't like the price in Amarillo, go
7 somewhere else. So they're all in the same market, because
8 you, as a consumer, can go to those places to buy the things
9 you want if you don't like the prices that are being charged
10 here.
11 So those are basically what product and geographic
12 markets are.
13 Q. Do you start with defining or looking at what the product
14 is before you start looking at what the geographic area is?
15 A. Yes. You first need to have a good handle on your
16 product before you can tell what -- where it's being bought
17 and sold obviously.
18 Q. Given that then, do you have an opinion on what the
19 relevant product market is in this case?
20 A. Yes.
21 Q. Would you tell us what the -- well, tell us what your
22 opinion is.
23 A. My opinion is, the relevant product market in this case
24 is elite registered Quarter Horses.
25 Q. All right. Well, what do you mean when you say an elite
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 886
1 registered Quarter Horse?
2 A. We're talking about the horses primarily as their
3 breeding value. I mean, there are elite competitors, but
4 horses' competitive careers are pretty short, as I'm sure
5 you've heard here already. And after their competitive career
6 is over, they really don't have any value, unless they're good
7 breeding animals.
8 So an elite registered Quarter Horse would be a
9 registered Quarter Horse that has great pedigree, typically
10 great pedigree; great conformation, the way he's built; and
11 great trainability. Disposition is the word horse people use.
12 Q. All right. So, given that you have now told us what your
13 opinion is, what is the basis for your opinion that the
14 relevant product market in this case is the market for elite
15 registered Quarter Horses?
16 A. Well, the first thing I did, the first thing you have to
17 do in a case like this is start to mess around with the data,
18 look at pictures, graph things, because most of us are visual
19 and we see stuff.
20 So I started by doing a lot of charts and graphs to see
21 if somehow some horses were different than other horses, like
22 with respect to price, stud fees, what have you. I think we
23 have some slides here somewhere.
24 Q. We'll get to those.
25 A. Okay.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 887
1 Q. But you came into this case, this not being really your
2 first antitrust case, but you came in with a certain amount of
3 personal knowledge of the market, did you not?
4 A. And I had to go further than that. I had to do quite a
5 bit more reading. I read a bunch of Quarter Horse News,
6 Q-Racing, SpeedHorse. Got on the Internet, read blogs. I
7 read three books on the Quarter Horse business, and --
8 Q. Did you interview people?
9 A. Yes. I interviewed probably at least six or eight or ten
10 people in the industry, talked to them about it, because,
11 obviously, I'd read things, I'd go: "Why is this? I'm a
12 little confused here." So I'd call someone and say: "I read
13 this. What does this mean?" And if they were in the
14 industry, they could explain it to me.
15 Q. And we've seen just a few of the exhibits in this case,
16 but did you review documents, not only the exhibits that have
17 been introduced, but other documents that have been exchanged
18 between the parties in this case?
19 A. I haven't seen everything, but I've seen most things that
20 are important to forming my opinion, yes.
21 Q. Read depositions of the various witnesses that were
22 deposed prior to trial?
23 A. I did, and I sat in on a few.
24 Q. And did you do any statistical analysis of data?
25 A. Yes. Other than the graphing and the basic numerical
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 888
1 analysis, I also used what's called regression analysis, which
2 is a statistical technique, and then I used logistical
3 regression analysis, which is another statistical technique.
4 Q. So are these the types of things that form the basis of
5 your opinion as to the relevant product market in this case
6 being the market for elite registered Quarter Horses?
7 A. They are.
8 Q. All right. Now, you mentioned that you had prepared some
9 slides. I need you to pull the third volume of the white
10 notebooks up, please, Plaintiffs' Exhibits.
11 Have you got that in front of you?
12 A. I do.
13 Q. Now, I'm going to have you turn to Exhibit 92.
14 A. Okay.
15 Q. All right. Now, just briefly, this hasn't been admitted
16 yet. Okay? So I need you to tell us what it is.
17 A. Exhibit 92 are various slides that, and diagrams, that I
18 put together to help me in my testimony today to explain to
19 you all what I did.
20 Q. Is this stuff that you did?
21 A. Yes.
22 Q. And is this stuff that you believe will help aid and
23 assist in your testimony in explaining your opinions and the
24 basis for these opinions in this case?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 889
1 Q. Now, is what's in the notebook there the actual work
2 product? I mean, it's the original?
3 A. These come right off our spreadsheets and the like, yes,
4 and from our reports.
5 MR. STEIN: All right. Your Honor, at this time, we
6 would like to start using Exhibit 92, and I'm going to ask
7 that it be admitted into evidence in its entirety, and we'll
8 pull them up a slide at a time. But, at this time, I'm
9 offering Plaintiffs' Exhibit 92.
10 MR. LOFTIN: No objection, Your Honor.
11 THE COURT: Admitted.
12 MR. STEIN: Thank you.
13 Q. (By Mr. Stein) Now, then, let's talk about your
14 analysis. Are many Quarter Horses elite?
15 A. Very few.
16 Q. Very few. All right. Do you have a slide that will help
17 explain this?
18 A. I do. If you would put up, Slide 2, please.
19 MR. STEIN: Put up Slide 2, please.
20 Q. (By Mr. Stein) All right. Now, what does -- now, you've
21 got a little laser pointer.
22 A. I've used one of these before.
23 Q. Thank you. I think it will help. Tell us what we're
24 seeing here on Slide 2 of Exhibit 92.
25 A. Okay. If you see the red circle here, that's all the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 890
1 Quarter Horses that would be registered in a year. So, per
2 year, about 90,000 roughly Quarter Horses are registered, more
3 than that are born, because not every Quarter Horse that's
4 born is registered, but there's about 90,000. Now, a lot of
5 those, of course, are backyard breeding and what have you.
6 But there's a smaller group of horses, perhaps 6,000,
7 that are sold at major sales, and these are the prestigious
8 sales like the Ruidoso Sale, the Los Alamitos Sale in racing,
9 the Louisiana Racehorse Association, Heritage Sale in
10 Oklahoma, and what have you.
11 So out of this 90,000, you have about five or six
12 thousand which are the best -- some of the better horses that
13 are sold at the big sales.
14 But, out of this 6,000, you only have -- or 5,000, you
15 only have about 250 or 300 that most people agree they're
16 elite. So you're talking about 250 or 300 horses out of
17 90,000 that are born in a year. That's less than a half of a
18 percent, so it's a very -- it's a small group of horses that
19 represents a significant amount of money because these horses
20 sell for pretty big prices.
21 Q. Is price alone what we're looking at when we define what
22 an elite Quarter Horse is, an elite registered Quarter Horse?
23 A. No. An elite registered Quarter Horse has certain
24 characteristics, and, of course, they manifest themselves in
25 price, just like the characteristics of a luxury car. All the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 891
1 nifty things that it has, well, it leads to a pretty big price
2 for that car. So it's the same in a horse. A horse has
3 certain attributes, primarily hereditary attributes, that
4 manifest itself in a selling price in the marketplace.
5 Q. So why is it important that we're focusing only on the
6 elite Quarter Horses as a part of this market?
7 A. Well, because cloning's expensive, and someone, let's
8 say, who's breeding ranch horses or trail-riding horses,
9 probably is not going to clone one of their mares, because
10 they're not going to get enough money from the offspring to
11 pay for cloning and make a profit.
12 So the market that's relevant to the question here, which
13 is cloning, is these tippity-top horses that sell for a lot of
14 money and where you can clone a mare and make a profit by
15 cloning that mare and then breeding her to top stallions.
16 Q. Okay. Now, you mentioned that there were other
17 characteristics or factors that you looked at or that combine.
18 Do you have a slide that we can look at for that?
19 A. Yes. The next slide is, I think -- I don't have my
20 glasses on.
21 Q. I got down Page 3 or Slide 3.
22 A. 3, yes.
23 MR. STEIN: Could we put up Slide 3.
24 Q. (By Mr. Stein) Now, what are we seeing here, Dr. Pflaum?
25 A. Those are the characteristics of an elite Quarter Horse.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 892
1 Q. What do you mean by that? Are we saying that, if a horse
2 has any one of these characteristics, he's automatically
3 elite?
4 A. No, no. Typically, many of those characteristics.
5 Q. Does having these characteristics make the horse elite?
6 A. Well, it means he has an elite bloodline, but there's a
7 lot of diversity, randomness in genetics. So even if you put
8 a couple of great horses together, you may not get a great
9 horse out of that, but your probabilities of getting a good
10 horse, given an elite sire and an elite mare, are much higher.
11 So it's like -- it's like playing with loaded dice. You're
12 going to get the number you want more if the dice are loaded.
13 And if you have these characteristics, it's kind of like
14 loading the dice in the horse-breeding game.
15 Q. So if we can say that, once we have determined a horse is
16 elite, it will have these characteristics?
17 A. Almost always. Though, there are exceptions. Sometimes
18 you get a bolt out of the blue, a horse that's not -- does
19 great at the track, but it may not have breeding value.
20 Q. But just because a horse has these characteristics
21 doesn't necessarily make it elite?
22 A. Correct.
23 Q. All right.
24 A. There's the randomness.
25 Q. So -- now, we've -- we're probably going to switch back
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 893
1 and forth with this one. Okay? But you've got up there the
2 "cross of the elite sire with the elite mare," which is what
3 you've called a magic cross.
4 A. Depending on the bloodlines.
5 Q. And that's where I'm going. You've got "bloodlines" up
6 there next. Have you got something that you can share with us
7 to explain what you mean as to elite bloodlines or the various
8 sire and dam lines that combine to make these magic crosses.
9 A. Sure, if we go to Slide 4 first.
10 MR. STEIN: Can we put up Slide 4, please. Thank
11 you.
12 Q. (By Mr. Stein) What are we seeing here as just examples
13 of some of these elite bloodlines that you've mentioned?
14 A. These are some of the top horses. To the left, cutters.
15 High Brow Cat, the leading sire of all time, money winner of
16 all time. One Time Pepto, another great horse. Smart Little
17 Lena, one of the top sires of mares in -- of cutting. Then
18 Dual Pep, Freckles Playboy, Grays Starlight. Metallic Cat,
19 who right now is the leading sire in cutters.
20 Then on the racing side, you've got Mr. Jess Perry.
21 Corona Cartel. You'll see in racehorses the words Cartel and
22 Corona a lot in horses' names. One Dashing Eagle, which is
23 one of the top sires right now. First Down Dash, still a
24 sire. I think he dates back -- he's probably twenty --over
25 twenty years old now, but a lot of top horses come up from
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 894
1 him. Same thing with Feature Mr. Jess. Chicks Beduino, and
2 Easy Jet.
3 Q. So when you have examined the market and researched what
4 you have finally determined to be an elite Quarter Horse, are
5 you seeing these different sire combinations show up in the
6 pedigrees?
7 A. Yes, especially the more recent ones. Earlier today, we
8 heard testimony from Mr. Brown on some of what is called
9 foundation sires, going way back in time. And they're not
10 here, but they would be like racing horses, the Thoroughbreds,
11 3 Bars and Beduino.
12 I've gone back all the way on some of them to War
13 Admiral, which is pretty amazing. And cutters go back as Mr.
14 Brown discussed.
15 Q. Let's go back to Slide 3 again and take a look at these
16 characteristics again.
17 So if we move on down your list, "disposition,
18 conformation." How do you go out in the marketplace and find
19 some objective factor as to those types of things?
20 A. Well, elite bloodlines are associated with disposition.
21 For example, High Brow Cat's offspring have been said that the
22 most trainable cutting horses there are. And the same thing
23 with conformation, but then you've also got to look at the
24 horse.
25 Q. Okay. So there's some subjective element to it that
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 895
1 you're not able to study?
2 A. Quite a bit.
3 Q. Okay. So if we keep going on down. Again, these are
4 characteristics. Not necessarily do these characteristics
5 make the horse, but if we have identified the horse, we'll
6 find these characteristics.
7 A. Right.
8 Q. So what are you telling us with respect to "breeding is
9 often done by embryo transfer"? What do you mean by that?
10 A. Well, several reasons a breeder would prefer to use
11 embryo transfer. One, he can sometimes get multiple
12 pregnancies from the same mare in one year. He might get --
13 two would be not unusual; three, sometimes more than that, not
14 very often.
15 The other thing is that you don't want to risk a good
16 mare in pregnancy and birth. So do the transfer, because
17 you've got a very valuable mare, and you don't want her to die
18 in childbirth.
19 Q. So you see this technique being used with those mares to
20 a greater or a lesser degree than with others?
21 A. Much greater degree with the top mares, yes.
22 Q. And, you know, we have seen some evidence in this case
23 that embryo transfer and the embryo transfer rule actually
24 includes the slash oocyte, slash, ICSI procedure. Is that
25 something that you're covering with this, breeding is often
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 896
1 done by embryo transfer?
2 A. Yeah, because older mares become infertile, and the only
3 way you can get babies out of them are with these advanced
4 breeding techniques.
5 Q. Now, you've also got listed here, as one of the
6 characteristics at least of stallions, is that you find, once
7 a stallion fits into this category of elite status, he carries
8 this characteristics of, they're being bred to 100 or more
9 mares each year.
10 Tell us how that factors into your analysis of the elite
11 registered Quarter Horse.
12 A. Well, they're the top bloodlines on the stallions' side,
13 and everybody wants to breed to them. And so you -- and so
14 with things like cooled and frozen semen, artificial
15 insemination, a stallion can breed to hundreds and hundreds of
16 mares a year -- actually, unlimited numbers.
17 Q. So does this, stallions being bred to 100 more mares per
18 year, show up in records that you've reviewed and the research
19 you've done on like yearling sales or total earnings of
20 offspring?
21 A. Sure. For example, let's see if we can -- here. Go to
22 7.
23 Q. Can we look at -- you're wanting to look at Chart 7?
24 A. Look at Chart 7.
25 Q. Okay. What are we seeing here?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 897
1 A. Can you blow that up a little bit?
2 Q. What do you want to look at? The top few of them?
3 A. Yeah, the top ten, fifteen.
4 Q. Tell us what we're actually seeing, what this chart is
5 broken into as to columns, what it is that we're seeing here.
6 A. The first column is the name of the yearling. The second
7 is its date of birth, so these are all 2010 borns. That means
8 they were yearlings, probably the 2011 yearling sale. Then
9 the sex, mare or stallion. The sire, who's the daddy; the
10 dam, who's the mommy. The maternal grandsire, who's mommy's
11 daddy. And then the sale, which is -- which of the sales was
12 the horse sold at. And then the price at which the horse
13 sold.
14 MR. STEIN: Okay. Could you -- can you, I guess,
15 shrink it back so we can focus in on what the rank is -- oh,
16 the prices.
17 Q. (By Mr. Stein) So what you've done in this chart is rank
18 the yearling by top price?
19 A. Yes. I ranked them by price. You can see the top
20 yearling is Tapt Dancing Cat. She sold for 280,000 --
21 Q. And so we're --
22 A. -- thousand dollars.
23 Q. -- seeing the top ten or some of these high sellers are
24 all the same -- they're all half sib?
25 A. All the same sire, all by High Brow Cat.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 898
1 Q. Okay. So that's something that --
2 A. Notice, also, that you've got two dams that are the
3 same --
4 Q. Oh, I'm sorry.
5 A. -- Autumn Boon.
6 Q. You've got a column for dams and another column. Tell us
7 the significance of the column that you're seeing for dams.
8 A. Okay. Dams, who's the mother. And Cat/Boon is a magic
9 cross. So -- in fact, if you look down at the names of the
10 horses, you get an idea that, ah, these are sisters and half
11 sisters, crossed against the same horses, the same sires. And
12 those are called magic crosses.
13 Q. Okay. So what's the significance of the maternal
14 grandsire column as it pertains to what's in the dam column?
