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The Wait Begins: Fifth Circuit Hears HISA Constitutionality Appeal Arguments

A 2 1/2-year-old legal fight led by the National Horsemen's Benevolent and Protective Association (NHBPA) to try and overturn the Horseracing Integrity and Safety Act (HISA) based on alleged constitutional flaws got distilled into one hour of oral arguments on Wednesday in the case's second go-round before the United States Court of Appeals for the Fifth Circuit in New Orleans.

As expected, lawyers for the two sides stuck to the finer points of constitutionality law, and there were only several passing references related to horse racing. The arguments centered on the non-delegation doctrine, which is a legal principle that holds that Congress cannot delegate the power to legislate to executive agencies or private entities.

The panel of three judges–the same trio that declared a previous version of HISA unconstitutional last November, leading to an amended version of HISA that became law in December–did not overtly tip their hands as to which arguments they might be favoring based on the questions they asked of the attorneys. Nor did the judges conclude the session by declaring any timetable for issuing their decision.

The National NHBPA, 12 of its affiliates, and a number of Texas-based racetrack entities, plus the state of Texas itself and its racing commission, are the plaintiffs/appellants.

The HISA Authority, the Federal Trade Commission (FTC), and officials from each organization are the defendants/appellees.

“Congress did not, with this meager amendment, fix the fatal non-delegation problems plaguing HISA,” said William Cole, an attorney for the state of Texas who was among those who argued for the appellants.

“Again, there's at least three areas where the lawmaking power is not sufficiently subordinated, because, as we've mentioned time and again, the Authority's rules govern unless they can shove a rule through notice-and-comment rulemaking. The upshot is that for years, it's likely going to be the case that the Authority's rules govern, not the FTC's,” Cole said.

Joseph Busa, an attorney for the FTC, argued that the appellees believe the Fifth Circuit already settled the outstanding non-delegation issues when the same panel identified the constitutional flaws that led to Congress's rewrite of HISA.

“What [the appellants] are presenting to you, is they are saying no private entity can wield this kind of power, regardless of how subordinate they are, regardless of the degree of supervision that the public agency has over them. That is squarely inconsistent with almost 100 years of Supreme Court precedent,” Busa said.

The panel of judges referenced the “voluminous” number of pre-argument briefs filed by both sides in the case.

The HBPA had written in a pre-argument brief that it has problems with the Authority allegedly portraying itself as both a governmental body or a private organization “depending on which suits its interests on any individual argument,” according to an Aug. 25 court filing.

“Sometimes [the Authority] wants to be like a government entity, with the power to compel registration, collect mandatory fees, conduct searches, draw blood and urine samples, and impose sanctions with 'the force of federal law,'” the HBPA brief stated.

“Other times it wants to be a private business league, choosing its own board, running its own corporate affairs, and exempt from the Appointments and Appropriations clauses, the Freedom of Information Act, etc…” the brief continued.

This purported dual nature of the Authority, the HBPA alleged, “exposes the overall flaw” by which the 2022 rewrite of the HISA law should be struck down.

“Nothing could be more unfair or inequitable than to have a regulator with all the powers of government but exempt from all the democratic accountability and safeguards for liberty imposed on government,” the HBPA's filing stated.

The Authority defendants had asserted to the Fifth Circuit in their own pre-argument brief filed Aug. 4 that the HBPA's “feeble attempts” to contrast HISA with other statutes upheld against private non-delegation challenges rest on supposed differences that are either factually inaccurate or constitutionally irrelevant.

The Authority's brief put it this way: “Congress, the Executive, and all three federal courts that have considered the amended Act have reached the same conclusion: HISA is now constitutional. As every court to consider Congress's amendment has held, HISA no longer violates the private-nondelegation doctrine because the Authority is now subordinate to the FTC,” the filing stated.

The first time the HBPA plaintiffs attempted to challenge the original 2020 version of the HISA statute in federal court, on Mar. 15, 2021, the suit was dismissed, on March 31, 2022.

