Harnish et al v. Liberty Farm Equine Reproduction Center LLC et al

Filing 153

OPINION AND ORDER: Court DENIES 138 Motion for Summary Judgment; GRANTS 137 Motion for Partial Summary Judgment with respect to all challenged claims. Signed by Chief Judge Philip P Simon on 6/25/2013. (tc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
BRENT HARNISH, JULIE HARNISH,
STEVEN HECKAMAN, and
JANIS KENGIS,
Plaintiffs,

)
)
)
)
)
v.
)
)
LIBERTY FARM EQUINE
)
REPRODUCTION CENTER, LLC,
)
DEGRAFF STABLES KENTUCKY, LLC, )
DEGRAFF STABLES, INC., and
)
ROBIN DEGRAFF,
)
)
Defendants.
)

Case No. 3:10-cv-511-PPS

OPINION AND ORDER
There’s no denying that some people have great jobs. Take a federal judge, for example.
You work indoors, there’s no heavy lifting, and the work is pretty interesting. It’s a good gig.
On the other end of the spectrum is the job at issue in this case – equine semen collector. See
Dirty Jobs: Horse Breeding (Discovery Channel; Season 7, Episode 0; posted online on Mar. 31,
2011; available at http://www.mikeroweworks.com/2009/03/horse-breeding- dirty-jobs/). That’s
the job David Dooge did for defendant Liberty Farm Equine Reproduction Center, LLC. As
we’ll find out in more detail in a moment, the semen is collected with an artificial vagina (an
“AV” for short). The reason we’re here is that there was a glitch in the process. The unfortunate
combination of sharing AV covers and the introduction of a sexually transmitted disease
previously thought to be eradicated in the United States caused several of the stallions at Liberty
Farm to become infected. That, in turn, reduced their value. Four owners of afflicted horses are

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now trying to recoup the losses.
Two summary judgment motions are before me. First, Liberty Farm asks for summary
judgment on a tort clumsily referred to as the “violation of privacy through publication of private
facts.” It also seeks summary judgment on the more generic invasion of privacy claim as well as
the tortious interference and negligent or reckless supervision claims asserted against it. (DE
137.) There are a number of other claims not being challenged on summary judgment by Liberty
Farms including bailment, negligence, professional negligence and breach of fiduciary duty
claims. Second, the other defendants (Robin DeGraff and two DeGraff Stables companies) ask
me for summary judgment on all of the claims against them. (DE 138.)
I’ll take DeGraff’s motion first. She essentially argues that Plaintiffs Brent and Julie
Harnish, Steven Heckaman and Janis Kenghis (whom I’ll collectively refer to as the “Stud
Owners”) haven’t uncovered enough evidence to allow me to disregard Liberty Farm’s corporate
formalities and impute any of its liabilities to her or her other companies. I understand what
these defendants are saying, but I want to hold off on dismissing them, at least for now. To be
sure, a plaintiff attempting to pierce the corporate veil of a defendant normally faces a steep
hurdle. But the Stud Owners have pointed to at least some evidence suggesting that it might be
appropriate here. And in any event, this is a question of equity and not law, so it will be up to me
to decide after a jury returns a verdict. It may even be unnecessary if there is no liability to
impute to DeGraff and her companies (or if there is, but Liberty Farm has sufficient assets to
satisfy it). In light of that, the most efficient course of action is to keep them in the lawsuit for
the time being and address any veil piercing arguments as needed after the jury trial.
A different result is warranted with respect to Liberty Farm’s partial summary judgment
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motion. The tort of violation (or invasion) of privacy through the publication of private facts is
difficult to formulate because there aren’t a lot of reported decisions encompassing that sort of
claim, and those that do address it usually focus on different elements. But one thing is clear. In
order for the disclosure of a private fact to be actionable, that fact must be “highly offensive” – or
significantly embarrassing – to the person asserting the claim. That’s where the Stud Owners’
claims fall short. It’s just too hard for me to believe that a horse owner would suffer a sufficient
degree of personal embarrassment simply because it became known that his or her animal was
infected with an STD, and the Stud Owners haven’t presented me with any evidence or even
argument to make me think otherwise. They certainly might have suffered pecuniary damage
from the disclosure, of course, but that’s covered by their remaining claims.