15 A. The thing with the dam is, you can't breed her until
16 she's three years old. She has her first baby when she's
17 four. The baby doesn't compete for another two years, three,
18 before we get some real competition results in.
19 So the mare is seven years old before her babies have a
20 record in competition. Well, but there she is ready to breed.
21 And so for the younger mares that aren't what we call proven
22 mares, they haven't had a lot of good babies that have won in
23 competition, we look to see, well, who's the mare's sire, and
24 that gives us information about the quality of the mare.
25 Because some maternal grandsires are especially known for
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 899
1 producing really good mares.
2 Q. Well, let's stop right there and use Autumn Boon as an
3 example. If we see a High Brow Cat/Autumn Boon cross, are we
4 really -- do we really care much about who her sire is?
5 A. No, she's proven.
6 Q. She's proven?
7 A. Yes.
8 Q. So if we got her daughter, for example, Absolutely
9 Stunning, who we don't yet know about --
10 A. Right.
11 Q. -- we want to look at her sire and dam combination
12 because she's not yet proven?
13 A. Correct.
14 Q. Got you.
15 A. There's one other thing, and that is, in speed, there's a
16 gene linked to a large heart. Secretariat is the best-known
17 horse for this. His heart was three times the size of a
18 normal horse.
19 Q. Why is that significant to this analysis?
20 A. Because, the bigger the heart, the faster the horse.
21 Q. But why is that linked? Why is that important to this
22 case?
23 A. It's sex linked.
24 Q. Oh. You want to -- you want to use daughters of him?
25 A. Oh, yeah. You want to use -- it's through the daughter
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 900
1 that you get the big heart gene, which gives you a faster,
2 more energetic horse.
3 Q. All right. So these are the types of things that you've
4 analyzed and looked at in arriving at your opinion as to the
5 product market, the relevant product market being elite
6 registered Quarter Horses?
7 A. Yes, sir.
8 Q. All right. Now, let's go back to Slide 3. We're not
9 through with the characteristics.
10 All right. Well, the "winning percentage in competition"
11 or the "earnings per offspring," what -- what are you looking
12 at, or what have you found as a part of placing those
13 characteristics in this list?
14 A. The offspring -- well, first, you look at how often the
15 sire's won. Usually, a sire doesn't become a popular sire
16 unless he really performed well. Dams not so much so because
17 they -- they go to breeding earlier, and there aren't -- the
18 competitions are not as high dollar, I guess. I'm not really
19 sure there.
20 But the earnings per offspring is very important looking
21 at a bloodline, because this business is about making money on
22 the track or in the arena. So you look at, how do the
23 earnings of this sire or this dam done? What have their
24 babies done?
25 Q. Is that kind of data available?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 901
1 A. Oh, sure.
2 Q. What did you do in arriving at or ferreting out this kind
3 of data for this case?
4 A. Oh, for example -- can I show a magazine? Am I allowed
5 to?
6 Q. It's not in evidence. You can describe it. So I'd
7 rather --
8 A. For example, Quarter Horse News —— and it just came out
9 last month —— publishes leading sires, leading dams, offspring
10 earnings. So that's all readily available for the cutters.
11 And, also, there's a company call Equi-Stat that's out
12 of Fort Worth that makes all of these data available,
13 computer-readable format. We purchased those data.
14 Q. Okay.
15 A. For the racehorses, you go to Q, for Quarter Horse,
16 Racing Journal, and they have a statistical supplement. It's
17 at least annual. And you can get all the data on the
18 racehorses from that. You can also go to SpeedHorse and get
19 the data there.
20 Q. So you were able to go out and find this data and sort it
21 in some fashion to arrive at some type of a ranking of who
22 these top bloodlines or sire lines or dam lines were?
23 A. Yes, sir.
24 Q. Let's flip over to Slide No. 6. Now, tell us -- this is
25 a -- this is a cutting sire and a grandsire ranking, but tell
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 902
1 us --
2 MR. STEIN: Blow up the top three or four of those,
3 if you would.
4 Q. (By Mr. Stein) Tell us what you're seeing here. Now,
5 this is a ranking that you've put together. But what are you
6 seeing here?
7 A. Well, you can see, as I said earlier, High Brow Cat is
8 the top sire, and this is a year or so old, because it shows
9 him at about thirty-two million for his babies have made that
10 much in the ring.
11 Q. So that number represents the earnings of the offspring
12 of High Brow Cat?
13 A. As of last year. I think it's up to forty-five million
14 now.
15 Q. Wow. All right. Move on over to the grandsire column
16 where it says Smart Little Lena. Now, what does that column
17 tell us again?
18 A. Okay. So as the father -- this should be, I think,
19 maternal grandsire.
20 Q. Sure. It's the maternal grandsire.
21 A. The daughters of Smart Little Lena, their offspring ——
22 and, remember, mares don't have as many offspring as sires
23 because they have one or two babies a year —— won twenty
24 million dollars, which is frankly a huge number.
25 Q. So some of these sires actually may not be -- they may be
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 903
1 more recognized for being the maternal grandsire than they
2 will -- well, I'll --
3 MR. LOFTIN: I'd just ask that he not lead. I'd ask
4 that he not lead the witness, please.
5 THE COURT: Well, if you're making an objection,
6 I'll sustain.
7 MR. STEIN: I will rephrase, Your Honor.
8 Q. (By Mr. Stein) What have you learned with respect to the
9 maternal grandsire line in comparing those horses as being --
10 finding them more in that column than over here in the sire
11 column?
12 A. Well, I've known about this for a long time, because I
13 was a horse junkie as a kid. But certain stallions are just
14 known, they have a reputation, for producing great broodmares.
15 Best known, my favorite horse, Secretariat. He -- none
16 of his sons did anything of note, of great note on the
17 racetrack, but his daughters bred some of the top Thoroughbred
18 racing horses in history.
19 In the last Belmont Stakes, there were fourteen horses
20 running, and I heard the announcer say —— and I still don't
21 know if this is true —— eleven of those fourteen horses trace
22 back to Secretariat. So that's that big heart thing.
23 Q. All right. So you've looked at this maternal grandsire
24 ranking, earnings with respect to the cutters.
25 Did the same thing with respect to other disciplines?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 904
1 A. Yes, sir.
2 Q. All right. So these are the types of things that you
3 utilized in arriving at your definition of an elite registered
4 American Quarter Horse?
5 A. Yes, sir.
6 Q. Flip back to Slide 3.
7 A. Okay.
8 MR. STEIN: There.
9 Q. (By Mr. Stein) And then what we've got down there
10 towards the bottom, "selling price of yearlings," and "stud
11 fees," those are the last two.
12 Let's focus on the selling price of yearlings. What did
13 you look at in the way of data that caused you to think, "I
14 need to put this on this characteristic list"?
15 A. Yes. I got data on selling prices of yearlings for
16 both -- for cutters, reiners, those are called performance
17 horses, and for racehorses.
18 Not all the selling prices of all the yearlings are
19 available, but I got thousands. And found with selling
20 prices --
21 Do you have -- can you put a chart up there, so I can
22 show the jury?
23 Q. You want to look at No. 7 again?
24 A. No, I think I want to look at --
25 Q. You want to look at PX-112?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 905
1 A. How about if we look at No. 9.
2 Q. Oh, okay. That's the graph. All right.
3 MR. STEIN: Can we put up No. 9.
4 A. Okay. So this goes --
5 THE COURT: Now, that's number what?
6 MR. STEIN: This is Slide 9 as a part of the
7 Plaintiffs' Exhibit 92 already in evidence. This is Slide 9.
8 THE COURT: All right.
9 MR. STEIN: All right.
10 Q. (By Mr. Stein) Now, these are the same numbers that we
11 just saw over here on your offspring earnings chart.
12 A. Some them are -- well, yes, they were all ranked, but I
13 didn't show them all on that chart.
14 Q. This is a graphic depiction?
15 A. This is a graphic depiction of that same chart.
16 Q. Okay.
17 A. And you can see the highest priced horse was two eighty.
18 Q. That's clear over here. You want to use your pointer and
19 show them.
20 A. I'm not very good at this.
21 Q. All right. Clear over here on the left side --
22 A. Here is two eighty. And we know there's one horse there.
23 And you can see that -- and there are horses in between here
24 too but there's zero percent of all the horses sold. This is
25 ten percent. And when we get to ten percent of all horses
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 906
1 sold, we're down to horses that are selling for about $25,000.
2 But look at this. It's like -- it's horizontal, goes up
3 a little bit, and then it just climbs.
4 So when I look at that, I go, there's something very
5 different going on over here in this horizontal part than this
6 vertical part. And when I noticed that, I said, well, there's
7 clearly groupings of horses here, and there's a small number,
8 maybe five percent or so, of these horses that are incredibly
9 valuable. And then there's the other ninety or
10 ninety-five percent that aren't so valuable, not to say that
11 they aren't decent horses, but they're not -- they're not
12 elite.
13 Q. Okay. But tell me what's so significant about what
14 you're telling us here when it comes to defining the market
15 for elite registered American Quarter Horses.
16 A. Well, as we said, it's a small market. There aren't many
17 horses there, and those horses -- if you'd look at the horses
18 that sell out here (indicating) at these real high prices,
19 you're going to see that they have the characteristics that we
20 went over of an elite horse.
21 Q. All right. Flip back to Chart No. 2. Is what we just
22 saw on the graph another way of showing the little dot?
23 A. That -- that left part of the graph is that little dot.
24 Q. Okay. All right. Now, then, back to Slide 3 so we can
25 look at the rest of these characteristics.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 907
1 "Stud fees." How does a stallion's breeding fee or his
2 stud fee enter into this picture and make it onto the list of
3 what constitutes an elite registered American Quarter Horse?
4 A. For the most part, the more elite the stallion, the
5 higher the stud fee, and the more mares he breeds.
6 Q. All right. Are there statistics that can be used to
7 differentiate the elite Quarter Horse from what you call
8 non-elite Quarter Horse using something other than these
9 graphs and charts?
10 A. Well, one of the things that I did, if I can find it -- I
11 think now we're in the other group of exhibits. I have a
12 chart that shows five percent buckets.
13 Q. Oh, that's PX-112. If you'll turn -- it's not in the 92.
14 You'll have to go --
15 A. I've got it.
16 Q. All right. Now, then, tell us what that is. It's not in
17 evidence yet, so tell us what that is.
18 MR. LOFTIN: What number, please?
19 MR. STEIN: PX-112. It's not a part of the 92.
20 It's -- okay.
21 Q. (By Mr. Stein) Plaintiffs' Exhibit 112, tell us what
22 that is, please.
23 A. What I did is, was I took the top fifteen percent of
24 horses by price and put them into three buckets, and said:
25 "Well, what's the difference when I go from one bucket to
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 908
1 another? How does it -- how does the price change?"
2 Because that would give me an idea of this -- how it goes
3 from the horizontal to the vertical, and I'm trying to get
4 a -- start trying to get a mathematical numerical handle on
5 that. So I put together -- I did these calculations that are
6 on Exhibit 112.
7 MR. STEIN: All right. Your Honor --
8 Q. (By Mr. Stein) If we show this to the jury, would it
9 help assist you in explaining what you've just told us?
10 MR. LOFTIN: I don't have any objection, Sam, no
11 objection, Your Honor.
12 MR. STEIN: We'd offer Exhibit 1 -- it's Plaintiffs'
13 Exhibit 112.
14 THE COURT: Admitted.
15 MR. STEIN: Thank you. Could we show Plaintiffs'
16 112.
17 A. Okay. So we have the top five percent, the next
18 five percent, and then the third five percent.
19 The average price of a horse in the third five percent,
20 $25,900. The next five percent is $33,217 average price. So
21 it went up twenty-eight percent. So that's from the 15th to
22 the -- the 10th -- from the 15th to the 10th.
23 Now, look at the next one. When we go up to the top five
24 percent, we go from 33,000 on average to a bit over 68,000.
25 The price -- the average price doubles when we go up one more
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 909
1 five-percent bump.
2 Well, that's showing me numerically how we've accelerated
3 and now gone vertical and tells me that this is a different
4 group of animals.
5 Q. (By Mr. Stein) Okay. So let's clarify then. What I
6 understand you saying, when you started this project, when you
7 started your research and your analysis, you started seeing
8 some things within the data and within the literature?
9 A. Correct.
10 Q. Then you started trying to get a little more of the data
11 put together and started graphing it?
12 A. Correct.
13 Q. Then you started kind of doing some calculations to come
14 up with something like this Exhibit 112?
15 A. Yes.
16 Q. All right. I like to use analogies, but I remember
17 the -- I think it was Galileo, but let's say I walk outside,
18 and I look up into the sky, and I see the sun, and I go: "I
19 wonder if the sun's running around the earth or if the earth
20 is running around the sun," and I postulate that, and then I
21 try to prove it or disprove it.
22 Is that what's going on here with your thought process on
23 an elite registered American Quarter Horse?
24 A. It's the basic scientific method we all learned in
25 school. Look at what's going on around you, formulate
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 910
1 hypotheses, test those hypotheses. It's what I'm doing here.
2 It's the way economists do their work.
3 Q. Okay. So we're just seeing a little bit of it right now,
4 and then we're going to get into some more of it.
5 But let me ask you this: Are there --
6 MR. STEIN: Let's flip back to No. 3 again. It's
7 Slide 3 of Exhibit 92.
8 Q. (By Mr. Stein) Are there other attributes besides these
9 characteristics that you can attribute to this category of
10 elite registered Quarter Horses?
11 MR. STEIN: Let's look at Slide 21.
12 Q. (By Mr. Stein) Now, tell us what you've done here.
13 A. Okay. This is the -- this is the market for elite
14 Quarter Horses. And what you see, that there is a separate
15 market for these horses.
16 Remember we talked about product market. So now we've
17 gone from the horse itself to the product market in which the
18 horse exists, in which it's bought and sold.
19 One, there is a recognition of an elite Quarter Horse
20 market by people in the horse business. Read in all the
21 Quarter Horse publications, the blogs, what have you. They
22 talk about the top Quarter Horses, just like the Thoroughbred
23 people talk about the top horse that's going to run the Derby
24 or the Preakness or the Belmont.
25 There are the specific characteristics or uses of those
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 911
1 horses. By that, I mean -- we talked about the
2 characteristics, bloodlines and all that, those that are the
3 characteristics.
4 Uses, they're -- you're going to see them in the top
5 races, the futurities, the derbies, the super stakes. You're
6 going to see them in the top cutting competitions and the top
7 reining competitions. They travel between these competitions
8 just like any other elite athlete. They are elite athletes.
9 Separate production facilities. There are breeding
10 operations that specialize in these top horses. Now, there
11 are some breeding operations that do some top horses. There
12 are some that just flat do top horses. One of those would be
13 Marjorie Hawn Holt, for example. She just does the best of
14 the best.
15 And then there are the big producers that produce some
16 elite, some not elite, but we all know their names. If you're
17 in the horse business, you know who these people are.
18 Q. This jury would have heard some testimony, for example,
19 from Frank Merrill and his Windward Stud, and that's --
20 A. Yes.
21 Q. -- what we're -- that's what you're talking about when
22 you're talking about these separate production facilities?
23 A. Yeah. You would have heard about Butch Wise and his
24 syndicates and racehorses and things like that.
25 Q. Okay. Keep on going down here.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 912
1 A. Okay.
2 Q. What other indicators are -- that you have located or
3 determined exist that prove or establish in your mind a
4 separate market for these elite registered Quarter Horses?
5 A. Okay. There's specialized sellers, agents, and the like
6 who handle these top horses, or syndicate them, or what have
7 you.
8 Distinct buyers. Primarily, the buyers and the sellers
9 are the same, except in racehorses where syndicates will buy a
10 racehorse, race it, and then after it's raced, put it out to
11 stud. But there's distinct buyers and buying groups for
12 Quarter Horses. Primarily, your buyers are your breeders.
13 Syndicates, who are breeders, for example, will buy the
14 top stud horses, because they want access to that bloodline.
