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CDI Signs Agreement to Buy Ellis Park

Churchill Downs Incorporated announced that it has signed a definitive agreement to acquire Ellis Park Racing & Gaming in Henderson, Kentucky, from Enchantment Holdings, LLC, an affiliate of Laguna Development Corporation, for total consideration of $79 million in cash, subject to certain working capital and other purchase price adjustments. CDI will also assume Ellis Park's opportunity to construct a track extension facility in Owensboro, Kentucky.

“This is an exciting announcement for the horse racing industry, the cities of Henderson and Owensboro, and the entire Commonwealth of Kentucky,” said Kentucky Governor Andy Beshear. “Churchill Downs has proven it has the experience, resources, and desire to reinvigorate Ellis Park into a premier racing destination and provide unmatched gaming entertainment.”

Ellis Park, located north of the Ohio River and just south of Evansville, Indiana, also features a gaming facility venue with approximately 300 historical racing machines.

“We are very enthused to welcome Ellis Park to the Churchill Downs racing family,” said Bill Carstanjen, Chief Executive Officer of CDI. “Our team is committed to building a summer meet at the 'Pea Patch' that keeps more Kentucky-bred horses and Kentucky-based trainers' in their home state while attracting top horse racing talent from across the country to the Bluegrass State each July and August.”

The closing of the transaction is contingent upon approval by the Kentucky Horse Racing Commission. If change of control is approved, the parties expect to close the transaction shortly thereafter.

CDI has commenced planning to make both critical investments in the Ellis Park racing infrastructure and to construct Owensboro Racing & Gaming, a track extension and entertainment venue at Owensboro's Towne Square Mall that will feature 600 HRMs, a simulcast wagering center, and multiple food and beverage offerings. Over the next year, CDI expects its total investment in Henderson and Daviess Counties to be approximately $75 million in addition to the purchase price.

“The opportunity to bring Churchill Downs to Owensboro is particularly significant to us,” said Jason Sauer, Senior Vice President of Corporate Development for CDI, “We are eager to start the work to elevate Ellis Park's reputation as a summer destination for Thoroughbred racing while delivering a premier gaming and entertainment experience to Daviess County. We look forward to sharing more exciting details about our plans in the coming days.”

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CDI Names Gary Palmisano Executive Director of Racing

Gary Palmisano, Jr. has been promoted to Executive Director of Racing for Churchill Downs Incorporated, the company announced Monday. In this role, CDI says Palmisano will “support and enhance the Company's commitment to the U.S. Thoroughbred racing and breeding industry as well as focus on the implementation of standards and processes outlined in the Horse Racing Integrity and Safety Act” across CDI racing properties.

“Gary brings a wealth of varied industry experience that ideally positions him for success in this role,” said Bill Mudd, President and Chief Operating Officer at CDI. “In addition to strong relationships with key stakeholders, his unparalleled passion and vision for this sport will ensure that Churchill Downs and its racing assets remain progressive leaders in a rapidly-evolving industry.”

Prior to this promotion, Palmisano served in multiple roles at Churchill Downs Racetrack including Special Assistant to Track President, VIP Player Services Manager and, most recently, Director of Race Day Operations. Palmisano started his professional career in racing in Louisiana where he gained experience at Fair Grounds Race Course and with the Louisiana State Racing Commission.

“This opportunity is a lifelong dream realized for me,” said Palmisano. “Having grown up in the barn area of Fair Grounds Race Course with my dad, the late Gary Palmisano, Sr., being a longtime trainer and racing official, I quickly knew that racing would be my life's passion. Ever since moving to Louisville to pursue an Equine Business Degree at the University of Louisville and beginning my work as an intern at Churchill Downs Racetrack, I've maintained a focus on amassing as much knowledge as I could so I could serve the industry I love in a capacity like this.”

Palmisano's appointment as Executive Director of Racing will be effective immediately.

