drew mollica | Horse Racing Free Tips

NYSGC Nixes McPeek’s Request for Clarity in Quarantine Entry Snafu

The New York State Gaming Commission (NYSGC) on Monday denied a request by trainer Ken McPeek to bring clarity to the process of how and when Thoroughbreds coming out of a quarantine can be allowed to enter races.

Back on July 15, another trainer's horse in the barn McPeek shared at Saratoga Race Course tested positive for equine herpesvirus (EHV-1). State agriculture officials, the New York Racing Association, and the NYSGC then imposed a 21-day quarantine of the entire barn retroactive to July 11, which is a common precaution in such EHV-1 outbreaks.

The understanding was that if no other horses got sick during that time frame, the entire stable would be released from quarantine and allowed to race as of Aug. 1.

But when McPeek tried to enter seven horses just days in advance of the quarantine's expiration for the Aug. 1, 4 and 5 cards, the entries were denied by the Saratoga stewards because the horses were still under quarantine at the time those entries were to be taken.

After being unable to make any headway on his own, McPeek retained New York-based attorney Drew Mollica, who reached out to the stewards on July 30, some 3 1/2 hours before the Aug. 3 card was drawn, in hopes that a hearing could be held and the McPeek horses could begin running as soon Aug. 4.

Mollica told TDN at that time that he had sent emails and placed phone calls to NYSGC steward Braulio Baeza Jr. and to the commission itself, but none of the messages yielded a reply.

Mollica wanted to point out that a recent precedent should have been used as a template in the matter: He said that in January 2018, trainer Linda Rice was allowed to pre-enter a horse coming out of an EHV-1 quarantine prior to the actual expiration of that restriction.

Eventually, McPeek's horses were allowed to enter races at the Spa after Aug. 1. But he and his clients had already missed out on purse-earning opportunities. Some owners had made plane and hotel reservations to come to Saratoga to see their horses run, and jockeys had given up other mounts to commit to ride the McPeek stable's horses that the trainer thought would have been able to race.

McPeek then had Mollica formally appeal the situation to the NYSGC, seeking a declaratory judgment arguing that the stewards' position was arbitrary and capricious. McPeek also wanted NYSGC to adopt quarantine race-entry protocols so he and other horsemen would know what to expect in the future, and he asked for equitable relief to assuage the financial injury to himself and his owners.

During the NYSGC's Nov. 8 meeting, all three of those requests were denied.

The case was not discussed and ruled upon by commissioners during the open, public meeting. Instead, executive director Robert Williams read a prepared statement that stated the commissioners had previously heard the arguments and had designated commissioner Peter Moschetti to rule on the matter.

“Following consideration of submissions, commissioner Moschetti found that a declaratory judgment was not available, as the time to enter horses in the desired races had passed, and that there was no longer an existing controversy that would have a direct and immediate effect upon the rights of the parties,” Williams stated.

“Commission Moschetti also found that the granting of the relief sought would constitute issuing an advisory opinion which was not allowable under the facts and circumstances of the matter,” Williams stated.

“Finally, commissioner Moschetti found that directing the commission to create a protocol or rule for the future to decide the issue [that was] raised was beyond the scope of the appeal,” Williams stated.

After the meeting, Mollica told TDN via phone that he wasn't sure if there would be a next legal step for McPeek to seek remedy. But he said it's imperative that the NYSGC address the stewards' inconsistencies in how they handled the 2018 and 2021 EHV-1 entry situations.

“While the commission chose not to delve into the facts and suggested that they procedurally had no power, the reality is that the actions of the stewards were completely contradictory to the actions they had taken in 2018 in the matter of Linda Rice,” Mollica said.

“The horse had the exact same virus. It was exactly the same quarantine, and they allowed her to enter the day before the quarantine ended,” Mollica said.

“It is my hope that although they didn't decide it on the merits, that Mr. McPeek's efforts brought this egregious situation to light, and that they will address it administratively in the near future, because Mr. McPeek brought the inconsistency of their actions to light,” Mollica said.

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This Should be Required Reading for Every Trainer and Owner

by Andrew J. Mollica, Esq
and Len Green, CPA

What an industry!