I also agree with Liberty Farm with respect to the negligent/reckless hiring and
supervision claims. The only person who the Stud Owners say was negligently or improperly
hired or supervised is Dooge. Perhaps he didn’t have enough experience at the time he was
hired. But it doesn’t matter now. Dooge has worked for DeGraff and her operations for at least
ten years, and there’s undisputed evidence he gained extensive breeding experience during this
time. So regardless of whether he should have been hired in the first place, any negligence or
recklessness a decade ago isn’t a proximate or substantial cause of an injuries that occurred years
later. Similarly, given Dooge’s extensive experience breeding horses, there wasn’t any reason for
his supervisor (DeGraff) to think he was so incompetent as to warrant close supervision. And the
Stud Owners haven’t produced any evidence to the contrary. They just say that DeGraff must
have been negligent in supervising Dooge given the ultimate outcome. That’s not enough.
Therefore, and for the reasons set forth below, the Motion for Summary Judgment (DE
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138) is DENIED, and the Motion for Partial Summary Judgment (DE 137) is GRANTED as to
all challenged claims.1
FACTUAL BACKGROUND
The facts of the case are complicated but mostly undisputed. The Stud Owners are four
individuals who own several stallions used for breeding purposes. (DE 137-2 at 5.) Liberty
Farm is a horse breeding facility located in Midway, Kentucky. (Id. at 1-2.) It’s sole member is
DeGraff, who manages the company with the assistance of a number of employees and
associates, including Dooge. (DE 142-2 at 3; DE 143 at 2; DE 143-2 at 8.) DeGraff Stables, Inc.
is an Ohio corporation that owns and breeds horses from an Ohio facility. (DE 137-2 at 2.)
DeGraff is an officer and the sole owner of the company. (DE 142-1 at 5.) DeGraff Stables
Kentucky LLC is a Kentucky limited liability company; DeGraff is the sole member of the entity.
(DE 143 at 2.)
Before I start on my narrative of the case, I should address one factual issue that has
become relevant – the corporate relationship and interactions between DeGraff, Liberty Farm,
and the other two DeGraff companies. DeGraff says that when she communicated with at least
some of the Stud Owners, she was acting on behalf of Liberty Farm. However, there is some
evidence that she solicited them to use her breeding services before the company was even
formed, and that she never indicated she was merely acting as a representative for a third party.
(DE 140-1 at 1; DE 140-2 at 1; DE 140-3 at 1; DE 142-1 at 31-32.) There’s also some evidence
that Liberty Farm failed to observe normal corporate practices, like taking and retaining company

1

The Stud Owners have abandoned their tortious interference claim so judgment will be
entered on that claim without further discussion.
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meeting minutes. (DE 142-1 at 12; DE 142-6 at 1-2.) Finally – at least for the purpose of this
opinion – there’s evidence that assets from the various DeGraff companies were used
interchangeably by one another and by DeGraff and Dooge for their own personal use, including
a Cadillac, house and even a common website. (DE 142 at 2; DE 142-2 at 2; DE 142-4.)
Let’s move on to the meat of the story. In November 2007, DeGraff began soliciting the
Harnishes to use her operation to breed their stallion, Gentlemen Send Roses (known informally
as “Gus”). (DE 29 at 2; DE 137-5 at 4.) The Harnishes had some hesitation, but on December
14, 2007, they took her up on the offer and sent Gus to what was then Liberty Farm to have his
semen collected for breeding. (DE 137-2 at 5.) On February 18, 2008, Heckaman and Kenghis
sent two of their stallions (named Potential Investment and Potential Asset) to Liberty Farm for
the same purpose. (Id.; DE 137-6 at 2.) Shortly thereafter, the Harnishes purchased another
stallion, Invited Back, which they had taken to Liberty Farms to be put in the ongoing breeding
season. (DE 137-5 at 5.)