The HBPA plaintiffs then appealed, leading to the above-referenced Fifth Circuit Court reversal on Nov. 18, 2022, that remanded the case back to the lower court. In the interim, an amended version of HISA got passed by Congress and was signed into law by President Joe Biden on Dec. 29, 2022.

On May 4, 2023, the lower court deemed that the new version of HISA was constitutional because the rewrite of the law fixed the problems the Fifth Circuit had identified.

The HBPA plaintiffs then swiftly filed another appeal back to the Fifth Circuit, which led to an “expedited” scheduling of the Oct. 4 oral arguments.

The three judges on this Fifth Circuit panel are Stuart Kyle Duncan and Kurt D. Engelhardt (both nominated to their positions by President Donald Trump in 2018) and Carolyn Dineen King (who was nominated by President Jimmy Carter in 1979).

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Judge: ‘Substantial Overlap’ of Plaintiffs In Multiple Anti-HISA Suits ‘Indicative of Improper Motive’

A lawsuit spearheaded by the states of Louisiana and West Virginia that is trying to derail the Horseracing Integrity and Safety Act (HISA) via alleged constitutional violations was dealt a setback Wednesday when a federal judge recommended that an amended version of the complaint be stricken from the record.

That recommendation, if it gets put into place by a final order, would bar 14 individual Horsemen's Benevolent and Protective Association (HBPA) affiliates, plus a wide swath of states, racing commissions, and individual racetracks from becoming parties to the 14-month-old lawsuit.

Magistrate Judge David Ayo of the United States District Court (Western District of Louisiana) also recommended in his 13-page report that the original case be stayed pending the outcome of a separate, but similar Fifth Circuit Court appeal that is headed by the National HBPA and is also trying to stop HISA from operating based on other alleged constitutional violations. Oral arguments in that case are scheduled for Oct. 4, but it could then be months before a Fifth Circuit decision gets issued.

The judge minced no words in his Sept. 13 report, which in part scolded the original and would-be plaintiffs for wasting the court's resources with “substantial overlap of parties” and their “multiple suits challenging the Act,” referring to litigation that is either currently swirling in the federal court system or has already been adversely adjudicated against some of the plaintiffs over the course of the last 2 1/2 years.

“After an exhaustive review of the landscape of suits challenging the Act, this Court concludes that Plaintiffs' amended complaint is the result of deliberate strategy and not excusable neglect and, for that reason, is a 'bad faith amendment' within the Fifth Circuit's interpretation of that term,” the judge wrote.

“Additionally, Plaintiffs' amendment is an abuse of procedure and an impermissible use of judicial resources. Finally, there can be no doubt that the shuffling of plaintiffs from one suit to another in this manner prejudices Defendants. This litigation tactic is duplicative and the very definition of 'piecemeal.'”

The original plaintiffs in the June 29, 2022, lawsuit were the state of Louisiana, its racing commission, the Louisiana HBPA, the Louisiana Thoroughbred Breeders Association, the state of West Virginia, its racing commission, and five individuals regulated as “covered persons” under HISA. The Jockeys' Guild was also an original plaintiff, but it opted out of the lawsuit on Dec. 23, 2022, after Congress had just passed and President Biden was about to sign into law the amended version of HISA that is now in effect.

The defendants, who consist of the HISA Authority, the Federal Trade Commission (FTC), and board members and overseers of both entities, are alleged by the plaintiffs to have violated the Fourth, Seventh and Tenth Amendments to the U.S. Constitution, plus the Administrative Procedure Act (APA), which governs the process by which federal agencies develop and issue regulations,

On Feb. 6, 2023, the plaintiffs filed an amended complaint to the lawsuit, with the chief changes being the addition of the broad new slate of new plaintiffs.

After the defendants moved to strike the amended complaint on Mar. 6, the plaintiffs followed up three weeks later by filing a memorandum in support of allowing the new entities.

“Defendants suggest that Plaintiffs engage in something sinister by seeking amendment to request expanded relief,” the plaintiffs' Mar. 27 court filing stated. “But parties across the country routinely amend to seek expanded relief without issue.”