The recent, well-publicized ongoing legal sagas of both Ahmed Zayat and Ken Ramsey have brought issues surrounding owner-trainer financial relationships into clear focus. Yet, the truth is that no-pay or slow-paying owners probably have been a small, but existing part of racing since the game was invented.

Despite its topical nature, the problem is not going away anytime soon, and the reason is simple: horse racing is a 21st-century industry that is based on an 18th-century business model. At this late date, virtually all owner-trainer relationships are still based upon oral contracts.

While established contract law renders verbalized agreements legally binding, the pragmatic reality is that oral contracts are not easy to enforce and are even more difficult to litigate. In this regard, the words of the late, great movie producer Samuel Goldwyn ring true: “Oral contracts are not worth the paper they are written on.”

Consider that for any contract to be enforceable in court there must be a “mirror image” displayed between the offer of one participant and the acceptance of the other. Agreement terms reflect one another very well when they are written down and subscribed by each party. The establishment of an oral contract almost always degenerates into a he-said/she-said scenario and eventually turns on the credibility (or lack thereof) of the respective parties.

It's for this reason that judges and juries look askance at purported contracts not memorialized in writing and often refuse to find for the litigant (in this case the trainer) who is seeking contract enforcement.

Coady

Suggested Solutions

Clearly, written contracts would make things much easier, both to abide by and to litigate, but a future proliferation of written contracts between owners and trainers would be sea change that is nowhere in sight. Why? The reason is simple: most racetrackers (and people in general, for that matter) hate change.

This said, many would argue that mucking up the existing system–in place for decades if not centuries–with written contracts and more lawyers is not worth the effort. Ironically, it's exactly the opposite; where a writing is missing, it actually encourages non-performance by the owner, and actually clogs the system with more cases, more lawyers, and big problems.

Let's take a common example. An owner and trainer orally agree upon a $100 per-horse day rate–at many tracks, today's standard of what trainers charge.

The question posed is whether a written agreement or an up-front retainer is really necessary for such a simple, straightforward agreement. Consider that by the time a trainer gets her first check from the owner, she has already fronted that owner the training fees for about 45 days. If our hypothetical owner gave our imaginary trainer 10 horses, by the time the trainer bills the first $30,000 at the end of the first month, she is in serious trouble if the owner fails to make timely payment. Worse, the owner might send a check for less, claiming that the day rate verbally agreed to is much less than what the trainer is claiming.

In businesses like law, construction or big-ticket specialty retail, up-front payments, deposits or retainers are the norm. But it is not the standard in the horse industry.

Why are they virtually nonexistent in our industry? The answer is simple. Most successful trainers would tell you they could never ask for either a retainer or a written contract for fear they would not get the horses offered by the owner into their barn, and therein lies the rub.

The late Hall of Fame trainer P.G. Johnson used to say, “An empty stall is better than a no-pay horse.” What Johnson was saying is true: an empty stall does not cost the trainer any money, but the horse of a no-pay owner triggers the same care, custody and control responsibilities (and costs) of any other horse in the barn. Of course, that's when the downward spiral begins.

Coady

The simple fact is that obtaining clients and horses to train is very competitive.

Many times, new owners, who can afford to spend large sums of money on purchasing horses, are greatly influenced to select their trainers based on which trainers win the big races.

Trainers increase their opportunities to win these big races based on the number and quality of the horse they train.

Trainers need horses to train, so when an owner falls behind, the trainer is put in an even more unenviable position. The options are limited: demand payment and most likely lose the horses, or stay the course and hope for a miracle.

The clear answer is demand payment, and don't get further behind. Yet, trainers often keep their no-pay owners on an ever-elongating leash in the faint hope the horse will earn money and the bill will be paid. The consequences of this decision are evident in the headlines today.

Bottom Line

Is there any tax benefit for writing off the accounts receivable as a bad debt?

No.

Most trainers are paid on a cash basis. They only record income as they are paid.

Therefore, they receive no tax benefit for not getting paid.

The Legal Remedy

In every state in the Union except one (Vermont), trainers, or stablemen, have the protection or remedy commonly referred to as an agister's, or stablemen's, lien. In New York, the law is codified as 183 of the New York State Lien Law and in New Jersey it is codified in 2A:44-51.