15 We talked about prices.
16 Q. But I want to stay on this distinct buyers and sellers
17 type thing. If you -- in your review of sales data, for
18 example, from the Heritage Winter Mixed Sale or --
19 A. Uh-huh.
20 Q. -- from any of these other sales where it listed the
21 horse and the price and the seller and the buyer, do you keep
22 seeing the same names show up over and over again?
23 A. Oh, absolutely. They're the -- like the biggest owners
24 historically of cutting horses are the Rapps and the Milners.
25 Q. I got you.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 913
1 A. They're your buyers and sellers.
2 Q. So you keep seeing these same names, or family names
3 even, maybe the next generation?
4 A. Sure. In racing, Vessels, Frank Vessels opened up Los
5 Alamitos in California, is basically the father of organized
6 pari-mutuel Quarter Horse racing.
7 Q. And he was -- how was he related to Scoop Vessels, who
8 we've heard about in this case?
9 A. I think it's his grandson.
10 Q. There you go. All right. So we have -- in your mind,
11 from what you've determined, have you found these factors --
12 these indicators in the data?
13 A. Yes, of that market, you know, research, you can't help
14 but come across all of these things with regularity.
15 Q. Now, what's this last one? What is this last bullet
16 point that: "Participants in the elite Quarter Horse market
17 are not sensitive to price changes"? What does that mean?
18 A. I couldn't put it better than Mr. Brown put it earlier.
19 Q. What do you mean?
20 A. You know, you asked -- Ms. Stone asked him if the horse
21 went up five percent in price, would that change your mind,
22 and he said, "Not as long as I could afford the horse."
23 The people who breed these elite animals, who are in the
24 top of this market, this business, and who are breeding
25 animals and competing them, are not going to accept lesser
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 914
1 substitutes, because they know they're not going to win with
2 them.
3 Q. Okay. So then, given this -- this bullet point here, can
4 you tell us, from your research and from your statistical
5 calculations, is it possible to tell at exactly what price the
6 elite horses are separated from the non-elite horses in
7 classifying these by quality?
8 A. Not the exact price. There's the flat area. And no one
9 would -- I don't think in the business would disagree, horses
10 to the left of there are elite. Then there's the going up
11 straight area, and I don't think anybody in the business would
12 disagree that those horses are not elite. Then there's the
13 curvy portion of the curve.
14 Q. Okay.
15 A. And even Mr. Brown spoke to this.
16 Q. All right. Now, then, let's look at Slide 24, please.
17 A. Of 92?
18 Q. Yeah, Slide 24 of 92. Now, here's what I want to ask.
19 And you've talked about this statistical confirmation. Tell
20 us what you did in the way of statistical confirmation, what
21 you did in the way of math, to confirm your opinions that
22 you've already told us regarding these various attributes of
23 just what constitutes an elite registered Quarter Horse?
24 A. Sure. Okay. My hypothesis is that certain factors, the
25 ones that I can measure at least are genetic, result in a
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 915
1 Quarter Horse yearling that sells for a lot of money. And
2 yearlings are kind of homogeneous.
3 So my hypothesis is that the price at which a Quarter
4 Horse yearling will sell —— and right now, we're looking at
5 racing yearlings —— is a function of whether his sire was
6 ranked in the top ten, whether his dam, his mother, was ranked
7 at all, whether his sire was ranked, so I'm measuring rank
8 twice, whether his maternal grandsire was in the top ten,
9 whether his grandsire on the dad -- father's side in the top
10 ten, male or female, was the dam in the top twenty-five of all
11 time, was the maternal grandsire ranked.
12 And then there's -- if you remember from Algebra, even
13 before, the line intercepts the Y axis, that's called a
14 constant. Y equals AX.
15 Q. Are you trying to tell us you did a mathematical formula
16 to define what an elite horse is?
17 A. Oh, it was worse than that. I used advanced statistics.
18 Q. That's what this -- you're showing us this on this slide?
19 A. Yes. What we use is -- regression analysis is a
20 statistical technique to estimate an equation from data, so
21 you have a bunch of numbers, prices are on the right, prices
22 function of all of this stuff on the left, all of these
23 variables I just talked about, and the statistical procedure
24 of regression analysis —— in this case, it's linear hedonic
25 regression —— will give you the equation that best describes
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 916
1 your data.
2 Q. Okay. So this one you said is to racing. Let's quickly
3 flip over to 27. Did you do the same thing for cutting?
4 A. I did.
5 Q. All right. Same thing. You built this formula. You
6 come up with these factors, and you plug them in somehow in a
7 calculation?
8 A. And I estimate the price at which the yearling would
9 sell, correct.
10 Q. And then if we look at Slide 24 --
11 A. Yes.
12 Q. -- is that a part of your regression, or is that this
13 other --
14 A. That is my regression. That's -- those are the -- that's
15 the output of my regression analysis.
16 Q. So we've got that for a yearling, cutting yearlings.
17 What is 26?
18 A. That's for -- well, 24 is racing yearlings.
19 Q. And 26?
20 A. 26 is cutting yearlings.
21 Q. Okay. So you did it on those disciplines. So what --
22 what's the net result, Dr. Pflaum. What did this fancy math
23 that you did, plugging in all of these numbers and cranking
24 them out, tell us as it pertains to the opinions you've
25 already given us?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 917
1 A. Well, it tells us that all of the factors that I
2 hypothesized would be important are important. Every one of
3 these, what we call, coefficients, right? Y equals A, the
4 intercept, plus BXB is the coefficient.
5 Every one of those B's is statistically significant,
6 which means -- in the case of my -- of the racing model, for
7 example, most of them -- the only -- let's see. The maternal
8 grandsire ranked, there's a 3.9 percent chance that actually
9 has no effect. For all the others, there's virtually no
10 chance that they have no effect. I mean, it goes out to four
11 decimal places.
12 Q. Did you arrive at any conclusions or form any opinions as
13 to what side of the pedigree is more important to the results
14 that you learned in this regression analysis?
15 A. As I thought it would be, it's the female side.
16 Q. Why did you think it would be?
17 A. Well, if you look at the -- earlier we looked at the
18 results of the sale, and we saw those High Brow Cats.
19 Remember that slide?
20 Q. Yeah. Let's go back to -- let's look at 7. Is that the
21 one you're talking about?
22 A. Yeah. Blow up the first --
23 THE WITNESS: Well, can y'all see? Can everybody
24 see that?
25 MR. STEIN: There you go. We'll just take it right
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 918
1 there.
2 A. Highest price horse, mare, female. Second, mare. Third,
3 mare. Fourth, mare. Fifth, mare. Sixth, mare. Seventh,
4 mare.
5 I think something like -- I haven't counted them
6 recently. I think it was like seven or eight out of the top
7 ten were mares and eleven out of the top fifteen. At the very
8 tippity top, mares sell for more than boys.
9 Q. (By Mr. Stein) And did you find that consistently
10 throughout all of the data that you analyzed?
11 A. For the top horses, yes.
12 Q. Okay. Now, can you explain economically why the mare
13 side is more important in this elite ranking?
14 A. Dr. Veneklasen yesterday, I think, he said he got eleven
15 billion sperm from High Brow Cat yesterday.
16 Q. Well, the day he testified, you mean? It was twenty-two
17 million from Metallic Cat.
18 A. Twenty-two million from Metallic Cat. Okay. Excuse me.
19 Twenty-two million.
20 That means that that one collection could create, using
21 ICSI, twenty-two million offspring.
22 Now, at -- let's make the math easy. Let's say it was
23 100,000 per year, twenty-two million, that's a couple thousand
24 years, isn't it? So one dose of semen from one horse could
25 make all the Quarter Horses for a couple thousand years. I
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 919
1 think I did one calculation, came out with 5,555. It's -- so
2 there's just no limit to the reproductive ability of the sire.
3 But, as we discussed, a mare can have, you know, maybe a
4 couple of babies a year. So if you want to breed good horses,
5 you need good mares. They're the con -- economists call it
6 constraint. They're the things that stop me from breeding
7 more, is that a mare can only have two, and boys and girls are
8 born in approximately fifty percent in the horse population.
9 So it's the mares that are -- that hold the supply down, not
10 the stallions.
11 Q. Have you found that concept in any peer-reviewed
12 published literature that has enabled you to do these kinds of
13 cases in the horse industry?
14 A. Yeah. Many years ago, my first case, I was looking for
15 the literature, and I found an article in a very good journal
16 called Economic Inquiry, which is published by the American
17 Economic Association, and it's by Coelho and McClure. And
18 they were studying the market for Thoroughbreds and made --
19 they did a graphical theoretical analysis to explain what the
20 constraints were on the production of high-quality
21 Thoroughbreds.
22 And I've used that model in all three antitrust cases.
23 Q. And has that -- has that model that you're just
24 describing, are you relying upon that model in this case?
25 A. Yes. And that model says the constraint is the mares.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 920
1 Q. And is that something that's ever been challenged by
2 anyone in any of these other cases you've been in?
3 A. No.
4 Q. Is it fairly well accepted within the arena that you're
5 dealing with on these antitrust cases within the horse
6 industry? Is that pretty well what is relied upon as the
7 model?
8 A. There hasn't been that many cases, but if you look at the
9 model, it's obvious. To an economist, it's just obvious; it
10 has to be. You look at the model. You look at the world
11 around you. Yeah, that's the way it works.
12 Q. Okay. Have you seen anything in this case in the way of
13 evidence that contradicts that model?
14 A. No.
15 Q. All right. And is that what you're basing your opinions
16 on as we go throughout this case?
17 A. My theoretical, yeah, that's the foundation for my
18 opinion.
19 Q. And after conducting all of this review of the market,
20 your analysis of the industry, after you've done all of these
21 charts and graphs and done the backup statistics, does all of
22 that confirm your opinions regarding what the relevant product
23 market is in this case?
24 A. Yes.
25 Q. And it is again?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 921
1 A. The market for elite registered Quarter Horses.
2 Q. All right. Anything else you want to explain to the jury
3 on that before we move into the geographic market.
4 A. Let me just do one more thing on product market in case
5 it's not clear.
6 Let's say that General Motors decided that it was going
7 to raise the price on Chevys, and -- okay. So they raise the
8 price. It's their right to do so. It's their -- their brand.
9 Well, consumers could turn to Fords, Toyotas, Hondas,
10 what have you, and buy them instead. Now, one of two things
11 would happen. Well, one, Chevrolet would probably lose some
12 sales if they're in the same product market with Ford, Toyota
13 and Honda, and I think most of us would think they are. The
14 other thing that is, that consumers aren't harmed, because,
15 okay, GM raised the price on the Chevy. Oh, I like that
16 Toyota anyway; I'll buy that instead.
17 So just to give you kind of the everyday definition of
18 what an economist means by a product market, it's other
19 products to which the consumer can turn.
20 Q. And so these concepts that you introduced to us early on
21 about the product market and the geographic market and the
22 harm all are interrelated?
23 A. They are.
24 Q. And we stairstep -- do we stairstep through this analysis
25 by then next looking at geographic market?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 922
1 A. Yes.
2 Q. All right. Then let me ask you this question: Do you
3 have an opinion as to whether a relevant geographic market
4 exists in this case pertaining to the product market you've
5 identified?
6 A. I do.
7 Q. And what is that opinion?
8 A. The relevant geographic market is the United States and
9 Canada.
10 Q. All right. What is the basis for your opinion that the
11 relevant geographic market is these two countries? Do you
12 have some slides that we could look at?
13 A. Yeah, I'll put the -- just put the first one out
14 verbally, and that is the AQHA is the registry in the U.S. and
15 Canada. So they control registration in those two countries.
16 They don't control it in Mexico or Brazil or anywhere else.
17 Q. What did you find in researching that part of this case
18 about where the sales of elite Quarter Horses take place?
19 A. From everything that I saw, it's the United States. It's
20 the sales here in the states where the elite horses change
21 hands.
22 Q. Now, let me make sure that I understand here. When we're
23 discussing what the geographic market is, must you look at
24 what the product is for that market?
25 A. Sure. Go back to our Chevy example. The Chevrolet
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 923
1 dealers here in Amarillo get together over coffee one day, and
2 say, yeah, we're going to raise our prices by five percent.
3 Well, there are Chevrolet dealerships in Borger and
4 Pampa. I looked this up on the map. And so those aren't too
5 far away. People -- some people from Amarillo would drive to
6 Borger or Pampa, and they'd buy their car there if they wanted
7 a Chevy.
8 So if you were looking at the relevant product market,
9 since buyers could reasonably turn to dealers in these other
10 two towns to buy Chevrolets, then Amarillo, Borger, and Pampa
11 would all be in the same geographic market. Dallas wouldn't
12 be. It's too far to go buy a car.
13 Q. Okay. So do we look at non-elite horses in addition to
14 the elite horses when we are defining what the geographic
15 market is?
16 A. No. At this point, we've got our product market. It's
17 the elite. So now we want to know where the geographic market
18 is in which those elite horses are bought and sold.
19 MR. STEIN: All right. Let's look at Slide 30,
20 please.
21 Q. (By Mr. Stein) What is this showing us?
22 A. Okay. So when we define a geographic market, we're
23 looking at two things or, among others, two things. One, what
24 percent of the supply —— in this case, elite Quarter Horses ——
25 come from outside the U.S. and Canada and are sold inside to
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 924
1 U.S. and Canadian buyers?
2 Q. Did you look at data and do any research to find out if
3 there are elite registered Quarter Horses from outside the
4 U.S. and Canada coming into the market?
5 A. Yes. Looking at the sales records from the major sales,
6 I couldn't identify any. Then I talked to people in the
7 industry.
8 Q. Okay.
9 A. And they told me, no, that horses do not come in from
10 outside.
11 I did some research on transactions, costs, I mean,
12 it's -- if you want to sell a horse from Mexico in the United
13 States, there's a bunch of paperwork to get done for it then
14 to be registered here.
15 And, finally, I looked at registrations per year. The
16 AQHA provided data recently on registrations. And I think I
17 wrote this down somewhere.
18 Q. When you're looking at registrations, while you're
19 looking at that, let me ask this question: Is registrations
20 that you're looking at for elite horses or for just all
21 horses?
22 A. This is all horses.
23 Q. I thought we were looking at only the elite market?
24 A. Well, we've got to start somewhere.
25 Q. Okay.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 925
1 A. Okay. Last year, only -- 2011 rather, only 110 non-U.S.
2 horses were registered by the AQHA. That is one-tenth of one
3 percent of all horses that were registered.
4 Q. Well, so we've got some horses out there coming in. So
5 does that mean that we have a market broader than the United
6 States and Canada?
7 A. Well, no, for many reasons.
8 Q. Okay. Why not?
9 A. One, I also -- we also looked at some of the, that we
10 could find, foreign horses that were registered with the AQHA.
11 And we then -- you know, we have these lists of elite sires,
12 elite dams, and elite grandsires. So we cross-referenced
13 these -- this heredity with these -- with these horses that
14 were registered outside the U.S., and only eight of them had
15 elite, semi-elite even, you know, ranked horses on both the
16 sire side and the dam side.
17 Q. Well, but doesn't that now tell us that we've got some of
18 these elite horses that are coming into the United States, and
19 so our market is broader?
20 A. They were not highly ranked. They were ranked. They
21 were not highly ranked.
22 Q. Is there a statistical number that we look at? Is there
23 some kind of a -- okay, look, if it's a half percent or a
24 tenth of a percent, we look?
25 A. The rule is outside in, ten percent.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 926
1 Q. Okay. You weren't anywhere close to that?
2 A. No. It's just -- no, not anywhere near that.
3 Q. All right. So you've looked at the outside in. Do we
4 have a chart that explains the inside out concept?
5 A. Yes.
6 MR. STEIN: All right. Could we look at Exhibit --
7 or it will be Slide 31 to Exhibit 92.