Not so, rebutted the defendants, who in an Apr. 3 court filing characterized the alleged piling-on of plaintiffs as “maneuvering” intended to “piggyback” upon temporary relief from HISA's rules that had already been granted via a stay to the states of Louisiana and West Virginia.

The Sept. 13 report by Judge Ayo explained why he sided with the HISA Authority and the FTC in recommending that the amended complaint be stricken.

“[G]roups of plaintiffs, including the State of Louisiana and the Louisiana HBPA, have already litigated the constitutionality of the Act, as amended, creating substantial overlap among these suits as to parties and claims,” the judge wrote. “To the extent Plaintiffs would draw a distinction between this suit and those now on appeal to or decided by various circuit courts of appeals based on the inclusion of APA claims, this Court concludes that such argument must fail based on considerations of claim splitting.”

In federal courts, a rule against “claim splitting” prohibits parties from simultaneously initiating multiple suits involving the same subject matter against the same defendants. Application of the rule does not require that the claims or parties be identical in each suit. A court may find improper claim splitting where the claims in the more recent suit arise from the “same nucleus of operative facts” as those advanced in a prior suit.

Judge Ayo continued, writing in a footnote at a different point in the report that, “this Court is mindful of the benefit of allowing an issue to 'percolate' in the various district courts and courts of appeals.

But, the magistrate judge added, “Plaintiffs leapfrogging from one case to another in different district and circuit courts in the wake of unfavorable rulings does little to further this objective.”

Judge Ayo's report and recommendations now go to Chief U.S. District Judge Terry Doughty, who is overseeing the underlying lawsuit. Both sides in the case will have 14 days to file specific, written objections, after which Doughty will issue a final decision at the district court level that will be appealable to the U.S. Court of Appeals.

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Vets: HISA Puts Them at ‘Greater Risk than Other Covered Persons’

The North American Association of Racetrack Veterinarians (NAARV) is arguing for the United States Court of Appeals for the Fifth Circuit to overturn the Horseracing Integrity and Safety Act (HISA) on constitutional grounds because the law allegedly “places the racetrack veterinarians at a greater risk than other covered persons” from a due process standpoint.

Chief among the assertions made by the NAARV in a 51-page “friend of the court” brief filed July 14 are that “initial findings of wrongdoing by a member of NAARV, pursuant to HISA, result in a report to the Federal Trade Commission (FTC) and, therefore, a federal violation. A federal violation would inevitably result in the loss of not only the NAARV member's track license, but also the loss of the member's professional license to practice veterinarian medicine.”

In addition, the NAARV alleged that HISA creates a “financial barrier to due process review.”

That's because, according to the NAARV's filing, the ultimate authority, the FTC, isn't obligated to accept any covered person's request for review of a HISA ruling against them.

And if such a request for review is denied, that covered person's only right to appeal is to bring the matter all the way to a United States Court of Appeals, the NAARV stated. There are only 12 such courts in the country, divided regionally.

“Logistically, this is more challenging,” the NAARV filing stated. “Take, for example, a covered person who has an alleged violation in Texas. He or she must now pursue an appeal before the Fifth U.S. Circuit Court of Appeals in New Orleans, Louisiana.

“A person who has allegedly committed a medication violation in Puerto Rico, if he or she decide to appeal, must pursue that appeal before the First U.S. Circuit Court of Appeals in Boston,” the brief continued.

Beyond potential travel burdens, the NAARV pointed out, bringing any legal action to that level of the federal court system isn't cheap.

“The estimated legal cost for a trip to the U.S. Court of Appeals is in excess of $25,000,” the NAARV stated.

“It creates a cost or premium for substantive due process rights that is unobtainable for most NAARV members and thus, results in a denial of their due process rights,” the NAARV stated.

At a different point in the filing, the NAARV explained that veterinarians accused of wrongdoing would no longer be “in a position to 'take the deal' on a minimum violation but instead forced to defend their position to maintain their license and their livelihood.”

The NAARV continued: “Prior to the implementation of HISA, NAARV members were able to negotiate a state violation without necessarily risking their general veterinary license. Under HISA, they are forced to do so in a system [that] deprives them of both substantive and procedural due process.”

