A jury verdict in Amarillo on July 30 may lead to big changes in the American Quarter Horse industry.

After a Texas jury found the American Quarter Horse Association (AQHA) violated antitrust laws by not registering cloned horses, Texas horse breeders who are plaintiffs in the lawsuit now seek a permanent injunction to force the AQHA to register cloned horses.

The plaintiffs in Abraham & Veneklasen Joint Venture, et al. v. American Quarter Horse Association alleged the AQHA violated antitrust laws because its Rule 227 creates a “monopoly in the market for high-quality registered Quarter Horses” by banning registration of horses produced by “any cloning process.”

The verdict is significant to the American Quarter Horse industry, says Nancy Stone, who represented plaintiff Abraham & Veneklasen Joint Venture in the litigation.

“If, as we believe, the court will require the AQHA to register these horses, it will open up . . . the elite Quarter Horse market to cloned horses and their offspring,” Stone, a solo practitioner in Amarillo, says.

W. Wade Arnold, a shareholder in Underwood Law Firm in Amarillo, who represents the AQHA in the suit, did not return a telephone message. However, in a press release on Aug. 1, the AQHA announced it would “take any and all necessary legal steps to overturn” the verdict. As described in the release, the AQHA’s position is that its rule prohibiting the registration of clones and offspring is reasonable and lawful.

The plaintiffs in the suit are Jason Abraham, a horse breeder in Canadian, along with Abraham Equine Inc., and Abraham & Veneklasen Joint Venture. The plaintiffs own cloned horses or their offspring.

On July 30, a federal-court jury in Amarillo returned a verdict finding the AQHA violated sections 1 and 2 of the Sherman Antitrust Act, and sections 15.05(a) and 15.05(b) of the Texas Free Enterprise and Antitrust Act. The jury also found the defendant’s actions caused damage to each of the plaintiffs, but did not award any monetary damages.

U.S. District Judge Mary Lou Robinson of the Northern District of Texas set a hearing for Aug. 12 on the plaintiffs’ claim for equitable relief and attorney fees, and asked the plaintiffs to submit a proposed judgment.

Sam L. Stein, who represented plaintiff Abraham Equine, says the plaintiffs will ask Robinson to enjoin the AQHA’s enforcement of its current rule for registering horses, and to order it to register clones. Stein is a solo practitioner in Cherokee, Okla. and of counsel at Whittenberg, Whittenberg, Stein & Strange in Amarillo.

An injunction ordering the AQHA to register cloned horses would make cloned horses and offspring of cloned horses, such as those owned by the plaintiffs, more valuable because they could then race and be used for breeding.

“If they aren’t registered, they can’t race. A horse that can’t be registered is pretty worthless as a breeding animal,” says Brian Robinson, a partner in Gibson, Dunn & Crutcher in Dallas, who along with Amarillo solo practitioner Ronald Nickum, represented Jason Abraham.

According to a factsheet on its website, the AQHA had 281,563 members in 2012 and has registered more than 5 million horses worldwide since 1940.

The plaintiffs alleged in their first amended complaint filed on Feb. 19, that by controlling horse registration, the AQHA controls the supply of high-quality registered Quarter Horses

“Specifically, Rule 227(a), by excluding from the market any cloned horse and their offspring otherwise eligible for registration, limits the supply of registered horses, thereby driving up the price and injuring consumers and their competitive process,” the plaintiffs allege in the complaint.

The plaintiffs allege in the petition that the AQHA’s refusal to register the cloned horses reduces the market value of those horses by 70 to 80 percent.

The plaintiffs brought these causes of action against the AQHA: agreement which unreasonably restrains competition, monopolization, attempt to monopolize and violation of Texas Business and Commerce Code section 15.05. They also seek injunctive relief.

In its original answer to the complaint, filed on March 5, the AQHA alleged the plaintiffs lack standing to bring an antitrust action, and alleged they are not entitled to the relief they sought. It also denied the plaintiffs’ characterization that Somatic Cell Nuclear Transfer technology, which is used in cloning horses, is “nothing more than an assisted reproductive technique.”

The AQHA does register horses produced with other assisted reproductive techniques, such as artificial insemination.

The AQHA also pled affirmative defenses, alleging the plaintiffs lack standing to sue and are barred on numerous grounds.

“The activities of Defendant do not give rise to antitrust liability because they did not result in adverse effects on competition, or, in the alternative, any such effects were outweighed by the pro-competitive benefits of the activities,” the AQHA alleged in its answer.