All four horses had their semen collected while at Liberty Farm. It generally was a three
person process. DeGraff would handle the horses. (DE 142-1 at 13-14.) An employee named
James Skipper prepared them for collection. (Id.) And Dooge did the actual collecting. (Id.) He
also cleaned the instruments used in the process, including the AV, which is normally used with
a cover. (Id.) At the time Liberty Farm and DeGraff were collecting from the Stud Owners’
stallions, they sometimes shared AV covers between the different horses – which, as we will
soon see, will be an important fact in this case. (Id. at 21.)
That takes me to the heart of the case. Unbeknownst to the Stud Owners (or DeGraff and
Dooge, for that matter), at around the same time that they sent their stallion to Liberty Farm,
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another horse arrived on the scene. On December 17, 2007, Zips Heaven Sent (Zips for short)
was taken to the farm for on site breeding and semen collection. (DE 137-2 at 4-5.) The
problem was that Zips was infected with contagious equine metritis, or CEM. (Id. at 5.) This is
a highly contagious sexually transmitted disease that’s spread between horses from mating or –
most relevant here – the use of contaminated breeding equipment and instruments. (DE 142-7 at
1-2.) Zips ultimately infected seven horses with CEM. (Id.; DE 137-13.) Evidence in the case
suggests that the primary culprit behind the spread is the sharing of AV covers. (DE 142-1 at 21;
DE 142-7 at 2.) Further complicating matters, at the time the United States was thought to be a
CEM-free country, and horses generally weren’t tested for the disease. (DE 137-3 at 3.) So there
was no real way to detect the infection, at least not domestically. (Id.)
In any event, Liberty Farm sold horse semen throughout 2008, and it was successfully
inspected by the USDA in March and October of that year. (DE 137-2 at 6.) That shouldn’t be
surprising because, again, the USDA wasn’t testing for CEM at the time. (DE 137-3 at 3.) The
semen samples were shipped and subjected to international testing at a non-USDA facility, which
did test for CEM. (DE 137-2 at 6.) The samples tested positive, and Liberty Farm was
quarantined by federal and state regulators on December 10, 2008. (Id.) On December 15, 2008,
Liberty Farm posted an announcement on its website disclosing the quarantine, and it sent emails
to its customers informing them of its status. (DE 137-11.)
No horses were identified at this point. However, on December 20, 2008, Liberty Farm
began posting on its website more detailed information, including the horses that were being
tested, those that were positive for CEM, and those that were negative. (DE 137-12.) This
continued throughout 2009, and by at least February 27, it had indicated that Gus, Invited Back,
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and Potential Asset (as well as Zips and three other horses) had tested positive and undergone
successful treatment. (DE 137-13 at 1.)
The record is a bit vague on the dollar figures, but there doesn’t seem to be any dispute
that this positive test status reduced the value of these horses, at least to some degree. (DE 142-8
at 2-3.) The Stud Owners brought their lawsuit on December 8, 2010, seeking to recoup those
losses. (DE 1.)
ANALYSIS
Summary judgment is proper “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A genuine dispute about a material facts exists only “if the evidence is such that a
reasonable jury could return a verdict for the non-moving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). In making this determination, I must construe all facts and draw
all reasonable inferences from the record in the light most favorable to the nonmoving party. Id.
at 255.
Piercing Liberty Farm’s Corporate Veil
The first thing I’ll address is the summary judgment motion by DeGraff and her
companies. It essentially argues that the Stud Owners’ claims only lie against Liberty Farm – the
entity that took in their horses – and not its owner (DeGraff) or affiliates (DeGraff Stables
Kentucky LLC or Degraff Stables, Inc.). The Stud Owners respond with two points. First, they
argue, if DeGraff was acting as Liberty Farm’s agent and not in her personal capacity, she never
disclosed that fact. Second, even if she was representing Liberty Farm, the Stud Owners say that
I should pierce the corporate veil and disregard the legal formalities separating that company
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from its owner and affiliates.