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CDI: Baffert ‘Broke Rules, Must Bear Consequences’

Just days after the one-year anniversary of Churchill Downs, Inc. (CDI)'s, ruling-off of trainer Bob Baffert over his repeated equine medication violations, the gaming corporation that controls the GI Kentucky Derby swatted back at the Hall of Fame trainer in federal court in an attempt to get a judge to dismiss a lawsuit initiated by Baffert that aims to reverse the two-year ban.

“For the past eleven months, Bob Baffert has tried to dodge accountability for drugging Medina Spirit,” CDI wrote in a reply brief filed June 6 in United States District Court (Western District of Kentucky, Louisville Division).

“He has brought legal challenges around the country, all of which have ended in failure,” the filing continued. “The Kentucky Horse Racing Commission (KHRC) and the New York Racing Association (NYRA)–organizations Baffert admits have 'no skin in the game'–have independently reached the same conclusion as CDI: Baffert broke the rules and must bear the consequences.”

Baffert, whose horses have crossed the finish wire first in the Derby a record seven times, was declared unwelcome to race in the Derby or at any CDI-controlled property through the 2023 spring meet after post-race tests revealed his 2021 Derby winner, Medina Spirit, tested positive for betamethasone.

The CDI ban is separate from the under-appeal, 90-day suspension Baffert is currently serving for the Class C drug infraction ruling that was handed down in February by the KHRC.

“In this Court, Baffert has failed to defend the legal sufficiency of his complaint, and this lawsuit should meet the same fate as all his others,” CDI's filing stated.

The filing continued: “None of this misdirection works…. Baffert's lawsuit is a desperate and baseless attack on CDI's right to protect the integrity, reputation, and safety of the races it hosts. The Court should dismiss his complaint.”

Baffert doesn't see it that way. The federal lawsuit he filed Feb. 28 against CDI, its chief executive, Bill Carstanjen, and corporate board chair, Alex Rankin, alleged that Churchill Downs is actually a “municipal park” that counts as “public property,” and that CDI is purportedly restraining his ability to participate in interstate commerce.

Baffert also took umbrage with CDI's supposed “usurping” of the powers of the state racing commission to police the sport, and he alleged a “conspiracy” by CDI's higher-ups to “deprive [his clients] of their freedom to select their chosen trainer for their Derby horses while leaving the licenses of their own trainers unencumbered.”

CDI, in its June 6 rebuttal, described Baffert's legal approach as “free-wheeling,” adding that “he offers a jumble of factors that might bear on state action, propounding six different formulations in a single perplexing paragraph. The Sixth Circuit does not take this approach. It holds plaintiffs 'must prove' state action under one of three tests established by the Supreme Court.”

They are, according to CDI:

The Function Test–“Baffert fails to allege facts showing that horse racing has been 'traditionally and exclusively performed' by 'the government' in Kentucky.”

The Compulsion Test–“Baffert has not plausibly alleged that Kentucky compelled CDI to suspend him.”

The Nexus Test–“Baffert drains the thesaurus in offering various proposed formulations of state action, but he cannot satisfy the nexus test, which requires showing Kentucky was 'a joint participant in the challenged activity.'”

As for Baffert's assertion that Churchill Downs is a public space because CDI 20 years ago transferred its flagship Louisville facility to the city and then leased back the land as part of a lucrative redevelopment financing deal, CDI wrote that the track “is not a public park, and there is no constitutional right to race in the Derby or [GI Kentucky] Oaks. Baffert…remains free to attend races at the Racetrack, [but] there is no 'liberty interest' in competing in horse races at a privately operated track.”

The CDI filing continued: “Baffert has not even pled a coherent theory as to how the suspension restrained trade…. Even if the suspension could be deemed a restraint of trade under some other theory Baffert does not articulate, it would be evaluated under the rule of reason…which would require Baffert to establish that Defendants have market power.