8 Q. (By Mr. Stein) What is this telling us?
9 A. This -- now, the next question we ask ourselves is: How
10 many horses that are sold in the U.S. in U.S. horse sales, go
11 outside the United States after they're bought?
12 Q. So is that just a function of who the foreign buyers are?
13 If we go to Heritage Place, and we see that there's names
14 of --
15 A. Well, home -- hometowns. Like you'll see Juarez, Mexico
16 City, things like that.
17 Q. Sure. If we're seeing that, I mean, are we -- we can
18 look at that data, but if we look at that and say, "Well, you
19 know there was a bunch of horses that were sold at Heritage
20 Place that were bought by buyers from south of the border,"
21 doesn't that mean that we've got an expanded geographic market
22 outside the United States and Canada?
23 A. One, it depends were these elite horses; two, what's the
24 percentage; three, did they actually move them outside the
25 United States.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 927
1 Q. All right. So did you look at those factors in making
2 your determination in arriving at your conclusion as to the
3 relevant geographic market still only being the United States
4 and Canada?
5 A. I did.
6 Q. And what did you find?
7 A. Only about five percent of horses sold were sold to
8 non-U.S. and Canadian buyers. That was the max of the sales I
9 looked at.
10 I then looked at a few -- we had heard -- and I forget
11 who the witness, the AQHA witness was, who was talking about a
12 high-dollar horse that was bought by a buyer from Mexico. It
13 turns out he moved him to California. So, one, it didn't make
14 the ten-percent cutoff; two, the elite horses we're able to
15 identify bought by foreign buyers, a lot of them stayed in
16 this country, especially the top ones.
17 Q. You mean the foreign buyers would buy them, but they
18 would stay here?
19 A. Sure.
20 Q. Did you determine or arrive at any conclusions that there
21 were some horses, some registered horses, that were leaving
22 the country, that were actually being exported?
23 A. No, no. I couldn't -- don't have the data to actually
24 look at the exports. I only know foreign buyers. Some of the
25 top horses I looked at didn't leave this country.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 928
1 Q. When you looked at the sales data on the yearlings from
2 over at Heritage Place, what did you find with respect to the
3 seven and eight hundred dollar ones as opposed to the six-
4 figure horses?
5 A. The lower-priced horses were more likely to be going to
6 foreign buyers.
7 Q. Okay. Now, has the evidence, in your opinion,
8 established in a conclusive manner, in your mind, where the
9 relevant geographic market is in this case?
10 A. Yes.
11 Q. And are you standing by your opinion that it is the
12 United States and Canada?
13 A. Oh, absolutely.
14 Q. All right. Now, anything else on geographic market
15 before we move into market power?
16 A. No.
17 Q. All right. Please define for the jury what market power
18 or monopoly power is.
19 A. Market power is the ability to control price or supply in
20 a geographic and product market.
21 Q. Okay. What do you mean the power to control price or
22 supply? What are you talking about there?
23 A. Well, it can raise or lower price. And, of course,
24 supply and price, law of supply and demand, it's simultaneous.
25 But someone who can -- let's say you have a monopoly on --
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 929
1 let's use widgets. We always use widgets. You have the
2 widget monopoly. And you decide, well, I want to raise the
3 price on widgets, so you can just reduce the number of widgets
4 you sell. Supply and demand works its magic, and the price
5 goes up.
6 Q. All right. Is that a simplified example?
7 A. That's very simplified. And, in fact, our hypothetic
8 widget manufacturer has a monopoly because he is the only
9 widget manufacturer.
10 Q. I got you. So given that explanation and that
11 definition, do you have an opinion on whether the American
12 Quarter Horse Association has market power in the market for
13 elite registered Quarter Horses as you've defined those
14 markets?
15 A. Yes.
16 Q. And what is that opinion?
17 A. They absolutely have market power. The AQHA is the only
18 registry for Quarter Horses in the U.S. and Canada. They have
19 no competition as a registry.
20 And so they decide what a Quarter Horse is, what gets
21 registered, what doesn't get registered. That's an absolute
22 monopoly power.
23 Q. You find anything that says that Quarter Horse
24 Association is buying and selling horses?
25 A. No, but they control supply by their registration.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 930
1 Q. Explain that, please. How is it that they control supply
2 by their registration process?
3 A. Well, like in this case, there's requests -- there have
4 been requests to register clones and their offspring. Were
5 that done, the supply of elite Quarter Horses would increase,
6 but the AQHA said, "No, you can't do that." So they've
7 restrained -- they've put -- it's an absolute bar and naked
8 restraint on output.
9 Q. So if we -- if we accept what you're telling us, that
10 there is this power to control the supply of these elite
11 horses, what effect does that have on the price of these elite
12 horses?
13 A. Well, supply and demand. If supply goes down, demand
14 stays the same, price goes up. So by limiting the supply,
15 they're keeping the price higher than it would be if the
16 supply were increased, because if you had more -- well, if you
17 had more mares, you would have more elite foals. More elite
18 foals, price of elite foals would go down.
19 Q. Is that implicit within the model that you have relied
20 upon by Coelho and McClure that has been accepted around the
21 country as a basis for antitrust analysis in cases such as
22 this?
23 A. Yes.
24 Q. Do you have an opinion then whether the American Quarter
25 Horse Association has willfully acquired or maintained
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 931
1 monopoly power in the relevant product and relevant geographic
2 market through its exclusionary conduct by denying the
3 Plaintiffs access to something that is essential for them to
4 compete in the relevant market?
5 A. Yes.
6 Q. Tell us what that opinion is.
7 A. The AQHA has acquired and maintained a monopoly and, by
8 its rules, has established an absolute barrier to entry in the
9 form of a naked restraint against people who would like to
10 introduce these new horses into AQHA competition, breeding,
11 what have you.
12 Q. Into the market?
13 A. Into the marketplace.
14 Q. All right. And it's this market that you've just defined
15 for us?
16 A. It's the elite market, yes.
17 Q. All right. So tell us then, after you have given us this
18 opinion, what is the basis for your opinion? What is it that
19 you're now relying upon to support this opinion that you've
20 given us?
21 A. Well, there have been repeated attempts to get this rule
22 changed, and the AQHA has decided not to change it. They
23 clearly understand that it would increase supply.
24 When embryo transplant was finally allowed, there was a
25 big fear that that would cause an increase in supply, and a
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 932
1 lot of the top breeders were against it, but one of the SBRC
2 members, Dr. Blodgett, in fact, gave an interview and he said,
3 "Well, this is going to increase the supply of these good
4 mares and breeding opportunities and maybe reduce the price a
5 little bit."
6 So I think, yes, they -- they know what they're doing.
7 Q. You were here when Mr. Brown testified?
8 A. Yes.
9 Q. You understand that he's got a clone of Doc's
10 Serendipity?
11 A. I do.
12 Q. He's been breeding her and selling foals for these guys
13 to go cut with. Why is that not an alternative to AQHA
14 registration?
15 A. All sorts of reasons. One, papers are what gives some
16 assurance to the buyer of a horse that, in fact, the horse is
17 what the seller says it is. Two, in many venues, you've got
18 to be -- it has to be an AQHA registered horse or they can't
19 compete.
20 Q. Give us an example.
21 A. Racing.
22 Q. Okay.
23 A. The racing commissions have Quarter Horse races,
24 Thoroughbred races and paint horse races, and you've got --
25 the horse has got to be registered either through the AQHA,
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 933
1 Quarter Horse, Jockey Club, Thoroughbred, American Paint Horse
2 Association if it's a paint.
3 Q. Okay. So is any ol' kind of pedigree confirmation a
4 substitute for AQHA registration papers?
5 A. No. There have been attempts, and they've all been,
6 unsuccessful. The AQHA is the registry.
7 Q. All right. So do you have an opinion then whether the
8 exclusionary conduct that you have mentioned in the failure to
9 register clones, do you have an opinion on where that --
10 whether that exclusionary conduct has affected intrastate --
11 interstate commerce here within the geographic market?
12 A. Sure. At Quarter Horse sales, buyers and sellers from
13 across the country meet. It's not just within a single state.
14 Q. My question is: Do you have an opinion?
15 A. Oh, yes.
16 Q. Okay. Now, tell us what the opinion is.
17 A. Buyers -- at these big sales, even the littler sales,
18 buyer and sellers from across the country meet at Heritage
19 Place, Ruidoso, Los Alamitos, whatever, and they do business,
20 so it's very much interstate commerce.
21 Q. All right. And you've just basically given us a little
22 summary or the basis why you've given us that opinion?
23 A. It's because it's nationwide, and there are sales in
24 Canada too, and Canadian horses come down to our sales more
25 than we go up to theirs. So it's across the whole U.S. and
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 934
1 Canada.
2 Q. This next question is going to be real similar: Do you
3 have an opinion whether the exclusionary conduct in the
4 failure to register these clones and their offspring affects
5 commerce within the State of Texas?
6 A. Texas is the hotbed of the Quarter Horse industry. It's
7 been -- Weatherford, Texas is home to cutting horses. It's
8 amazing.
9 Q. So you do have an opinion?
10 A. I do.
11 Q. And what is that opinion?
12 A. I'm sorry. My opinion is that Texas is the hotbed of the
13 Quarter Horse business. Weatherford for cutting. There are
14 500 races a year in the State of Texas for Quarter Horses.
15 This -- if it affects anywhere more than the country as a
16 whole, it's this state.
17 Q. Okay. Now, then, I'm going to ask you a series of
18 similar questions, because over here I asked you about the
19 market power within the market. Okay?
20 Now, I'm going to ask you a series of questions about
21 whether or not there was a contract, combination or
22 conspiracy. Are you with me?
23 A. I am.
24 Q. I've got a different -- a little different highway going
25 here.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 935
1 A. Yeah, I noticed you moved.
2 Q. I did. Do you have an opinion whether the American
3 Quarter Horse Association has engaged in a contract,
4 combination or conspiracy that has unreasonably restrained
5 trade by denying the Plaintiffs access to something that is
6 essential for them to compete in the relevant market?
7 A. Yes.
8 Q. And what is that opinion?
9 A. The denial of regis -- the members of the SBRC, Board of
10 Directors, membership have combined through their votes to bar
11 the Plaintiffs -- well, to restrict commerce in the relevant
12 product and geographic market.
13 Q. So you mean just by mere coming together at a convention
14 and agreeing to vote the way they did to deny a rule change,
15 you're telling this Court and this jury that, in your opinion,
16 that is a contract, combination or conspiracy?
17 A. I think by definition -- that will be a question, of
18 course, of law, but, as I understand it, as an economist, it
19 would be.
20 Q. All right. Is the agreement that you have just talked
21 about, is it something that totally excludes these Plaintiffs
22 from the market you have defined?
23 A. In my opinion, breeding especially, it's an absolute
24 barrier to entry in its naked restraint.
25 Q. All right. Do you have an opinion then whether the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 936
1 contract, combination or conspiracy, this vote, this agreement
2 is in restraint of trade -- I'm going to say that over again.
3 Did this agreement that constitutes the contract,
4 combination or conspiracy affect interstate commerce?
5 A. Yes. As we discussed earlier, it's all over the country,
6 because buyers and sellers from all over the country engage in
7 this --
8 Q. Whether we're talking about abuse of monopoly power over
9 here or whether we're talking about an agreement, contract or
10 conspiracy, combination or conspiracy, it's the same thing as
11 far as the effect on interstate commerce?
12 A. Right, right.
13 Q. Do you have an opinion then whether this contract,
14 combination or conspiracy in restraint of trade affected
15 commerce within the State of Texas?
16 A. Again, as I said, Texas is the hotbed.
17 Q. So you have an opinion?
18 A. I do. And the opinion is, yes.
19 Q. For the same reasons?
20 A. For the same reasons.
21 Q. It doesn't matter whether we're calling it an abuse of
22 monopoly power or whether we're calling it a conspiracy?
23 A. Correct, it doesn't matter.
24 Q. All right. Do you have an opinion on whether AQHA's ban
25 on the registration of clones and their offspring, which AQHA
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 937
1 has implemented as we've just discussed through the contract,
2 combination and conspiracy, has it harmed competition in the
3 market for elite registered Quarter Horses in the United
4 States and Canada?
5 A. Yes.
6 Q. And what is that opinion?
7 A. That by restraining supply of mares, it restrains supply
8 of offspring of these elite horses and raises their prices
9 beyond what the prices would be in a competitive market.
10 Q. Okay. I went that one kind of backwards, because I asked
11 that harm-to-competition question over here on the conspiracy
12 count.
13 Now I'm going to ask it over here. Has the AQHA's ban on
14 the registration of clones and their offspring, which AQHA as
15 implemented through its monopoly power or its abuse of market
16 power that you've just described, has that harmed competition
17 in the market for elite registered Quarter Horses in the
18 United States and Canada?
19 A. Yes.
20 Q. And the basis of these opinions that you've given, what
21 are they?
22 A. They're the same, because it's the restraint on output,
23 and when supply is reduced, price goes up, and people pay
24 more. And, in a competitive market, there are no restraints
25 on supply, and the competition between buyers sets supply at
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 938
1 market-clearing price, and consumers pay the lowest prices and
2 get the best quality and choice.
3 Q. All right. Now, we've already talked about that, within
4 this harm, that really the restraint, the limiting factor, is
5 the mare?
6 A. Correct.
7 Q. Now I want to ask you a few questions pertaining to that,
8 but answer me this: How would cloning result in more of these
9 elite mares? I mean, what is it about this technology, this
10 advanced reproductive technique, that is going to change your
11 economic model?
12 A. Well, let's say -- I think the numbers that y'all have
13 heard is, it costs about $200,000 to clone a horse and raise
14 it for a couple of years. It's the number I've kind of come
15 to.
16 Well, compared to what it costs to buy a proven mare
17 who's already aged and has fewer years left in her, of
18 reproductive value, that's not very much. Compared to the
19 price of buying, as you saw here, $280,000, for that top
20 filly, and there are a bunch of fillies there that sold for
21 over $200,000, and those were top yearlings. Well, that
22 horse -- those mares aren't even proven yet, but they're
23 selling for a couple hundred thousand dollars.
24 You can take a proven mare. The genetics are there.
25 She's the genetic twin of an existing elite mare who's proven
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 939
1 that she has good babies. You can clone her, and you can
2 start making babies just like she makes them.
3 Q. So let's use a real-life example, because we've been
4 talking about Autumn Boon in this case some, but she's
5 approaching the twenty-year mark.
6 A. Yeah. If you clone Boonie as opposed to having a horse
7 that you have to send to Colorado State and have needles stuck
8 in it and all sorts of other things to try and get -- I don't
9 get what you call the eggs, oocytes? Get these oocytes and do
10 all of this advanced stuff.
11 You could just clone her for a couple hundred thousand
12 dollars, and if you crossed Boonie with Metallic Cat, you
13 would get some seriously valuable babies.
14 Q. So what you're telling us is -- or maybe I should ask
15 this: Is what you're telling us, that it makes more sense to
16 clone Boonie at a couple hundred thousand to go to the --
17 rather than go to the futurity sale and buy Absolutely
18 Stunning for 575,000?
19 A. Oh, absolutely. I mean, there's -- there's no
20 comparison. Boonie is a proven mare who's had a lot of great
21 babies, and she -- as I said, she's proven.
22 Absolutely Stunning, I'm sure, is a terrific -- is a
23 terrific horse, but she's still not proven. She's a yearling.
24 She hasn't had any babies yet.
25 So you're taking a risk. Even with her great genetics,
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 940
1 she may be that odd one out that doesn't produce, or at least
2 doesn't produce to the level to justify those kind of dollars.
3 Q. All right. Let's graphically show the jury at this point
4 what I understand you have just said when it comes to this
5 increasing the supply of these elite mares.