Under these statutes, a trainer having care, custody and control of a horse has an automatic lien on the horse against unpaid bills. To perfect the lien, the trainer must both formally notify the owner of the indebtedness and the intention to satisfy the debt by selling the horse at public auction. The power of the tool is obvious, because if the horse is worth appreciably more than the bill owned, the wayward owner will usually run to the barn, cash in hand, rather than lose his valuable, income-producing asset in an agister's sale.

Sarah Andrew

Despite this potent legal remedy, most trainers never utilize it.

For one, they often receive bad advice, sometimes from the stewards, who inform them that they had better give up the horse to the non-paying owner lest they be sued and that they should instead sue the owner to get a judgment or, worse yet, they are encouraged to hold the foal papers. None of these “steward tips” have any validity under the law.

First, if an owner is going to sue a trainer, she will do it whether the trainer has possession or not, so the advice is simply bad.

Second, if the trainer turns possession of the horse back to the owner, the trainer loses possession, hence his statutory lien is now forfeited and the trainer has lost the remedy and most likely any chance of recovering her money.

Third, holding the foal papers is an illegal act and, moreover, foal papers are soon to go the way of bobby socks and land-line telephones, as electronic papers become the norm. This is very bad advice as well.

Aside from this, trainers who are owed vast sums of money often don't perfect their liens because they are afraid they will be looked at as bad guys in the industry, while others simply don't want to pay the legal fees to get their money.

Whatever the reason, trainers who are owed money have a legal recourse, but they have to make the hard decision to perfect their liens and sell the horse. If they don't, we have seen the results.

In sum, although it may be unlikely to ever become a reality, all agreements with owners involving the trainer's care and custody of the horse should be expressed in a clear, concise, comprehensive, straightforward writing signed by the parties, and one of the terms that should not be left out is the payment of an up-front training fee.

Lastly, the question should not be whether to auction off the horse of a non-paying owner, but rather how quickly it can be done after the first training bill is more than 30 days late.

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Orlando Noda Fined $5,000 ‘For Action Detrimental To The Best Interest Of Racing’

New York stewards have fined trainer Orlando Noda $5,000 “for action detrimental to the best interest of racing,” reports the Daily Racing Form.

While neither Noda nor commission steward Braulio Baeza would comment on the fine, the DRF report indicates sources that saw Noda “being overly aggressive on a horse that he was exercising ontrack during a recent morning in Saratoga.”

Noda plans to appeal the penalty with the help of attorney Drew Mollica.

Mollica told DRF: “Mr. Noda vehemently denies any behavior that warrants this kind of fine.”

NYRA Trainer Orlando Noda Fined $5,000

According to a ruling released Wednesday, trainer Orlando Noda has been fined $5,000 by the New York stewards for “action detrimental to the best interest of racing.”

According to a report in the Daily Racing Form, which cited multiple sources, Noda was seen being overly aggressive with a horse during morning exercise recently in Saratoga.

When reached by the TDN, Noda declined to comment and referred questions to his attorney, Drew Mollica.

“The commission rendered a fine and the allegation is not clear to me yet,” Mollica said. “I am still investigating, but I have spoken to Mr. Noda and he vehemently denies any actions that could have caused such a sanction. We are in the fact-gathering stage right now and we will defend this vigorously. At no time did he ever do anything to suggests a sanction of this magnitude.”

Noda's lone runner on the Thursday card at Saratoga, A Colt Named Susie (Frost Giant), was scratched, but the DRF reported that had nothing to do with Noda's fine. Rather, the horse was scratched because no one from his stable was present when the track veterinarian showed up to administer Lasix.

The ruling cites three regulations that the stewards used to assess a fine, including Rule 4022.11, which states: “The stewards have power to regulate and control the conduct of all officials and of all owners, trainers, jockeys, grooms and other persons attendant on horses.”

Noda has been training only since 2019, a year in which he won 11 races. He is having the best year of his career this year, with 26 wins from 161 starters for a winning rate of 16%. He is 4-for-30 at the current Saratoga meet.

Wednesday's ruling was the first for Noda since 2019, when he was fined on two separate occasions for minor offenses.

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