It’s important to recognize that this will be a question for me to resolve, and not the jury.
That’s because the doctrine of piercing the corporate veil is an equitable one under both Indiana
and Kentucky law.2 See Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1234 (Ind. 1994);
Stacey-Rand, Inc. v. J.J. Holman, Inc., 527 N.E.2d 726, 728 (Ind. Ct. App. 1988); Schultz v. Gen.
Elec. Healthcare Fin. Servs. Inc., 360 S.W.3d 171, 175-76 (Ky. 2012). And the Seventh Circuit
is clear that when veil piercing is an equitable doctrine under the applicable state law, it will be a
question for the court – and not a jury – to decide. See Int’l Fin. Servs. Corp. v. Chromas Techs.
Can., Inc., 356 F.3d 731, 737 (7th Cir. 2004).
This is important, because it means that I don’t have to worry about (for example) a jury
being confused by the similar sounding names of some of the defendants and getting it wrong. I
also don’t have to worry about wasting a jury’s time with evidence about whether the various
DeGraff companies commingled assets with one another, or whether Liberty Farm has enough
assets to satisfy a judgment against it, or whether it would otherwise be unfair unjust to shield
DeGraff and her companies from Liberty Farm’s liabilities (if there are any). The jury will
determine whether there’s any liability in the first place and then, if they find that there is, I will
conduct a bench trial thereafter to determine whether I should pierce the corporate veil to allow
the Stud Owners to go after Liberty Farm’s owner or affiliates. Given all this, I’m inclined to

2

Because this is a diversity action, I must use the choice-of-law rules of the forum state in
which I am sitting. See Land v. Yamaha Motor Corp., 272 F.3d 514, 516 (7th Cir. 2001).
However, under Indiana choice-of-law rules, the analysis is only required if the difference in state
laws is outcome determinative; if it isn’t, then I should apply Indiana law. See Ky. Nat’l Ins. Co.
v. Empire Fire & Marine Ins. Co., 919 N.E.2d 565, 575 (Ind. Ct. App. 2010). As I’ll explain
throughout the opinion, the same outcome is warranted under either state’s law.
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give the Stud Owners the benefit of the doubt and let them proceed against all defendants if they
point me to any evidence that would support a veil piercing theory.
They’ve cleared that modest hurdle here. Under both Indiana and Kentucky law, a
plaintiff seeking to pierce the corporate veil of a defendant must do at least two basic things –
show that the failure to do so promotes fraud or injustice, and show that the defendant is so
interconnected with another entity that it is functioning as an alter ego or instrumentality of the
second company. See Inter-Tel Techs., Inc. v. Linn Station Props., LLC, 360 S.W.3d 152,
162-65 (Ky. 2012); Aronson v. Price, 644 N.E.2d 864, 867 (Ind. 1994). With respect to the fraud
or (especially) injustice component, there’s no real way to decide that until the underlying claims
are determined and we know (a) whether the Stud Owners win a judgment against Liberty Farm
and (b) are able to collect that judgment – though I’ll note there’s some evidence that Liberty
Farm is no longer operating as a viable enterprise, so there’s at least some concern that any
judgment against it would be one involving an empty shell company.
As for the corporate separateness element, both Indiana and Kentucky apply a detailed
multi-factor analysis, with no particular factor controlling or dispositive. See Reed v. Reid, 980
N.E.2d 277, 301-02 (Ind. 2012); Inter-Tel Techs., 360 S.W.3d at 162-65. These factors include
(among many others) the commingling of assets and the failure to observe corporate formalities.
See Reed, 980 N.E.2d at 301-02; Inter-Tel Techs., 360 S.W.3d at 162-65. And at a minimum the
Stud Owners have produced evidence showing that DeGraff transferred assets among her
companies interchangeably without documenting the exchanges (DE 143 at 2) and that DeGraff
and Dooge commandeered a house owned by DeGraff Stables Kentucky, LLC and a vehicle
owned by DeGraff Stables, Inc. for their own personal use. (Id. at 3; DE 142-2 at 2.) There’s
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also some deposition testimony implying that DeGraff essentially treated the various companies
as a single ongoing operation. (DE 142-1 at 11-12.)