6 You do have -- you have got some graphics that we can
7 look at?
8 A. I do. I have some supply-and-demand analysis.
9 Q. And do those -- do those actually find their basis in
10 this Coelho and --
11 A. McClure.
12 Q. Yeah. I keep forgetting the name of that.
13 A. Coelho and McClure.
14 Q. Coelho and McClure model that you've relied upon so many
15 times?
16 A. Yes. I took their model of the Thoroughbred market and
17 changed it so it conforms to the Quarter Horse market.
18 Q. Are you going to be able to use your pointer so that you
19 can show us on these graphs what you're talking about?
20 A. I'd rather have a blackboard, but, yes.
21 Q. Would it work best if you used the easel?
22 A. Do you have a picture up there?
23 Q. No.
24 A. No, then we'll use that.
25 Q. Okay.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 941
1 A. I don't draw that well.
2 Q. Okay.
3 MR. STEIN: Then let's put Slide 36 up, please.
4 A. Okay.
5 Q. (By Mr. Stein) Tell us what this is.
6 A. I don't know how many of you took economics, but here we
7 go. If you look at our chart, here's (indicating) price on
8 the vertical axis, and here's (indicating) quantity, numbers
9 sold, on the horizontal access -- axis. Here's (indicating)
10 the demand curve.
11 The higher the price, the fewer the numbers sold. Price
12 goes down, more get sold.
13 So that's -- if you're a buyer, you want to get those low
14 prices. If you're a seller, on the other hand, you want to
15 get high prices. So the supply curve is lower at the lower
16 prices, the people who are selling are willing to sell fewer,
17 and at the higher prices, they're willing to sell --
18 Q. You've got three supply curves up there. There's three
19 supply lines up there.
20 A. I do.
21 Q. Okay. Tell us what's going on there.
22 A. But here's -- this (indicating) is the supply curve.
23 What we've got here, supply. To make a baby takes a
24 mommy and a daddy. So, here, down here, (indicating) this
25 horizontal line, that's the supply of sires. We talked about
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 942
1 it, a sire can sire as many babies in a year as a million, so
2 it's horizontal, because, no matter what the quantity, they
3 can put it out at that price.
4 However, if you're trying to get an elite horse, with the
5 mare, it's entirely different. You have this many elite
6 mares. Basically from the intercept to -- I think that says
7 alpha. So this is how many elite mares you have.
8 Q. This is representative by a -- this theoretical model
9 from this --
10 A. Coelho and McClure.
11 Q. Okay. All right.
12 A. Now, to get an elite baby after that, the odds go down.
13 Q. Why?
14 A. Because you're breeding to a lower-quality mare, and so
15 just like the loaded dice, the dice get progressively --
16 aren't loaded anymore.
17 Q. Well, I thought you said that somebody that was after an
18 elite mare is not going to go look for a non-elite mare?
19 A. But if they -- well, they're not. They're going to only
20 buy -- well, they may -- but you run out of mares.
21 Q. Oh, okay. Where the line goes at the angle is where we
22 run out of the elite mares?
23 A. Right. This (indicating) is where we run out of elite
24 mares. And, now, to get top babies, you got to make more --
25 you got to make more babies, because the odds of getting a
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 943
1 good baby have gone down now. You're not using those elite
2 mares anymore.
3 Q. So it takes more mares bred to the elite stallions --
4 A. To make more elite babies.
5 Q. I got you.
6 A. Okay.
7 Q. So that affects this supply curve?
8 A. So you add. This (indicating) plus this (indicating) is
9 equal to this (indicating), and this is the market supply
10 curve.
11 So the way things are now, where you have artificial
12 insemination and frozen sperm and all of that, you're getting
13 this intersection right here (indicating) Q0 at P0. So the
14 price is P0, that price right there (indicating), and the
15 quantity is that right there (indicating).
16 So this is the way the market is right now where, if you
17 want to get more elite babies, you have to breed a lot more
18 mares.
19 Q. Okay. So where do we go from here to see how the use of
20 this cloning technology, the use of somatic cell nuclear
21 transfer alters this particular model that you've demonstrated
22 on the graph?
23 A. Okay. You go to the next one. I think it's Figure 7, if
24 I'm not mistaken.
25 Q. 37. Okay.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 944
1 A. Okay. This one isn't as pretty. Let me make sure it's
2 the right one. Yes. Okay.
3 So now we still have the supply of stallions, but now we
4 have clones. So we've increased the supply of elite mares,
5 and it now becomes horizontal also.
6 Q. Why is that?
7 A. Because there's no shortage anymore.
8 Q. Okay. So we don't have that little crook in the supply
9 curve?
10 A. The kink is gone.
11 Q. The kink is gone?
12 A. We're not kinky.
13 Q. All right. So that's why this supply curve is different
14 than the other one?
15 A. Correct.
16 Q. All right. So --
17 A. Now, you add this supply curve (indicating) and this
18 supply curve (indicating), and you get the market supply
19 curve, which is now horizontal. And if you look at your
20 intersection of supply and demand, it's right there
21 (indicating). And so now your quantity, the number of elite
22 offspring you've produced, has gone up from Q0 to Q*, and the
23 price has gone down from P0 to P*.
24 Q. Are these -- where you've got the little dotted dashes
25 where it says "SM," supply mares, and the little dotted dashes
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 945
1 for -- is that -- if you were to overlay the prior chart on
2 that one --
3 A. Correct.
4 Q. -- that's where those two kink supply curves would
5 actually intersect?
6 A. Correct.
7 Q. So you're trying to show the both of them on this graph?
8 A. Yes.
9 Q. All right. So what is this telling us?
10 A. Well, this tells us price has gone down, number of horses
11 produced has gone up, and it shows us -- I could get into
12 deadweight loss, but it shows us society's benefited by the
13 amount of that colored-in area.
14 Q. This graphically then demonstrates what you have just
15 testified to as to the harm to the marketplace, the harm to
16 competition in the marketplace?
17 A. Right, because before when you had the kink, you were
18 losing that area, and now you've gained it.
19 Q. All right.
20 A. And consumers have gained that.
21 Q. Okay.
22 MR. STEIN: We can take that down now.
23 Q. (By Mr. Stein) Now, you understand that you have
24 received some criticism in this case for the opinions that you
25 are expressing?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 946
1 A. Yes.
2 Q. Dr. Ugone claims that there are a large number of mares,
3 elite or otherwise, but he claims there are a large number of
4 elite mares that are not being utilized to their potential,
5 that they're not being fully bred, and so that we really don't
6 have this kink in the supply curve, and if there were such a
7 demand for their offspring, these mares would be bred to their
8 full potential, and we wouldn't have to worry about cloning.
9 What is your response to that?
10 A. Well, first of all, it doesn't make any economic sense.
11 Q. Why?
12 A. What he's saying is that you have these breeding
13 opportunities, selling opportunities for elite foals once a
14 year, and if you don't do it in a year, it's lost forever.
15 And when you breed these elite mares to elite sires, you're
16 almost, almost guaranteed you're going to make money. Now,
17 there's no guarantees in horse breeding, but the probability
18 that you're going to make a profit is very high.
19 So what he's saying is that the owners of these elite
20 mares are going: "Eh, I just don't feel like it; I'm going to
21 leave money on the table." That's -- economics teaches that
22 that doesn't happen. Even if it really happens maybe
23 sometimes in real life, economics teaches it doesn't happen.
24 Kind of like if you're a fisherman, fishing for crab in
25 Alaska, you have a season. You're going to get in your boat.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 947
1 You're going to get out there in that season, and you've got
2 to catch crab. Because once that season's over, you can't go
3 crabbing anymore. It's not like, "Well, I didn't get all of
4 my crab last year; I'm going to take some more next year."
5 You can't do that.
6 Same thing with breeding these mares. If you don't breed
7 them in a season, then you've lost the opportunity to breed
8 them, and you have left money on the table. And no -- there's
9 no way an economist could make an argument, using economic
10 theory, for that happening.
11 In fact, as a businessman, I can't make a business
12 argument for that happening. I mean, it -- just it befuddles
13 me.
14 Q. Practically speaking --
15 A. Practically speaking.
16 Q. -- have you followed up on that criticism and
17 investigated whether or not the class of elite mares or at
18 least -- I'm talking about the old -- Autumn Boon, the Autumn
19 Boons of the market, have you followed up on whether or not
20 there are any of these elite mares that all -- I mean, we can
21 almost call them the blue hens.
22 A. They are blue hens.
23 Q. Are they being underbred and underutilized?
24 A. No. Dr. Ugone provided a list, and it was a list of
25 mares that I had classified as elite blue hen mares. And so
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 948
1 he went into the breeding records, or got them from the AQHA,
2 and said: "Well, you could breed each of these three times a
3 year. So how many of these mares are not producing three
4 babies a year?" And he just counted them up.
5 We had a -- I asked Dr. Veneklasen to have his assistant
6 do a survey of all the owners of those mares, and we have the
7 results in a chart that we can put up on a slide.
8 THE COURT: Is your examination of this witness
9 going to go a little bit?
10 MR. STEIN: Yeah, we've got about thirty, forty,
11 thirty-five more minutes.
12 THE COURT: We'll be in recess at this time for
13 fifteen minutes.
14 COURT SECURITY OFFICER: All rise.
15 (There was a recess taken; after which, the following
16 took place in open court with the jury and all parties
17 present.)
18 Q. (By Mr. Stein) Okay. Dr. Pflaum, I do have to clear up
19 one thing. Borjure (phonetic) is where?
20 A. Borger.
21 Q. Borger?
22 A. Borger.
23 Q. Okay. I didn't understand that that's what you were
24 talking about. We've got that cleared up, Borger and Pampa.
25 All right. We left off with your attempt at explaining
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 949
1 this excess capacity of these elite mares, and you wanted to
2 look at a particular visual.
3 Have you turned to Plaintiffs' 127 that's in the
4 Plaintiffs' notebook. Are you there?
5 A. I'm there.
6 Q. Is this a table that came out of one of your expert
7 reports?
8 A. Second one, yes.
9 Q. Is this something that we could use to help explain your
10 testimony at this time?
11 A. Yes, it would be.
12 Q. And this is your work product?
13 A. The survey was done at my request by Dr. Veneklasen's
14 assistant.
15 Q. To specifically explain and rebut these claims that we've
16 got a whole bunch of elite mares laying around waiting to have
17 babies?
18 A. Correct.
19 Q. All right.
20 MR. STEIN: Your Honor, at this time, we would move
21 to admit Plaintiffs' Exhibit 127?
22 MR. LOFTIN: No objection, Your Honor.
23 THE COURT: Admitted.
24 MR. STEIN: Thank you. Can we have it up on the
25 screen, please. Could we have it rotated.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 950
1 A. First let me make a correction. Number one, A Cat Above
2 was born in 2001. We copied this from a handwritten document
3 and apparently mistranscribed.
4 Q. (By Mr. Stein) Oh, I got you. So we'll just put that on
5 the record. The 2007 that appears in that exhibit actually is
6 2001?
7 A. Correct.
8 Q. All right. Now, what is it that you're attempting to
9 explain here in this Exhibit 127 as it pertains to the
10 criticisms that Dr. Ugone has made to your excess capacity, or
11 lack thereof, in your opinions?
12 A. Well, he said that the top mares that I had identified
13 in -- forty-two of them at least, he looked at, and that's --
14 I think about the number I identified. I might have
15 identified forty-five.
16 He said that these mares could have had three each, three
17 babies each. And to the extent that one didn't have three
18 babies, that she was being underutilized, and so if they just
19 made more babies out of her, which, for some reason, the
20 owners decided not to, then we wouldn't have any -- there
21 was -- therefore, there wasn't a shortage of high-quality
22 mares.
23 Q. All right. Now, you dispute that?
24 A. Oh, yes.
25 Q. All right. Tell us what you did to follow up on that
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 951
1 claim that we've got underutilized mares such as Autumn Boon
2 out there that just aren't having enough babies.
3 A. Right. As I said, it didn't make sense, and I explained
4 that.
5 Well, what we did next is, I called Dr. Veneklasen's
6 office, and we discussed this. First, we discussed the claim
7 and agreed that it just didn't make any sense, in his
8 experience as a reproductive specialist; didn't make any sense
9 to me as a economist.
10 So why don't -- I said, "Well, why don't we just have
11 somebody call these people, the owners of each of these
12 horses, or whoever's breeding them and see. Are you just not
13 fully breeding that horse?"
14 And these are the results we got of that survey, and, as
15 you can see --
16 Q. Did you find out that there was a bunch of mares just
17 sitting around waiting to be bred?
18 A. We found out there were some dead ones.
19 Q. Oh, okay. I guess it would be kind of hard to raise
20 offspring out of dead mares.
21 A. Yeah, I would think. So we found that, no. I think we
22 only couldn't contact, one, two. Yeah, we only couldn't
23 contact two. All of the others, either —— Dr. Ugone said
24 where I have zero in this chart —— were being fully bred or,
25 like Bet Yer Boons, the owner there, that's No. 5, he said
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 952
1 that they were having fertility problems and they were ICSI
2 breeding her, they were trying, but ICSI doesn't always work.
3 Cita Dun It, she's not fertile.
4 Q. Can't have a baby at all?
5 A. Right.
6 Q. So she's not sitting around waiting to have a baby?
7 A. They were trying, but, then again, she's probably not
8 elite. I looked up these horses too to see if they all were
9 elite. These were -- some that weren't, in my opinion.
10 Colonel Mistress was dead. Curly Gray Hair was not
11 fertile. Flo N Blu Boon, they were trying for two to three a
12 year, but she's probably not elite. Great Red Berry is
13 probably not elite. Hicks Little Diamond, we couldn't get in
14 touch with. Highbrow Supercat, a very well known horse,
15 they're trying to maximize her breedings, so they weren't
16 under-breeding her.
17 Couldn't get in touch with Little Lena Merada's owner.
18 Look at Miss Puro Quixote. She was born, looks like, 1996.
19 That's a very old horse. She's beyond breeding age.
20 Q. But they're still trying to breed her?
21 A. No. 16, no, just she's very -- you know, the comment was,
22 this is a very old horse, so if they're trying to breed her,
23 they're not successful.
24 The next two, Miss Stylish Pepto, Miz Brown Velvet,
25 trying to max. Money Talks Smart, trying to max. And she's
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 953
1 definitely no longer considered elite, because she sold for
2 $29,000 in 2010, and you don't sell an elite mare for 29,000.
3 Peptos Stylish Sue, they were trying to max. Pitchforks
4 Lena, they said they fully bred her. Whatever the owner
5 thought fully breeding was, he fully bred her. Play Like Clay
6 and Play Peek A Boon, they're both trying to max. Playware
7 was dead.
8 And here -- a couple here unknown. Quiet Impulse,
9 couldn't even find that horse. We don't know rather. Remedy
10 For Sweets, Roosters Cute Wilson, fertility problems, they
11 were trying to maximize her. Shesa Smarty Lena, fairly old
12 horse, '89, so she was pretty old, not fertile. Some Kinda
13 Memories, not fertile, they were trying to breed her. Sugar
14 Pop Gun, trying to maximum her. Tivios Little Queen, 1990
15 horse, she's twenty-odd years old. They were -- don't
16 think -- they couldn't get any more out of her apparently.
17 Q. After doing this diligent study and survey and following
18 up on this, on these mares that are claimed to just be sitting
19 around waiting to produce more elite horses, do you believe
20 that these elite mares, that there are any elite mares out
21 there that are being underutilized?
22 A. No. It doesn't make sense in theory, and the numbers are
23 not out there to support it.
24 Q. All right. Now, do you have an opinion on whether the
25 contract, combination and conspiracy that we've discussed in
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 954
1 this case was a material cause of any injury to the
2 Plaintiffs?
3 A. Yes.
4 Q. And what is that opinion?
5 A. It was -- it was the cause of injury to the Plaintiffs,
6 because, if they had been able to breed their animals, they
7 would have made some money.