The NAARV's assertions were made in support of the appeal led by the National Horsemen's Benevolent and Protective Association (NHBPA) and 12 of its affiliates.

The defendants in the underlying case, which has lingered in the federal court system for 28 months, are personnel from the FTC and the HISA Authority.

The HISA Authority and FTC have an Aug. 4 deadline to file their own briefs with the Fifth Circuit Court.

Oral arguments in the case are tentatively scheduled for the first week in October.

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FTC: Latest Anti-HISA Suit Doesn’t Come ‘Within a Furlong’ of Demonstrating Harms

The Arkansas-based lawsuit filed six weeks ago that is the most recent among five separate federal complaints attempting to derail the Horseracing Integrity and Safety Act (HISA) via alleged constitutionality claims was broadly rebuffed Monday in separate legal filings by the defendants in the case, who are executives with the HISA Authority and the Federal Trade Commission (FTC).

The plaintiffs, led by Bill Walmsley, president of the Arkansas Horsemen's Benevolent and Protective Association (HBPA), and Jon Moss, the executive director of the Iowa HBPA, had asked a judge in United States District Court (Eastern District of Arkansas, Northern Division) on Apr. 6 to declare HISA unlawful and to impose an injunction prohibiting the defendants from enforcing the Anti-Doping and Medication Control (ADMC) rules scheduled to go into effect May 22.

The HISA Authority's opposition brief stated that the plaintiffs in this case, much like those in the other four cases currently swirling in the federal court system, represent only “a faction of the industry long opposed to any change” who continue to “search for a favorable forum” by essentially making similar arguments in front of different judges.

And, the HISA Authority's filing pointed out, both Walmsley and Moss are already involved as parties who have taken various legal actions in three of the other four anti-HISA cases.

“Apparently discontent with those courts' rulings, the Iowa HBPA, Walmsley, and Moss now seek the same extraordinary relief here,” the HISA Authority's May 15 filing stated.

The HBPA-affiliated plaintiffs wrote in their complaint last month that HISA “barely pretends to comply with the Constitution's separation of powers. The Act allows a private corporation to issue binding rules with no guiding principle. The FTC's ostensible oversight serves as a mere mirage.”

The HISA Authority saw the situation differently in its filing.

“The vast majority of industry participants and horseracing states have welcomed the uniform national standards, which took effect on July 1, 2022. Two [presidential] administrations have now supported the law and two bipartisan Congresses have embraced it–including through a statutory amendment that reinforced the Act's constitutionality in December 2022,” the HISA Authority's filing stated.

“Plaintiffs come nowhere near the showing required for a court to dismantle this critical federal regulatory program. Most notably, Plaintiffs cannot demonstrate a likelihood of success on the merits: All four federal judges that have considered Congress's recent amendment to HISA have concluded that the Act is constitutionally sound,” the HISA Authority's filing stated.

“Plaintiffs next rely on a meritless public nondelegation claim that the challengers in the other cases wisely abandoned, or did not consider worth [pursuing], in light of the clear intelligible principles Congress provided,” the HISA Authority's filing stated.

“And Plaintiffs' final claim under the Appointments Clause is contradicted by the undisputed fact that the Authority is not a governmental entity [and] by the decisions of the two federal courts that have already denied the same Article II claim,” the HISA Authority's filing continued.

“None of the other preliminary injunction factors favor Plaintiffs, either. Plaintiffs fail to show irreparable harm: They have been subject to HISA's racetrack safety rules for over 10 months and to similar anti-doping rules under State law for years; purses in Arkansas and Iowa have surged; and the racing season in Arkansas has now ended,” the HISA Authority's filing stated.

“The balance of harms and the public interest also weigh heavily against disrupting a federal regulatory scheme that Congress has mandated (twice) and that has enjoyed substantial compliance already,” the HISA Authority's filing stated. “This Court should deny Plaintiffs' motion for a preliminary injunction.”

The FTC's May 15 filing put it this way: “[The plaintiffs] do not come within a furlong of demonstrating, with evidence, that any purported 'harm is certain and great and of such imminence that there is a clear and present need for equitable relief.'”

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