This all may not be enough to allow me to pierce the corporate veil separating Liberty
Farm from DeGraff and her companies at the end of the day. But this evidence is sufficient to
clear the relatively low threshold to merely keep them in the lawsuit for now, especially given the
costs and benefits – and most importantly, efficiencies – inherent in doing so. The proof will be
in the pudding, and this pudding will be served up at a bench trial only if the jury finds Liberty
Farm liable.
Violation of Privacy through Publication of Private Facts
Now on to the tort of violation of privacy through publication of private facts. Kentucky
law isn’t entirely clear on this issue,3 but it seems to embrace the Restatement (Second) of Torts’
formulation of the species of torts generally involving invasion of privacy. See McCall v.
Courier-Journal & Louisville Times, 623 S.W.2d 882, 887 (Ky. 1981) (adopting Restatement
(Second) requirements for invasion of privacy generally in a false light case); Cheatham v.
Paisano Publ’ns, Inc., 891 F. Supp. 381, 384-85 (W.D. Ky. 1995) (considering an invasion of
privacy through publication of private facts claim and citing both McCall and the Restatement
(Second)). According to that standard,
[o]ne who gives publicity to a matter concerning the private life of another is
subject to liability to the other for invasion of his privacy, if the matter publicized
is of a kind that (a) would be highly offensive to a reasonable person, and (b) is
3

From what I can tell, not a single reported Kentucky state court decision specifically
addresses the tort of violation of privacy through the publication of private facts, though it’s
mentioned in at least one opinion. Liberty Farm fails to cite any decisions as well (though it does
cite a federal case from the Eastern District of Kentucky), leading me to believe that I’m not
alone in failing to locate on point state court authority.
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not of legitimate concern to the public.
Restatement (Second) of Torts § 652D.
Indiana courts require the same showing but add another element – the publication must
be “coercive or oppressive.” See, e.g., Nobles v. Cartwright, 659 N.E.2d 1064, 1073-74, 1074
n.19 (Ind. Ct. App. 1995). The parties argue about whether Liberty Farm’s disclosure of the Stud
Owners’ horses’ CEM status meets this last requirement, but they don’t point me to any cases
explaining what it means. My own research likewise failed to turn up any helpful decisions – the
closest I could find was a footnote in the Nobles case stating that “[t]he coercive and oppressive
manner requirement under the Indiana definition, however, could be interpreted to refer merely to
the objective circumstances surrounding the disclosure, as opposed to any culpable state of mind
on the part of the discloser.” Id. at n.19. That’s obviously not especially helpful; it tells me more
what the requirement doesn’t mean than what it does.
But I don’t need to resolve this question because I can’t see any plausible argument that a
horse’s CEM-positive status is highly offensive information. It’s a horse after all. The
arguments by counsel on this issue are a little hazy. Liberty Farm’s argument seems to be a long
non sequitur. Basically, it contends, the information that the Stud Owners’ stallions were CEMpositive wasn’t highly offensive because it was helpful to the public to know which horses were
infected and which ones weren’t. But that doesn’t make sense. Whether or not information is
helpful is irrelevant to the question of whether it is highly offensive. Indeed, there’s a separate
requirement that the information must not be a legitimate concern to the public, which largely
would be redundant under Liberty Farm’s theory. Furthermore, the only case cited by Liberty
Farm is one in which the disclosed information – the contents of an employees private diary –
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was highly offensive, so it’s not very instructive. See Ghassomians v. Ashland Ind. Sch. Dist., 55
F. Supp. 2d 675, 679-80 (E.D. Ky. 1998).
Yet the Stud Owners’ response is equally lacking. First, they don’t cite any cases. They
mainly seem to believe that it’s just obvious on its face that a horse’s CEM-positive status is
embarrassing or offensive information. But it’s not clear to me why that is necessarily true. If
we were talking about a person being infected with an STD, I’d surely agree that this information
is per se highly offensive. But again, we’re talking about horses, and it’s not plain or obvious to
me that the fact that someone’s horse has an STD is particularly offensive or inflammatory. The
Stud Owners go on to argue that the disclosed information affected their stallions’ value. But
this is beside the point; the financial ramifications of the information has nothing to do with its
offensiveness.