8 Q. All right. Now, again, I'm standing to the right side of
9 the podium, but that's the contract, combination and
10 conspiracy.
11 Let's talk about the actual exercise of market power, the
12 actual exclusionary conduct.
13 Now, do you have an opinion on whether the American
14 Quarter Horse Association exclusionary conduct in enforcing
15 Rule 227(a) was a material cause of any injury to the
16 Plaintiffs?
17 A. Yes.
18 Q. And what is that opinion?
19 A. It was the cause of injury to the Plaintiff, and it
20 caused them to lose profits.
21 Q. Let me ask you this: Were the injuries that you have
22 said the Plaintiffs suffered, were those injuries caused by a
23 reduction in competition, acts that would lead to a reduction
24 in competition, or acts that would otherwise harm consumers
25 and competitors in the market?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 955
1 A. As I said before, it's naked restraint, barrier to entry,
2 and those are the sorts of things that injure competition and
3 cause harm to consumers.
4 Q. All right. So, in talking about the basis for these
5 opinions, have you had occasion to estimate and calculate what
6 you believe the Plaintiffs' damages are in this case?
7 A. I have.
8 Q. Can you tell us generally what they are, and then we'll
9 put up some charts and show the jury what your conclusions
10 are.
11 A. Sure. They -- the Plaintiffs own a clone of Lynx Melody,
12 and she -- conservatively, she could have two -- carry two --
13 or have two babies a year. And so, 2010 through 2013, she
14 could have had eight babies. They would have sold for about
15 100,000 apiece, so that's $800,000. I should say they would
16 have netted after stud fee, vet bills, and all that about
17 100,000 apiece, so that's 800,000 in damages.
18 Q. Where are you getting these numbers at?
19 A. Well, I think we have some slides like for Lynx Melody
20 that shows what -- this is Lynx Melody Too, the clone.
21 MR. STEIN: Slide 41. Let's pull up Slide 41,
22 Exhibit 92, Slide 41.
23 Q. (By Mr. Stein) Is this the one you're looking at?
24 A. Yes, I've got a copy too.
25 So if you look at -- if you look at her babies and what
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 956
1 they sold at, the average is $128,000.
2 Q. Oh, you're looking at actually the Lynx Melody production
3 for looking at what the damages are for Lynxie Too?
4 A. Correct.
5 Q. Okay. You've got a direct comparison then of what Lynx
6 Melody's production is?
7 A. Assuming that the foals of the clones are accepted, yes.
8 Q. Okay. Well, we're going to talk about that in a minute,
9 but that's where you got these numbers for estimating damages
10 for Lynx Melody?
11 A. Yes. In each case, I looked to the original and what its
12 offspring sold for or what the semen doses sold for, and then
13 I did a lot of research in other industries where cloning is
14 accepted to see if there were price differentials, and my
15 research showed there were none. And so I felt comfortable
16 using the same price as the originals got.
17 Q. Right. But assuming that the offspring of the clones are
18 going to be accepted within the industry?
19 A. Correct.
20 Q. All right. Now, we're going to talk about that in a
21 minute, but I just wanted to know where you were getting the
22 numbers.
23 Have you done a similar comparison or analysis as to
24 Playboys Ruby?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 957
1 MR. STEIN: Could we put up Slide 42, please.
2 Q. (By Mr. Stein) What have you arrived at, or what have
3 you determined in calculating damages as to Ruby Too?
4 A. As you can see, in the big print that we can read,
5 Playboys Ruby foals sold for an average of $123,000. So the
6 loss per breeding is 95,000 per foal. So 190,000 for two
7 years, or 285,000 for three years.
8 Q. All right. So, again, as with Lynx Melody and Lynxie,
9 you're looking at Playboys Ruby data to estimate what the loss
10 is for Ruby Too?
11 A. Correct.
12 Q. All right. Now, then, have you done some type of a
13 similar calculation for the fact that Mr. Abraham and Dr.
14 Veneklasen on Reminic?
15 A. Yes. There should be a slide with Reminic's sales.
16 Reminic --
17 MR. STEIN: All right. Let's pull up Slide 43.
18 A. Reminic is the clone -- Nic is the clone of Reminic.
19 Reminic is actually a cutting horse who turned out to be a
20 great sire of reining horses. Reminic is still alive, but
21 infertile.
22 Reminic's current stud fee, ICSI only, is $6,800. ICSI
23 costs about $9,000. So the total cost of getting a Reminic
24 baby is about 15,500. Also, Reminic always filled his book
25 when he was fertile. When a horse goes to ICSI, the book goes
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 958
1 down because some people don't want to subject their mares to
2 ICSI. It's -- it's invasive at best, and it's expensive. So
3 a lot of people don't want to do that to their horses, period,
4 so they won't accept ICSI.
5 So assuming a 5,000 stud fee, 100 breedings a year for
6 2011 and 2012, that's 500,000 a year, two years is a million.
7 2013 has now been missed, so it appears damages have increased
8 to 1.5 million. Plus, there's a mistake on that.
9 Q. Okay.
10 A. I thought we fixed these.
11 Q. All we did -- we'll get to the other exhibit, but it's
12 got the calculations on it.
13 A. Okay. But the mistake is, it should be assuming a
14 $15,000 stud fee.
15 Q. Why is that? Why would you want to assume that if it's
16 $6,800?
17 A. Because it's 6800, plus the cost of the ICSI, which is
18 eight to nine thousand, so the actual cost -- if you were
19 just -- had a regular stud, and you were shipping cooled
20 semen, for example, or frozen semen, would be the ICSI fee
21 plus the stud fee, which in this case is fifteen thousand
22 eight. So I assumed fifteen to be conservative.
23 Q. What was Reminic's stud fee before he went infertile?
24 A. In that neighborhood, but I don't remember exactly.
25 Q. Okay. Now, if -- if -- you're assuming that, again, that
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 959
1 Nic, the clone, is going to be accepted within the industry
2 for this to work, right?
3 A. Yes.
4 Q. All right. And we're going to get to that then. So have
5 you done a similar comparison for Back To Feature who is the
6 clone of Feature Mr. Jess?
7 A. Yeah. Feature Mr. Jess, obviously, one of the top
8 running --
9 MR. STEIN: 44, please.
10 A. -- sires of all times. He's a great horse.
11 He died four years ago at age eleven. His stud fee was
12 $15,000. They have some frozen semen left, so they're selling
13 it by ICSI only for 6500. So if you add the cost of ICSI,
14 they're charging the same amount now that they charged for
15 cooled semen way back when, about 15,000.
16 A hundred breedings a year at 15,000, total lost revenues
17 1.5 million a year, and we've lost now two breeding seasons,
18 so that's $3,000,000 in lost breedings. And the Plaintiffs
19 own ten percent of Back To The Feature, so they've lost
20 $300,000.
21 Q. (By Mr. Stein) Okay. And we're going to get to these
22 exhibits in which you apportion these between who owns what,
23 but you understand that Playboys Ruby is owned by Mr. Abraham
24 and his company, Abraham Equine?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 960
1 Q. And you understand that Lynxie and these two stud horses
2 are owned by the joint venture?
3 A. Yes.
4 Q. And you've taken that into account when we show these
5 exhibits that actually portion out and summarize these
6 damages?
7 A. Yeah. We took the totals, and we apportioned them.
8 Q. All right.
9 MR. STEIN: And we can take that off right now.
10 Q. (By Mr. Stein) Here's the deal, why is it -- do you --
11 why is it that you think or believe that the market is going
12 to accept Nic as a replacement for or a stand-in for Reminic?
13 Why would you think that people would be breeding to Back
14 To Feature just because they bred to Feature Mr. Jess? Why do
15 you think that people would be as willing to pay for an
16 offspring of Lynxie Too as they were for Lynx Melody? And why
17 would you -- why would you think that the market would accept
18 offspring of Playboys Ruby in the same -- in the same way that
19 they accepted offspring of the original?
20 A. Because where cloning is permitted -- well, where cloned
21 animals can get papers --
22 Q. Yes.
23 A. -- they can get registered, there's no difference between
24 the prices paid for the offspring of clones and the offspring
25 of the originals.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 961
1 Q. So did you actually research that out?
2 A. Painfully.
3 Q. Tell us what you did and tell us what you learned,
4 please.
5 A. Okay. If I can refer to my notes, because I'm bad with
6 names.
7 Q. That's fine.
8 A. Let's start with cattle, food animals. Cattle have been
9 cloned for over ten years. In fact, it's pretty common in the
10 cattle industry, top animals are cloned, and, you know,
11 they're the backbone of the breeding stock.
12 So I talked to Mr. Eddie Sims. And, let's see, Eddie is
13 the chief bottle washer, the top guy at National Cattle
14 Services. He has over thirty years' experience as a cattleman
15 raising cattle and auctioning cattle.
16 Q. Have you got any slides that are going to help us with
17 this?
18 A. I don't know. I don't remember.
19 MR. STEIN: Throw up 39, and then we'll look at 40.
20 And see if this may not speed this along a little bit.
21 We're in Exhibit 92, Your Honor, Slides 39 and 40.
22 Q. (By Mr. Stein) Look at 40 and see if that helps. Now,
23 go back to 39. I'm going to leave those up there. They're in
24 evidence.
25 You talk. Tell us what -- tell us what you did in the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 962
1 way of this research.
2 A. Okay. So I talked to Mr. Sims about breeding stock in
3 the cattle business. And I already knew that Angus and
4 Hereford allowed it, and I didn't know about the price though.
5 Mr. Sims said that cattle breeders don't see cloning as a
6 problem. It's just another reproductive technology they use
7 every day, and that clones and originals do not differ in
8 price.
9 One that -- then he gave me a very famous -- I believe
10 this is an Angus; it might be a Hereford.
11 Q. No, it's an Angus.
12 A. An Angus. Primrose 2424.
13 Q. Yes.
14 A. That's my thought since you knew it so well.
15 The clones of Primrose 2424 have been sold for fifty to
16 one hundred thousand dollars; that's clones. Now, remember,
17 that it only costs $20,000 to clone a bovine. They're not as
18 expensive, for reasons I don't understand, as horses. So --
19 Q. You found within the beef cattle breeds that they were
20 readily accepted?
21 A. Readily accepted. Another clone, a Hereford, 56N, he
22 told me recently he sold for twenty-one. That's not a great
23 deal.
24 But Mr. Sims said cattlemen just don't differentiate,
25 clone, original, same price.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 963
1 Q. What did you find in research of other markets besides
2 just the beef cattle breeds?
3 A. Well, I talked to Diane Broek. She's general manager of
4 Bovance, which is a company that's specializes in cloning of
5 bovines. And she told me the same thing. She said: "All but
6 two of the registries allow registration." The two are some
7 sort of furry Scottish cow, which people keep as a pet, so
8 that doesn't matter.
9 And the other one, which is kind of funny, is the
10 American Bucking Bull Association, which just a bunch of guys
11 got together and started, and they took the rule book from the
12 Jockey Club and said, "We're going to have the same rules, and
13 we're not going to accept clones." The only thing is, it's
14 the Professional Bull Riders Association that makes the rules
15 for bull riding in rodeo, not the American Bucking Bull
16 Association.
17 Q. So are you finding that there are bucking bulls that are
18 getting cloned for the PRCA cowboys?
19 A. They are getting cloned. In fact, I appreciate the name
20 of this bull. Where is it? Amarillo Slim. Amarillo Slim was
21 cloned. I think there are three or four Amarillo Slim clones.
22 They all qualified for the National Bucking Bull Finals.
23 And I talked to their owner, and he said: "There's no
24 problem, if the fans want them; the fans know about these
25 legendary bulls."
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 964
1 I talked to a gentleman in Canada. What's his name?
2 John, no. Here it is. Shane Franklin in Alberta, and Shane
3 has some very famous bucking horses. One of them is Airwolf.
4 If you're a rodeo fan, you've probably heard of Airwolf. And
5 he's cloned them.
6 And there's Amarillo Slim, Yellow Jacket and Houdini have
7 been cloned, and all four of -- I even had this memorized.
8 All four of Amarillo Slim's clones qualified.
9 Airwolf and Go Wild and one other bucking horse have been
10 cloned. They're being used for breeding. And when I talked
11 to Mr. Franklin, about these, he said: "There's a lot of
12 excitement in -- by rodeo fans that these babies of these
13 great legendary bucking horses were going to come back and be
14 in the ring again in a couple of years." It takes five years
15 for a bucking horse to mature and hit the ring, because you
16 can't put --
17 Q. All right. You've talked about the cattle, beef cattle,
18 you've talked about the bucking bulls, and you talked --
19 A. John Erbsen I spoke to. He's a Holstein man. He told me
20 the same thing. He said that he's cloned Holsteins, and his
21 clones don't sell for any different price than his originals.
22 And one of his clones was the World Intermediate Championship
23 at the World Dairy Expo, so --
24 Q. Well, that's wonderful, but what about the horses? Are
25 there any breeds of horses out there that are allowing the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 965
1 clones and offspring of clones to be registered, and what
2 research have you done in that arena?
3 A. Okay. Well, one breed or one group of horses is the
4 Olympic horses. The FEI, the Federation Equestre —— I can't
5 speak French —— Internationale -- International there. They
6 permit clones in the Olympics.
7 And I spoke to a lady who runs a place called Replica
8 Farms, and she's in the Warmblood industry, raises jumpers,
9 dressage, eventing horses. And she said that, I think, there
10 are 100 clones on the ground right now of these million-dollar
11 horses, and that, as long as they're papered and they can
12 compete, the people in the competing world, the breeding world
13 do not differentiate between the clones and the originals.
14 The prices are no different.
15 Q. So you're telling me these horses over there, these
16 million-dollar jumpers and polo ponies and whatnot, that they
17 have a registry?
18 A. Well, the jumpers are registered.
19 Q. Okay.
20 A. Now, the polo ponies -- and, by the way, there's a
21 mistake in that slide. Cuartetera was a polo pony that was
22 sold in late 2012. He sold for $800,000, not 80,000, 490,000
23 euros, which is the highest price ever paid for a horse in the
24 history of polo, and he's a clone. She's a clone.
25 Q. Have you -- have you learned whether or not these
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 966
1 registries from Europe or these Olympic-type horses where
2 they're actually -- they were not registered, and then, all at
3 once, they allowed them to be registered? And you can give
4 us --
5 A. Sure.
6 Q. -- the benefit of your research on comparisons before and
7 after.
8 A. Well, let's see. I have to find out who I talked to.
9 Here it is. I've even -- I don't think we have this letter in
10 evidence, but I spoke to Kathleen McNulty, and she's one of
11 the top breeders of Olympic horses.
12 Q. Where? Where?
13 A. In the United States.
14 Q. Oh, okay.
15 A. And, anyway, we also exchanged e-mails, a very nice
16 person. So she's -- she's very well known, and she's the one
17 who told me that, right now, in dressage, jumping, and
18 eventing, there are over 100 young clones on the ground.
19 Q. Have you learned whether there's any difference in the
20 breeding barn on the stud fees between these clones and their
21 donors?
22 A. Well, they -- they were allowed to go into the Olympics
23 starting in July 2012.
24 Q. Yes.
25 A. And, around that same time, some of the breed registries
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 967
1 allowed them. And you can shop for registry also, because,
2 like a Holsteiner, there are different registries in different
3 countries. You've got to have a papered horse to compete.
4 Q. Over there?
5 A. Over there in the Olympic-type events, but there are
6 competing agencies. So if you can't get the Germans to
7 register your horse, maybe the Dutch will or the Belgians.