“Here, however, Baffert does not even allege that CDI or Carstanjen compete in a 'horse breeding' market, let alone have market power in it.”
The filing continued: “As to Rankin, the complaint contains no plausible factual allegations that he exerts power over the purported market, nor could it, given that Rankin is just one among a universe of horse breeders in the United States and is not even alleged to have ever run a horse in the Derby or Oaks.”

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CDI Wants Baffert Suit Dismissed in Entirety

On the same afternoon that Churchill Downs took entries for the GI Kentucky Derby that included two horses formerly trained by barred trainer Bob Baffert, the gaming corporation that controls the Derby asked a federal judge to dismiss a lawsuit Baffert had filed Feb. 28 attempt to get his private-property banishment by Churchill Downs, Inc. (CDI), overturned.

Back on Apr. 11, the same federal judge in United States District Court (Western District of Kentucky) had permitted Baffert to withdraw his motion for a preliminary injunction to allow him to enter horses in this year's Derby when it became evident that such a motion, even if successful, would have been trumped by a Kentucky Horse Racing Commission (KHRC) equine drug suspension that Baffert is currently serving.

But because the original lawsuit was also intended to fight CDI's two-year banishment of Baffert that runs through the 2023 Derby, the suit remains active despite the withdrawal of the motion for injunction. So on May 2, CDI took the next logical legal step by asking for the suit as a whole to be thrown out.

“This lawsuit is as meritless as all of his others,” CDI stated in its dismissal motion, alluding to court cases Baffert has initiated against the New York Racing Association (NYRA) and the KHRC. “Baffert's claims fail as a matter of law, and this Court should dismiss his complaint in its entirety.”

Baffert's flurry of litigation over the past year stems from now-deceased Medina Spirit testing positive for betamethasone after winning the 2021 Derby, plus Baffert's recent history of equine drug positives in major races.

Last May CDI barred Baffert from its properties. The New York Racing Association (NYRA) has also sought to ban the Hall of Fame trainer, but a federal judge has ruled Baffert can still race in New York while an internal NYRA exclusion hearing process plays out. Baffert also recently failed in Kentucky courts to get a stay of his 90-day suspension and $7,500 fine while those KHRC penalties go through a separate appeals process.

The Feb. 28 complaint alleged that CDI and its corporate officers and executives have, “without legal authority and without any notice or opportunity to be heard, 'suspended' Baffert's right to race horses on CDI properties, precluding him from practicing his chosen profession or using his license on CDI properties. CDI's actions also constitute an unlawful restraint on trade.”

CDI begged to differ in its May 2 dismissal motion.

“Whatever his theory may be, Baffert is wrong in contending that CDI had no right to exclude him,” the court document stated, noting that legal precedents have already established that Churchill Downs is “a private facility” that may “exclude whomever it desire[s] from the track.”

CDI laid out four specific reasons for the suit to be tossed out.

“First, the due process claim fails because CDI is a private corporation, the individual defendants are not government officials, and no one violated Baffert's rights in any event…

“Second, the 'unlawful exclusion' claim fails because Kentucky has never recognized a standalone tort of unlawful exclusion. Nor can there be tort liability where, as here, the tort claim is not independent of the parties' contractual duties. CDI has a well-settled common law and contractual right to exclude from its property and its races repeat offenders like Baffert who endanger the safety of horses and jockeys, and threaten the integrity of the sport and CDI's signature events.

“Third, the antitrust claims fail because Baffert does not allege antitrust injury. His argument is that CDI's suspension injured him; he does not plausibly allege that the suspension harmed competition in a commercial market–the type of injury the antitrust laws were intended to prevent. His claim of a conspiracy to restrain trade fails because he has not alleged an actionable conspiracy…

“Fourth, the tortious interference claims fail because it is well-settled Kentucky law that exercising rights under a contract–as CDI indisputably did here when it suspended Baffert–cannot give rise to such claims. Baffert also failed to allege facts that plausibly show Defendants acted with malice.

“This lawsuit is nothing more than Baffert's latest attempt to dodge accountability for his wrongful actions,” CDI summed up. “The Court should dismiss his complaint with prejudice.”

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