As noted above, I couldn’t find any state court decisions from Kentucky addressing this
type of tort. There are a number of Indiana cases that do, but very few of those clarify what
“highly offensive” means in this context. The only one that really says anything about it is
(again) the Nobles decision, which – in a footnote – simply states that the information in question
must be “embarrassing to an ordinary person.” 659 N.E.2d at 1074 n.17. That’s more-or-less
consistent with the Restatement (Second), which explains in a comment that “[i]t is only when
the publicity given to him is such that a reasonable person would feel justified in feeling
seriously aggrieved by it, that the cause of action arises.” Restatement (Second) of Torts § 652D
cmt. c (1977).
Some guidance is found in a handful of cases outside of Kentucky and Indiana in which
physicians were found liable for disclosing information about their patients’ diagnoses and
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afflictions, see Lisnoff v. Stein, --- F.Supp.2d ----, 2013 WL 595882 (D.R.I. 2013); Hudson v. Dr.
Michael J. O’Connell's Pain Care Ctr., Inc., 822 F. Supp. 2d 84 (D.N.H. 2011). Another case
involved a hospital employer improperly disclosing a former employee’s performance review to
other staff members and patients. See Machon v. Penn. Dept. of Pub. Welfare, 847 F. Supp. 2d
734 (E.D. Pa. 2012). A few treatises also provide a little more specific guidance; for instance,
the relevant entry in American Jurisprudence lists five examples of potentially embarrassing or
offensive facts, all of which involve private details about person’s physical characteristics or his
or her sexual orientation or preferences. See 62A Am. Jur. 2d Privacy § 112.
All of this suggests that the dispositive question is whether the improperly disclosed
information concerns a person’s history or characteristics – his health or medical history, his
prior deficient employment performance, or his sexual orientation or preferences. I just can’t see
how information about a person’s property falls within the confines of this tort. All of the
examples I could find in recent cases and in treatises involve private and personal details about
the actual person claiming invasion of privacy, and not merely information about his or her
property. So they’re all distinguishable.
To be sure, I can empathize that the Stud Owners might not want their horses’ infections
publicized for financial reasons. But financially disadvantageous information isn’t always – or to
be honest, even usually – embarrassing or offensive to the person in question. The Stud Owners
simply haven’t connected those two dots. And that’s the main point. Summary judgment is the
time in the litigation process where a party needs to lay its cards on the table and tell me how its
going to prevail on its claims, assuming the jury believes its evidence. Siegel v. Shell Oil Co.,
612 F.3d 932, 937 (7th Cir. 2010) (“Summary judgment is the ‘put up or shut up’ moment in a
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lawsuit.”). If there is a reasonable argument that the Stud Owners’ horses’ CEM status is
embarrassing or highly offensive information, they needed to articulate it at this stage of the case.
They didn’t. That’s fatal to their claim of violation of privacy by the publication of private facts
claim.
Invasion of Privacy Generally
There seems to be some confusion as to whether the Stud Owners are asserting a separate
and distinct and more general breach of privacy claim aside from the claim discussed in the
preceding section. To be sure, it’s not pled as a separate count in their complaint, though the
Stud Owners seem to act like it was in their response to Liberty Farm’s partial summary
judgment motion. (DE 141 at 10-11.) For its part, Liberty Farm didn’t mention the claim in its
opening brief (which shouldn’t be surprising, given its omission from the original complaint),
and it spends less than a page on the issue in its reply.