8 So she told me that she had -- like her horse, Sapphire,
9 was $2,000,000 at the height of his career. He was cloned, is
10 approaching three, so he's still too young to compete. She
11 believes that unregistered he would have been passed over by
12 mare owners for breeding, but, now, she's getting the same
13 price for breedings which -- that she used to get with
14 Sapphire, so --
15 Q. With papers, no discrimination by the mare owners?
16 A. Right, right. So that -- her observation was the big
17 deal. Once you could get the clone registered —— and I think
18 it was in Belgium —— then the value, it was like any other
19 horse. Nobody cared.
20 Q. All right. So, from your conversations with these
21 people, these interviews that you had, the exchanges of
22 e-mails and letters, did these people that you spoke with or
23 that you exchanged communication with confirm to you in any
24 way the importance of registration such as we're dealing with
25 in this case through AQHA?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 968
1 A. Yeah. They all said that -- I think Eddie Sims called it
2 the seal of approval. Once you could get registration, you
3 could verify parentage of the animals you're buying, that
4 buyers then did not differentiate between clones and
5 originals, because they performed and were genetically --
6 they're genetically identical, and they performed the same.
7 Q. So have you reached an opinion, based on this research
8 that you've done, as to the market acceptance --
9 A. Yes, sir.
10 Q. -- of the clones and the offspring of clones once AQHA
11 papers are granted and these horses that we're here about
12 today are allowed into the stud book?
13 A. Yes.
14 Q. What is that?
15 A. I believe that they will sell, and the market -- the
16 pricing of the horses, their semen, everything else since
17 they're genetic duplicates will be the same as the originals
18 because they are in every other area.
19 Q. So the daily -- or the data that you used on Playboys
20 Ruby would be directly applicable to Ruby Too?
21 A. Yes.
22 Q. And would the data applicable to Lynx Melody also be
23 applicable to Lynxie?
24 A. Yes.
25 Q. And would the data that you researched and looked at on
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 969
1 Feature Mr. Jess also be applicable to Back To Feature?
2 A. Yes.
3 Q. And then would the data that you relied upon as to
4 Reminic also be applicable to Nic?
5 A. Yes.
6 Q. And, based on that, have we prepared or have you prepared
7 a couple of summary charts that summarize the calculations on
8 the damages for the horses that we've talked about, along with
9 the various Plaintiffs that are in this case, that we could
10 show the jury at this time?
11 A. Yes.
12 Q. Would you look in your book, please, at exhibit --
13 Plaintiffs' Exhibit 137.
14 All right. Tell us, please, what Exhibit 137 is. Have
15 you got that in front of you?
16 A. It hasn't been corrected.
17 Q. No, it has. It's 138. We're putting them both up. I
18 want you to tell me what 137 is first.
19 A. That was before we made the corrections, that this
20 allocates the damages between the Plaintiffs by category.
21 Q. So if we were to look at these last four slides that we
22 did on damages, it's summarized in 137?
23 A. Yes.
24 MR. STEIN: All right. Your Honor, at this time, we
25 would move to admit Plaintiffs' Exhibit 137.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 970
1 MR. LOFTIN: No objection, Your Honor.
2 THE COURT: Admitted.
3 MR. STEIN: If we could show it, please.
4 Q. (By Mr. Stein) All right. This summarizes the damages
5 before you made the correction as to the Nic semen price?
6 A. There were a couple of corrections. We had to add 2013
7 into it.
8 Q. Sure. And so we've done this to show what it was before,
9 correct?
10 A. Yes. And, also, there was a mistake we had to correct.
11 Q. Yes. And this allocates under the old numbers --
12 A. Yes.
13 Q. -- allocates between horse and between Plaintiff?
14 A. Yes.
15 Q. All right. Now, then, tell us what 138 is.
16 A. Okay. These are the corrected numbers -- let me just
17 check. 800. Well, this is wrong. This is right, and this is
18 right. There's one incorrect number in here.
19 Q. On 138?
20 A. Yes.
21 Q. Well, can you tell us about it once we put it up?
22 A. Sure.
23 Q. Can you tell us what it is that you're going to correct,
24 so that don't -- I mean, we're not going to write on the
25 exhibit, but tell us what it is.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 971
1 A. Okay. The Ruby Too foals lost two seasons, and so it's
2 190,000, two foals a season at 95,000 a horse. That's 190,
3 two seasons, 380.
4 MR. STEIN: Okay. So, Your Honor, at this time,
5 given the fact that he's explained that, we would still move
6 to admit Exhibit 138.
7 MR. LOFTIN: No objection, Your Honor.
8 THE COURT: Admitted.
9 MR. STEIN: Can we show Exhibit 138, please.
10 Q. (By Mr. Stein) Now, tell us what this damage summary
11 represents.
12 A. Okay. In the first element of damages is the horse, or
13 the clone. The amount is the amount associated with each
14 clone, semen sales, foals that weren't born, et cetera, and
15 then we have the ownership in the next block, Jason Abraham
16 individually, Abraham & Veneklasen Joint Venture, or Abraham
17 Equine, and those are the three Plaintiffs. So this block
18 gives us the allocation percentages for each of those elements
19 and amounts of damages. And then the final block shows us the
20 dollar damages to each Plaintiff.
21 Q. All right. So let me ask you this: Are the sums that
22 you have arrived at, as depicted in Exhibits 137 and 138, are
23 those based upon objective facts, figures, and data that
24 you've discussed with us today?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Direct--Mr. Stein) (Plaintiff Abraham Equine, Inc.) 972
1 Q. Now, are the opinions that you are rendering as to the
2 amount of damages attributable to each of the horses as
3 apportioned to each of the Plaintiffs, are those calculated
4 and estimated to a reasonable degree of certainty as would a
5 normal -- as would a calculation by an economist in the field?
6 A. Once I correct that one number, yes.
7 Q. All right. So you're wanting to correct that 190,000?
8 A. Correct. That should be twice that amount, 380,000.
9 Q. And the jury can do that, if they want to?
10 A. Sure.
11 Q. Given that, do you have an opinion to a reasonable degree
12 of certainty, based on objective facts, figures, and data what
13 the Plaintiffs have been damaged by reason of the
14 anticompetitive conduct that we've discussed this afternoon?
15 A. Yes.
16 Q. What is that opinion?
17 A. Before the correction, it's $5,790,000.
18 Q. And, after the correction, you add 190,000 to it?
19 A. Right.
20 MR. STEIN: Your Honor, at this time, I have no
21 further questions. I pass the witness.
22 MR. LOFTIN: May it please the Court, Counsel?
23 THE COURT: You may proceed.
24
25
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 973
1 CROSS EXAMINATION
2 BY MR. LOFTIN:
3 Q. So from 137 to 138 before the correction in 138, we went
4 up by $3,000,000?
5 A. It was a big mistake.
6 Q. And then we added another 190,000 to 138?
7 A. Yes.
8 Q. Kathleen McNulty, you spoke with her, and you've told the
9 jury how you relied on what she told you?
10 A. Yes.
11 Q. She owns Replica Farms?
12 A. Correct.
13 Q. And that's an authorized agent of Blake Russell's
14 company, ViaGen. Did you know that?
15 A. Yes.
16 Q. Okay. Now, trying to get to the big picture, in this
17 market you've described, which is a very elite small market,
18 correct?
19 A. Yes.
20 Q. And to participate in this market requires a great deal
21 of money?
22 A. Now it does.
23 Q. Okay. And we're talking about racing competition being a
24 separate market?
25 A. Racer -- yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 974
1 Q. And cutting competition being a separate market?
2 A. As events, sports, yes.
3 Q. But you said they're both -- both have separate markets
4 when I took your deposition?
5 A. Well, yeah. You have different -- they're different
6 kinds of horses, right.
7 Q. Different products in each market?
8 A. Correct.
9 Q. Okay. And different supply, different demand, different
10 participants with a little bit of overlap in the participants,
11 correct?
12 A. That's fair, yes.
13 Q. Okay. So, in this elite market, where price is just a
14 starting point, correct?
15 If I want to own a champion, then I have to have a horse,
16 don't I?
17 A. That would be a start.
18 Q. And if I want to have a champion at the highest level of
19 competition, that horse is going to cost me some money?
20 A. Yes.
21 Q. Unless I have a benefactor, which I don't think I would.
22 A. Me either.
23 Q. And so, once I buy the horse, I got to find a place for
24 the horse to be trained, I have to have a trainer, I have to
25 have veterinary bills, I have to have a rider, I have to get
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 975
1 the horse to competition.
2 So price is where we start if we want to have the dream
3 of owning a champion at the highest level, correct?
4 A. Price of the horse is where you start, correct.
5 Q. Okay. And your opinion is that, if the association
6 begins registering clones and their offspring, that at some
7 point in the future, prices will be lower than they otherwise
8 would be?
9 A. Correct.
10 Q. Okay. So, first of all, you're not saying that prices
11 will be lower in the future, because lots of factors determine
12 what prices are in the future independent of the registration
13 of clones and their offspring.
14 Let me ask that question again. As an economist, you
15 know that, in any market, there's a number of different
16 factors that determine what the price of a product is going to
17 be?
18 A. Correct.
19 Q. General economic conditions, for example?
20 A. Correct.
21 Q. I mean, when we -- when we went into the great recession,
22 in many areas prices either stayed the same or went down where
23 they otherwise might have increased with inflation, correct?
24 A. They might have increased for various reasons, sure.
25 Q. Lot of different reasons why prices -- whether they go up
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 976
1 or down?
2 A. Sure.
3 Q. Up or down. So what you're saying is that, if we
4 registered clones and their offspring, at some point in the
5 future, prices would be lower than they'd otherwise be?
6 A. The way an economist would more --
7 Q. Is that what you're saying?
8 A. Not exactly, no, not scientifically. The way an
9 economist would say that is, ceteris paribus, which is Latin
10 for all things remaining unchanged, everything else unchanged,
11 prices would be lower.
12 Q. Okay. Well, I'm not good at Latin, so --
13 A. I was an altar boy.
14 Q. All other things being equal --
15 A. All other things being equal --
16 Q. -- prices would be lower?
17 A. -- prices would be lower, yes, sir.
18 Q. And what we don't know is whether all other things will
19 be equal or not?
20 A. Rarely are.
21 Q. All right. And, as far as when after we start
22 registering clones -- if we start registering clones and their
23 offsprings, the next question is: Well, when, you know, are
24 prices going to be lower than they would otherwise be, all
25 other things being equal, and you don't have any sense of that
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 977
1 really?
2 A. Oh, yes I do. I thought about that a lot, and what
3 happens is, the supply goes up over time, and, as the supply
4 goes up, the prices will fall over time. So it will be a
5 multiyear period until the market comes into balance.
6 Q. So it will be a multiyear period?
7 A. Yeah. I mean, I would expect that, as soon as the
8 yearlings hit the first sale, we'll see some effect. More
9 will hit the second sale -- as cloning becomes more prevalent,
10 it will increase the supply of elite yearlings more year by
11 year, so we'll see a -- prices will decline immediately and
12 then over time. So we shouldn't have to wait very long for
13 the price decline.
14 Q. And, in terms of how much lower the price will be than it
15 would otherwise be, all things being equal, you don't have any
16 sense of that?
17 A. No, we'd have to -- no.
18 Q. Okay. They tell me it's summertime, and I've been so
19 busy, I haven't really noticed, but have you been following
20 the Quarter Horse racing season this year?
21 A. I have not.
22 Q. This past weekend, we had the Rainbow Derby over in
23 Ruidoso. Are you aware of that?
24 A. I'm aware of Ruidoso and the Rainbow Derby, yes.
25 Q. Okay. And that's a over-a-million-dollar purse, correct?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 978
1 A. Correct.
2 Q. Now, would that be the type of competition that we're
3 talking about where this would be the top of the top?
4 A. We would have the top horses in there, sure, the people
5 who think they're going to win. You got to pay to get in that
6 race.
7 Q. When you say -- in your report, the first report you
8 provided, you said that this market has people in it that want
9 to win elite competitions because they want both the money and
10 the prestige that comes with owning a champion horse. That's
11 what you said in --
12 A. Absolutely.
13 Q. -- your first report?
14 A. Yeah, absolutely.
15 Q. And there's no substitute for that?
16 A. No.
17 Q. And so winning the Rainbow Futurity, either the futurity
18 or the derby, that's going to bring substantial amount of
19 money and substantial amount of prestige, correct?
20 A. Correct.
21 Q. Okay. And Wicked Courage was the horse that won this
22 past weekend. Do you have any idea what he was purchased for?
23 A. Someone told me since I've been here in Amarillo. Not
24 very much.
25 Q. $4,000.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 979
1 A. Okay.
2 Q. Do you think the person that owns that horse is going to
3 have his feelings hurt that the horse he purchased wasn't
4 elite when he purchased him?
5 A. Well, after he finishes racing him, depending on his
6 bloodlines, he might not be elite again. I'm sure he's very
7 happy to cash that check.
8 Q. So you think he's going to have trouble -- the owner of
9 Wicked Courage is going to have trouble finding mare owners
10 who want to breed to that horse?
11 A. Well, I don't know if, you know, an elite mare owner,
12 depending on his bloodline -- and I haven't seen his pedigree,
13 but if he was purchased for $4,000, he's one of those
14 bolt-out-of-the-blue horses. He's a genetic freak, as we like
15 to say.
16 So if that's true, the top mare owner isn't going to
17 risk -- if she's only got -- if he's only got one or two
18 breedings a year, he may not risk breeding to her, but
19 somebody might. Okay. We've -- somebody might say: "Hey,
20 you know, maybe this is a new line. Maybe this horse has
21 something we've missed all of these years. Let's give him a
22 try."
23 Q. All right. But -- so you're saying maybe just a genetic
24 freak?
25 A. He might be just a freak and can't pass it on, or maybe
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 980
1 this is the start of a new bloodline.
2 Q. Okay. Now, you're familiar with the Heritage Place
3 Futurity?
4 A. I am.
5 Q. It takes place in June?
6 A. Yes.
7 Q. A-million-dollar purse?
8 A. Yes.
9 Q. Prestige and money go with winning that one?
10 A. Yes.
11 Q. And this time, I'm talking about the futurity.
12 A. Right.
13 Q. Do you know the filly that won that?
14 A. No.
15 Q. Big Biz Perry?
16 A. Okay.
17 Q. First of all, you know, fillies do race well. They're
18 not -- I mean, they're not -- you said something about maybe,
19 you know, fillies weren't the equal to the colts.
20 A. Some people have told me that the boys generally run
21 faster than the girls, but then you get some girls out there
22 that just beat the boys up mercilessly.
23 Q. Okay. Well, I guess Big Perry was one of those girls.
24 A. Hearts Wide Open was another one.
25 Q. Do you have any idea what the owner of Big Biz Perry paid
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 981
1 for her?
2 A. I do not.
3 Q. $20,000.
4 A. Okay.
5 Q. So, now, your line of demarcation in the racehorse market
6 is $35,000.
7 A. No. Is that the top five percent, or was that the top
8 seven?
9 Q. What you've said in your analysis is that when you did
10 your cluster analysis --
11 A. Right.
12 Q. -- followed by linear regression --
13 A. Right.
14 Q. -- followed by logistic regression --
15 A. Well, you got a little bit wrong, but okay.
16 Q. Was that somewhere close?
17 A. It was linear regression, cluster, logistic.
18 Q. Okay. But I got the three names right?
19 A. You did, sir.
20 Q. Okay. Well, when you did all of that —— okay —— you said
21 that you saw an elite class of yearlings at $35,000 and above,
22 or perhaps above thirty-five. I can't remember what you --
23 and then below were the non-elite yearlings, correct?
24 A. That's what the cluster analysis showed, yes.
25 Q. Okay. So let me -- let's talk about yearling auctions
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 982
1 for a minute, because we've heard a lot of testimony, and I'm
2 going to try not to repeat what the jury already understands.
3 But let's take the Heritage Place Auction. Do you have
4 any idea -- they have a yearling auction every year where it's
5 just yearlings, correct?
