Rudy Rodriguez Gets $394K Judgment Against Zayat Stables, Joins MGG Investments Civil Case

The pool of people seeking money from Zayat Stables got more crowded in recent weeks as a judge in Kentucky's Fayette County Circuit Court consolidated two civil cases against the 2015 Triple Crown-winning owner. Trainer Rudy Rodriguez won a motion in late June to combine his civil case in Fayette County with an existing case between MGG Investments and Zayat Stables over $24 million in unpaid loans.

Rodriguez won a judgment against Zayat Stables in a New York court in late 2019 for $394,437.19 in unpaid training bills that his legal team says went back years.

MGG had objected to the motion before Judge Kimberly Bunnell, questioning whether the two cases had enough in common to be combined. After all, the company argued, Rodriguez had a judgment in his favor from a New York judge, but had nothing to do with the loan Zayat took out from MGG in 2016.

“Zayat Stables undoubtedly owes a lot of money to a lot of people,” read paperwork filed by MGG ahead of the judge's order to consolidate. “Allowing Rodriguez Racing into the case will only open up Pandora's box and cause all of Zayat Stables' other creditors to come out of the woodwork to join this case, regardless of the irrelevance of their claims to the matters before the Court in this case.”

Attorneys for Rodriguez Racing disputed that assertion and pointed out that in one monthly report alone, over $137,000 had been paid to creditors of Zayat Stables by the receiver in charge of winding down the Zayat Stables operation.

Rodriguez no longer trains horses for Zayat, according to court filings. In mid-October 2019, he alleged the stable owed him more than $600,000 in unpaid bills, and filed an agister's lien on Lezendary and Majid, the two Zayat horses still in his possession at the time. Justin Zayat, son of Zayat Stables founder Ahmed Zayat, told media the two sides had come to an agreement over the amount owed.

“He's a wealthy man. I'm a working guy,” Rodriguez said at the time. “It costs me a lot to run the stable, with salaries and workers' compensation. Whenever I talk to him, he says he's going to pay, he's going to pay. I told him, 'I can't carry you anymore.'”

Ahmed Zayat would later announce in a tweet in late October that Rodriguez was “back on the team,” showing Rodriguez with Ahmed and Justin Zayat in what would seem to be the Zayat Stables offices in New Jersey. That tweet has since been deleted.

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MGG Wins $24 Million Summary Judgment Against Zayat Stables, Cases Against Co-Defendants Dismissed

The ongoing civil case between New York financial group MGG Investments and Triple Crown-winning owner Zayat Stables continued this week with a series of judgments on the myriad of motions before a Fayette County Circuit Court. A number of big names in the breeding industry who had been pulled into the case for purchasing horses or breeding rights from Zayat saw MGG's claims against them dismissed by Judge Kimberly Bunnell.

McMahon of Saratoga Thoroughbreds and Hill 'n' Dale Farm, which purchased Solomini and American Cleopatra respectively were dismissed from the case, as were LNJ Foxwoods and Orpendale Unlimited Company, which purchased breeding rights to American Pharoah from the Zayat family. MGG had brought suit against them as co-defendants because it claimed they knew or should have known MGG was entitled to proceeds from those sales, as Zayat still owed the group for a $30-million loan he had taken out in 2016. Judge Bunnell disagreed that the horses and breeding rights were subject to such a lien according to the Food Security Act, which states that purchasers of farm products are not subject to security interests created by the seller, whether they know about the existence of those interests or not.

Judge Bunnell also ruled on a series of motions traded in recent weeks between MGG and Zayat Stables, which brought counterclaims against the investment group. She granted an order for summary judgment against Zayat for $24,534,166.13, which represents the remainder of the loan and associated interest MGG claims Zayat still owes on the original $30 million.

When Zayat Stables was first sued for the loan alongside individual members of the Zayat family, it filed a counterclaim stating MGG did not understand the horse industry, “employed a pattern of deception to lock Zayat Stables into a loan written to fail,” and “crammed terms down Zayat Stables' throat that did not resemble the deal struck” at a time when the stable's debt was just about to mature.

The Zayat counterclaim included counts of fraudulent inducement, fraudulent concealment, breach of financing contract, breach of good faith and fair dealing, negligence/impairment of collateral, and tortious interference related to MGG's handling of the loan from before paperwork was signed to its seeking receivership just before the 2019 Eclipse Awards ceremony.

Judge Bunnell dismissed Zayat Stables' charges that MGG fraudulently induced it into a loan and concealed a lack of intent to fulfill its financial commitments to the equine operation. She did not dismiss a count of breach of implied covenant of good faith and fair dealing.

She also partially granted a complaint of fraud from MGG, ordering that it may only pursue claims against Zayat related to fraudulent inducement of pre-contract representations with regard to the American Pharoah breeding rights it sold, and any fraud possibly stemming from Zayat Stables' communication with MGG about its equine collateral.

It's unlikely the flurry of court motions being hurled back and forth in the case will stop any time soon. Documents filed by the receiver currently in charge of the Zayat Stable in early June indicated that conflict remains over Zayat horses whose bills have gone unpaid. The receiver describes a series of communications with trainer Robertino Diodoro, who has four Zayat horses in his shedrow which he has told the receiver he has claim to. The outcome of a hearing to determine whether the Kentucky court could compel Diodoro to give up the horses was not available at press time.

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