I’ll follow Liberty Farm’s lead and avoid spending much time on this. The first thing to
say is that distinguishing between the torts of breach of privacy and invasion of privacy by giving
unreasonable publicity given to the other’s private life is misguided. Breach or invasion of
privacy is broad category of tort that consists of a number of distinct “subtorts” (including the
violation of privacy by giving unreasonable publicity given to the other’s private life claim
discussed above). See McCall, 623 S.W.2d at 887; Nobles, 659 N.E.2d at 1073-74 & n.14. So
it’s not enough for the Stud Owners to broadly claim that Liberty Farm has breached or invaded
their privacy; they need to identify which of the privacy subtorts they think apply.
And which one is it here? Based on the Stud Owners’ scant argument in their response,
they seem to believe that Liberty Farm and DeGraff invaded their privacy by sharing information
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concerning the medical condition of their horses, and especially their subsequent treatment and
progress. But this nuance is simply a recasting of the same claim discussed above. If the fact
that a horse is infected with an STD isn’t embarrassing or highly offensive to its owner, it seems
hard to imagine that disclosing that animal’s treatment or progress would be any different.
Therefore, even if the Stud Owners do adequately bring a separate breach of privacy claim,
summary judgment is warranted with respect to it as well.
Negligent/Reckless Hiring or Supervision
That takes me to the final count challenged by the partial summary judgment motion, the
negligent/reckless hiring and supervision claim. The Stud Owners essentially fault Liberty Farm
for hiring Dooge to participate in its operations, including its semen collection efforts, despite his
lack of experience doing so. They also say that the facility (and DeGraff) were negligent or
reckless in supervising him at the time of the events in question. Liberty Farm disagrees about
this characterization of Dooge’s qualifications. It contends that the Stud Owners haven’t
produced any evidence to support their claim.
It’s probably easiest for me to break this issue up into its hiring and supervision
components. I’ll start with the negligent/reckless hiring theory. “Under Kentucky law, the
elements of negligent hiring and retention are: (1) the employer knew or reasonably should have
known that an employee was unfit for the job for which he was employed, and (2) the employee’s
placement or retention at that job created an unreasonable risk of harm to the plaintiff.” Ten
Broeck Dupont, Inc. v. Brooks, 283 S.W.3d 705, 733 (Ky. 2009). Indiana courts frame the
analysis slightly differently – they just require that an employer exercise reasonable care in hiring
and retaining employees. See Sandage v. Bd. of Com'rs of Vanderburgh County, 897 N.E.2d
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507, 511-12 (Ind. Ct. App. 2008).
It doesn’t matter which test I apply. A negligence claim requires something more than
but-for causation in both states. Kentucky, for its part, requires that the negligence be a
“substantial factor in bringing about the harm” at issue in the lawsuit. See Bailey v. N. Amer.
Refractories Co., 95 S.W.3d 868, 871 (Ky. Ct. App. 2001). Under Indiana law, in addition to
showing but-for causation, a plaintiff must prove that “the injury was a natural and probable
consequence of the defendant’s conduct, which in the light of the circumstances, should have
been foreseen or anticipated.” Kovach v. Caligor Midwest, 913 N.E.2d 193, 197-98 (Ind. 2009).
The problem for the Stud Owners is that the lag between when Dooge was hired and
when their stallions were infected with CEM is just too big to conclude that any impropriety in
the former was a substantial factor in the latter. It’s undisputed that Dooge began working for
DeGraff and her various horse breeding operations in the late 1990s, and that he participated in
the semen collection process for at least ten years before the incidents in question. That decade
of working with horses necessarily negates the possibility that any inexperience at the time he
was hired significantly contributed to the CEM outbreak. Put simply, even if I accept as true the
Stud Owners’ argument that Dooge never should have been hired due to his inexperience, by
they time their horses were infected, he wasn’t inexperienced at that point – and certainly not
enough for it to be a substantial factor in causing the infection.