6 A. That's correct.
7 Q. And at the Heritage Place, it's just racehorses?
8 A. Yes.
9 Q. Okay. And do you have any idea how many yearlings go
10 through that sale? Is it 1,000, 1500, something like that?
11 A. It's about 1,000 that go through that, as I recall it. I
12 looked at those numbers a couple of hours ago, but I think it
13 was about 1,000.
14 Q. About 1,000. Okay. And so you've got lots of people,
15 and the horses are coming through one after another. And at
16 every -- I'm just using that as an example. But at that
17 yearling sale, there's going to be a group of horses, you
18 know, maybe a handful or so, that draw a particular interest
19 from the buyers, correct?
20 A. Correct.
21 Q. And those are the ones that sell for, you know, hundreds
22 of thousands of dollars, sometimes even as much as 500,000 or,
23 on a few occasions, maybe even more than that?
24 A. Sometimes, yes.
25 Q. Those are the -- those are the ones that capture the
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 983
1 attention, imagination, and --
2 A. The wow.
3 Q. -- the pocketbooks.
4 A. They're the ones with the wow factor. They're the ones
5 that everyone is, "Wow, did you hear that this horse may sell
6 for $450,000?" And so they're all over Quarter Horse News and
7 the Internet and everything, sure.
8 Q. And so you have looked at some of the characteristics of
9 the horses you say -- and you put your line of demarcation at
10 $35,000, and you've talked about some of the characteristics
11 of the horses that are above that line of demarcation.
12 Now, you've done that, haven't you --
13 A. Yes.
14 Q. -- talked about --
15 Well, my question is: Have you -- have you tried to see,
16 okay, here's these horses that sold at the yearling auction,
17 these yearlings, fillies and colts, sold for elite prices,
18 let's see how that correlates to their earnings as
19 competitors?
20 A. Well, you mean did I go back --
21 Q. I'm just asking whether you've done that?
22 A. No. No, I haven't done that.
23 Q. Okay. Let's talk about elite. Elite is -- if my grammar
24 doesn't fail me, it's an adjective, correct?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 984
1 Q. Okay. And so, you know, you can say elite. You can say
2 high quality. You can say the best of the best. You can say
3 top drawer. There's lots of terms for -- synonymous with
4 elite, correct?
5 A. There are, yes.
6 Q. And, with horses -- now, you know, I think everybody
7 would agree that a Ferrari is an elite automobile, correct?
8 A. Indeed.
9 Q. Okay.
10 A. Aspirational.
11 Q. Aspirational. And that a Ford Escort is probably not
12 considered elite, at least here in the United States?
13 A. It -- I've heard them called transportational appliances.
14 Q. All right. So let's talk about a horse at the different
15 stages of its life. So a filly or a colt as a yearling, we
16 don't know yet whether he or she is going to become a champion
17 or even an elite competitor, you know, win, place, or show in
18 major events. We don't know that yet, do we?
19 A. Correct, we do not. Only odds.
20 Q. So we're calling them elite because of the price they
21 commanded at the yearling sale, correct?
22 A. Well, I thought that I said that price was a
23 manifestation of qualities that these horses have. If, for
24 some reason, someone decided to buy a horse out of no one by
25 nobody and pay a lot of money for it, that horse would not be
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 985
1 elite.
2 Q. Well, let me ask you the question this way: If I pay
3 half a million for a horse at the Heritage Place Auction and I
4 call it an elite yearling, nobody's going to quarrel with me,
5 are they?
6 A. Well, as I said, if for some reason -- and, Mr. Loftin,
7 you're a smart guy; this isn't going to happen to you. But
8 if, for some reason, this was a terrible horse and somebody
9 said, "Loftin's coming to the sale, and he'll pay anything for
10 this horse." And you bought a horse without a good pedigree
11 and paid $450,000 for it, I don't think we'd call that horse
12 elite.
13 Q. That doesn't happen though, does it?
14 A. It doesn't happen, no.
15 Q. Okay.
16 A. But what I'm saying is, you're saying elite is price, but
17 what I'm saying price is the manifestation of a bunch of
18 characteristics, including heredity, disposition, and the
19 like, and conformation.
20 Q. And you've talked about all of those characteristics?
21 A. Correct, yes.
22 Q. But, ultimately, what the consumers in this market want
23 is not characteristics; they want the money and prestige that
24 comes with winning major elite events, and then the economic
25 benefits that comes with breeding those animals, correct?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 986
1 A. Yes.
2 Q. Okay. So if I buy a yearling for a lot of money that has
3 all the right characteristics, but it never gets past training
4 and doesn't do any good as a breeding animal, then, you know,
5 things haven't gone well for me, have they?
6 A. No, sir.
7 Q. Okay. Now, if a horse competes well, then it's an elite
8 competitor, correct?
9 A. Correct.
10 Q. But that doesn't necessarily mean that it's going to be
11 an elite producer of offspring?
12 A. Perfect example, Refrigerator; although, he was a
13 gelding. Tremendous racehorse, but if you looked at his
14 pedigree, probably wouldn't be a horse that would have been
15 bred a lot.
16 Q. What I'm getting at is, we determine how well a horse has
17 performed in every aspect of its life. We do that with
18 hindsight, don't we?
19 And here's what I mean, maybe -- that's a preface. I'll
20 ask you a question.
21 A. Okay.
22 Q. We don't know how high a price a yearling is going to
23 command at the auction until the gavel goes down, right?
24 A. Pretty much.
25 Q. We have an idea, but we don't know until somebody buys
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 987
1 it?
2 A. Exactly.
3 Q. A horse is worth what somebody's willing to pay for it?
4 A. Correct.
5 Q. And we don't know whether a horse that we own is going to
6 win the big race until the race is run?
7 A. Correct.
8 Q. We can hope, we can be the favorite, but we've got to
9 cross the finish line first, right?
10 A. Correct.
11 Q. Okay. And we -- let's say that horse is a stallion, so
12 he's got good -- he has good bloodlines, collect a good price
13 as a yearling, cross the finish line.
14 We have every reason to believe that he's going to
15 produce great offspring, but we don't know that for sure until
16 he gets some offspring out there competing, and they start
17 winning money, correct?
18 A. That's right.
19 Q. And now, with a mare, you know, she may not compete that
20 well. Sometimes you have not a great competitor and then
21 really does well producing offspring. That happens sometimes,
22 doesn't it?
23 A. It happens frequently actually.
24 Q. And you can have it the other way, I suppose, where she
25 competes really, really well, but doesn't produce offspring as
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 988
1 well as -- lesser competitors, right?
2 A. I don't -- I think you're right, but I'm not positive.
3 Q. Okay. So we wish we knew in advance about each one of
4 these things, but, unfortunately, we don't know until after
5 the fact?
6 A. Correct.
7 Q. And what you haven't -- didn't do, as part of your
8 analysis, is, to say: "Okay. Here's what folks paid at
9 auction for yearlings. Let's look and see how much money
10 these yearlings earned as competitors."
11 A. That would make, as an economic proposition, as a
12 statistical proposition, no sense, because price formation is
13 based on the data we have.
14 As you said, we can't look in the future. I can't say,
15 "I know this horse is going to win, so here's how much I'm
16 going to pay for it now." We can only say: "Here's what I
17 know about this horse. Here's its bloodline. Here's how its
18 mother and father and grandfather did. Therefore, I expect
19 this horse will perform in the future well, and, therefore,
20 I'm willing to pay this price."
21 You've got it backwards. You've got sort of the
22 fortune-teller school of horse pricing. Ha, I need to know
23 what the horse actually did in order to know what I should
24 have paid for it or somehow -- and that's -- that's backwards.
25 It's economically backwards. And no competent economist, I
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 989
1 don't think, would suggest that that's how price formation
2 takes place.
3 Now, you might say: "Well, shouldn't you test your model
4 to see how it predicts price or something like that?" It
5 might be an interesting research question to look at the
6 correlation between the price paid for a yearling and how much
7 money it made at the track, the arena, or as a breeding
8 animal. Those are all interesting research questions, but
9 that isn't how price formation takes place.
10 Q. Maybe I didn't ask my question well. My question is
11 about whether you looked to see whether these yearlings that
12 were bought for the lower prices, how often or seldom they
13 actually went on to win hundreds of thousands of dollars at
14 the racetrack or in the cutting ring?
15 A. That might be interesting as a statistical study, but it
16 wouldn't explain pricing in the market for elite registered
17 Quarter Horses.
18 All it would be, it would be kind of an interesting
19 exercise of, hum, if I'm going to go with some other people
20 and we're going to buy a racehorse, should we buy some -- five
21 real cheap ones and maybe hit a bolt out of the blue, or
22 should we buy some expensive ones? But, as Mr. Brown said,
23 you know, if you're in this business, those aren't
24 substitutes.
25 Again, it would be an interesting study to do, but it
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 990
1 wouldn't have a lot of meaning.
2 Q. Well, you've said that the non-elite horses -- let's talk
3 about racing. So those horses that their characteristics are
4 such that they sell for less than $35,000 at the yearling
5 auction, based on their characteristics, people look at them,
6 pay less than $35,000, but they're not a substitute for the
7 horses that sell for more than $35,000 based on their
8 characteristics. That's what you've said?
9 A. I said that; Mr. Brown said that, yes.
10 Q. Okay. And so wouldn't it be interesting if we found that
11 lots of people who bought those horses for fifteen, twenty,
12 twenty-five, thirty thousand dollars won as much or more money
13 than the people that paid a hundred, two hundred, three
14 hundred thousand dollars?
15 If that turns out to be happening, then some people may
16 think about buying below your line of demarcation?
17 A. Well, sure, they may be buying below that line,
18 because -- let's talk about racing. I know that halfway well.
19 They're going to run this horse in a bunch of stakes races --
20 not stakes races, I'm sorry, claiming races. They make a
21 little bit of money on the horse, you know, month after month.
22 It's still a living.
23 I mean, if you're in a racing operation, if you were at
24 the track, you've got to fill your race card. And here, in
25 Texas, we have 500 races a year, and you're going to have ten
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 991
1 or so horses in every race. So you have to get -- there's a
2 lot of racehorses out there, and you can still make a living
3 with racehorses without winning the tippity top.
4 But if you want to win the tippity top and you want all
5 that prestige and the like, you've got a much better chance if
6 you spend the big money, buy the elite horse, put it with the
7 best trainer, and then campaign the horse.
8 Q. Well, this season, which isn't over yet, we've got two
9 owners, one of them paid 20,000, and one of them paid 4,000,
10 and they've won major races.
11 A. And people win the lottery.
12 Q. Let's talk about mares. Within the elite -- what you
13 call the elite class of mares, there's proven and unproven?
14 A. Correct.
15 Q. Okay. So when -- when a mare begins her breeding career
16 no matter what she may have done on the racetrack, no matter
17 how good her bloodlines, she's unproven until some of her
18 offspring go out on the track and perform well?
19 A. Yes.
20 Q. Okay. Now, if her very first set of offspring do perform
21 well, then the marketplace considers her proven?
22 A. Yes.
23 Q. Now, if she, as you said -- I think you used a term which
24 I know, but maybe people younger than me won't know, come a
25 cropper six times; is that what you said?
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 992
1 A. (Laughs.) It's only us old guys who use that.
2 Q. And so come a cropper the next six times means the next
3 six times her offspring don't perform well, correct?
4 A. Correct.
5 Q. Then the marketplace would consider her unproven again?
6 A. Or disproven maybe.
7 Q. The mare formerly known as a proven mare; is that right?
8 A. (Laughs.) Like the musician, formerly known as --
9 Q. Yeah.
10 A. Yeah. Yes.
11 Q. And, by the same token, if somebody takes a chance on her
12 after she's been kind of overlooked in the marketplace and she
13 produces another great racehorse, then she's proven again?
14 A. You would have to talk to someone who does breeding for a
15 living, I think, to get an explanation of what the market
16 would look at as a horse that had a checkered career. I don't
17 know.
18 Q. Well, you were telling me when I took your deposition
19 that they come -- they can come in and out of being proven?
20 A. I would think so, in and out of favor too, yeah.
21 Q. And the thing that we never know about a broodmare or a
22 mare that's producing offspring is, we never know the sequence
23 that they're going to come in, do we?
24 A. We do not.
25 Q. And, you know, if we get a couple of really great
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 993
1 offspring right away, you know, our evaluation can be very
2 high. If we get a couple of crops, a couple of years of bad
3 offspring, we can, you know, really lower our evaluation, and
4 that's based on pretty limited data though, isn't it, if it's
5 only a couple -- if it's only a couple of years of offspring?
6 A. Well, that's why we look at the grandsires.
7 Q. Okay. So what you're suggesting is that cloning will be
8 better for the marketplace than using these daughters of elite
9 mares that are coming up and needing to be proven or using,
10 you know, sisters, half sisters, all the other mares that are
11 available to breeders?
12 A. Well, those will still be used. I mean, we're not going
13 to kill the fillies. But you can augment the elite mare
14 supply by using cloning techniques of proven mares.
15 And you can take a mare who's in her twenties and at the
16 end of her fertility, you can clone her, for example, and now
17 you have an elite mare, an elite young proven mare.
18 Q. And when you make that decision as a breeder, you say,
19 okay, I'm going to clone a mare, it takes eleven months to get
20 the clone on the ground?
21 A. Eleven months, eleven days.
22 Q. Okay. And then, if you're in racing, it's going to be
23 two-years-old -- two years old before it can race; in cutting,
24 three years old before it can cut, correct?
25 A. Yes.
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 994
1 Q. And so it's going to be a good long while before you see
2 how this cloning has worked out for you, correct?
3 A. It's a good long while anytime you have a horse before
4 you see how it works out. I mean, that has nothing to do with
5 cloning. Cloning, you've bred to a genetic duplicate. So you
6 should expect nothing different than had you bred to the
7 original.
8 But, you know, that's getting into the science thing,
9 which really that's Dr. Veneklasen and Dr. Spier and people
10 like that need to talk about.
11 Q. Well, when you say, "expect nothing different," two
12 things. First of all, you don't know -- the sequence, you
13 have no reason to think the sequence of offspring will be the
14 same, correct?
15 A. No. No, of course not. What I'm saying is, you expect
16 the same -- the probabilities, the likelihoods of good versus
17 not good, the mix. Over the years, you expect the clone to
18 perform similarly to the original, because they're genetic
19 duplicates.
20 Q. And, plus, every breeding is a breeding of a sire and a
21 dam, so a lot of it is the particular cross that you have, and
22 that makes a big difference on the outcome in terms of the
23 foal?
24 A. You mean if your breeding -- if your breeding a clone
25 to -- let's say she's a dam, and you're breeding her to a
Stacy Mayes Morrison Official Court Reporter Christopher Pflaum (Cross--Mr. Loftin) (Defendant AQHA) 995
1 sire, your selection of sire --
2 Q. Right, it makes a difference?
3 A. Of course, yes.
4 Q. As does the training and the rider you pick for the horse
5 and all of that?
6 A. You have the genetics, and everything else.
7 THE COURT: Counsel, it's time for the evening
8 recess.
9 Ladies and Gentlemen of the Jury, you'll be in
10 recess at this time until 9:00 tomorrow morning. Follow all
11 the instructions concerning your conduct during recess. We'll
12 be in recess at this time.
13 COURT SECURITY OFFICER: All rise.
14 (Proceedings recessed until 9:00, 07/23/2013.)
15 (Further proceedings continued in Volume V.)
16
17 * * * * * *
18 I certify that the foregoing is a correct transcript from
19 the record of proceedings in the above-entitled matter. I
20 further certify that the transcript fees format comply with
21 those prescribed by the Court and the Judicial Conference of
22 the United States.
23
24 s/Stacy Mayes Morrison 9/12/2013 Stacy Mayes Morrison Date 25 Official Court Reporter
Stacy Mayes Morrison Official Court Reporter