The analysis is a bit different with respect to a negligent/reckless supervision claim,
though the end result is the same. Kentucky has adopted the Restatement (Second) of Agency’s
formulation of a negligent supervision claim: “A person conducting an activity through servants
or other agents is subject to liability for harm resulting from his conduct if he is negligent or
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reckless: ... (c) in the supervision of the activity.” Restatement (Second) of Agency § 213 (1958);
see also Smith v. Isaacs, 777 S.W.2d 912, 914 (Ky. 1989). Indiana courts have fleshed this out a
bit more. “Negligent retention and supervision is a species of negligence and has the following
elements: 1) a duty of care owed by an employer to a third person; 2) breach of that duty; and 3)
injury to the third person proximately caused by the employer’s breach.” Scott v. Retz, 916
N.E.2d 252, 257 (Ind. Ct. App. 2009) (citing Clark v. Aris, Inc., 890 N.E.2d 760, 763 (Ind. Ct.
App. 2008)).
The Stud Owners’ sole – and once again, virtually unsupported – argument seems to be
that because there must have been some negligence in the semen collection process, DeGraff and
Liberty Farm necessarily must have been negligent in supervising the collector. That doesn’t
make sense, for two reasons.
First, the question of whether Liberty Farm’s employees were negligent or reckless in
collecting semen from the Stud Owners’ stallions in the first place is separate and distinct from
the question whether Liberty Farm was negligent or reckless in supervising them. And while the
Stud Owners’ have produced some evidence supporting their position on the first issue, they
haven’t done so on the second. They acknowledge that there’s no way to know the exact details
concerning the infection of each of their horses but argue that if ordinary care had been taken
then those infections likely would not have occurred. Perhaps they’re right. Perhaps this sort of
scenario calls for the application of a res ipsa loquitur negligence presumption. See, e.g., Sadr v.
Hager Beauty Sch., Inc., 723 S.W.2d 886, 887 (Ky. Ct. App. 1987) (noting that the res ipsa
loquitur doctrine is an evidentiary doctrine which allows a jury to infer negligence on the part of
the defendant); Johnson v. Wait, 947 N.E.2d 951, 959 (Ind. Ct. App. 2011) (“Res ipsa loquitur,
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or ‘the thing speaks for itself,’ is a rule of evidence that permits an inference of negligence to be
drawn based upon the surrounding facts and circumstances of the injury.”).
But that invariably would go to their negligence and professional negligence claims, not
their negligent/reckless supervision ones. Or to put it slightly differently, I can buy the argument
– at least for now – that given the horses’ infection, we can presume that something went wrong
in the collection process. Yet this “something” doesn’t have to involve supervision. One could
easily imagine any number of scenarios in which DeGraff or another supervisor paid the
appropriate amount of attention to what Dooge was doing, and yet CEM still spread, perhaps
even negligently or recklessly. For example, there’s some evidence suggesting that DeGraff and
her team simply performed too many semen collecting procedures to be able to observe adequate
standards of cleanliness and hygiene. (DE 142-7 at 1-2.) If that’s right, it’s certainly strong
evidence of negligence or recklessness on the part of Liberty Farm and/or its employees, but it
doesn’t necessarily mean that the supervision of any particular employees should be faulted.
Second, based on my understanding of Liberty Farm’s collection methods, it seems
exceedingly unlikely that Dooge was inadequately supervised as a factual matter. Indeed, as I
noted when describing the facts of the case, it looks like he was accompanied by DeGraff and
one other employee in the vast majority of collection procedures. How could this even arguably
constitute negligent or reckless supervision? The bottom line is that Dooge or other Liberty
Farm employees may well have been negligent while collecting semen from the Stud Owners’
horses, but there’s just no evidence that this underlying misconduct automatically should be
traced to his employer’s (alleged) negligent or reckless supervision. Therefore, summary
judgment is appropriate on this claim as well.
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CONCLUSION
For all of the reasons discussed above, the Motion for Summary Judgment (DE 138) is
DENIED, though DeGraff and her companies will have the opportunity to reassert their veil
piercing arguments after the jury returns its verdict if they need to. The Motion for Partial
Summary Judgment (DE 137) is GRANTED with respect to all challenged claims.
SO ORDERED.
ENTERED: June 25, 2013.
s/ Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT

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