Fifth Circuit Court | Horse Racing Free Tips

Statement On HISA’s Anti-Doping Rules From ARCI

The Association of Racing Commissioners International (ARCI) has formally asked the Federal Trade Commission (FTC) to set aside and temporarily not approve proposed anti-doping and medication control rules proposed by the Horseracing Integrity and Safety Authority (HISA) until the constitutionality of the HISA Act is determined by the Courts.

“This has nothing to do with wanting uniform rules or having a central rule-making authority, two things the ARCI supports,” said Ed Martin, ARCI President. “This all has to do with avoiding a situation where an enforcement action is overturned because the authority of the enforcing entity to act is in question. The potential exposure to the entire sport is avoided by leaving the existing state rules and enforcement in place until this gets sorted out.”

The ARCI Board voted unanimously to make a similar request in early December and the FTC shortly thereafter rejected the proposed HISA rules without prejudice citing reasons of the underlying legal uncertainty. With the Fifth Circuit Court's rejection earlier this week of HISA's petition based on changes made recently to the Act, the potential for regulatory chaos remains.

The filing made today reads as follows:

“ARCI requests that the FTC yet again reject the Rules or, at the very least, withhold decision until all legal challenges to the Act are finally adjudicated. As you might know, in addition to the federal court case that led to the Fifth Circuit's ruling, other litigations raising material questions about the legitimacy and constitutionality of the Act remain pending. Moreover, after HISA resubmitted the proposed Rules, the Fifth Circuit denied HISA and the FTC's petition to vacate the court's earlier ruling and for a rehearing, meaning two important things: (1) by mandate of the Fifth Circuit, the preliminary injunction prohibiting HISA enforcement in states within the Fifth Circuit will return to full effect and no longer be stayed; and (2) the Fifth Circuit's decision that the Act is unconstitutional will stand for the time being.

Once again, the FTC is in a unique position to restore some level of regulatory certainty to the horse-racing industry. It should do so by quickly and publicly announcing what it already determined a few weeks ago–that it will not approve HISA's proposed rules at this time. A decision to the contrary would come at too great a cost, as it would lead to regulatory uncertainty, exacerbate existing confusion throughout the horse-racing industry, and seriously compromise public interests.”

Should the FTC approve the HISA rules and penalties were imposed for a violation of those rules, the action could be appealed and potentially overturned and wiped away due to the finding in the Fifth Circuit that HISA is unconstitutional.

Likewise if a racing commission enforces the existing State anti-doping rule and penalties imposed for a violation are appealed using the argument that the federal rule preempts state action the possibility that it can be overturned also exists.

The only way to avoid this Catch-22 is to leave state rules and enforcement in place by delaying final action on the HISA ADMC rules.

The ARCI has not taken a position on the pending litigation, although some member states have and are litigating the constitutionality of the Act. In August, Martin called for HISA to sit down with all litigants and negotiate a way out. That did not happen.

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HBPA Plaintiffs Tell Fifth Circuit New Law ‘Does Not Fix’ HISA’s Problems

As the Fifth Circuit United States Court of Appeals weighs a motion by the Horseracing Integrity and Safety Act (HISA) Authority to vacate its recent opinion that HISA is unconstitutional, a plaintiff team led by the National Horsemen's Benevolent and Protective Association (NHBPA) on Friday urged the court not to do that, arguing that a new federal law passed two weeks ago to amend the operative language of HISA “does not fix” three alleged constitutionality issues.

“This Court's opinion identified three distinct problems with HISA: 'An agency does not have meaningful oversight if it does not write the rules, cannot change them, and cannot second-guess their substance,'” the NHBPA and its co-plaintiffs wrote in a Jan. 13 response.

“Congress's recent tweak to HISA fails to fix the second problem and does nothing to address the first problem or the third,” the filing continued.

“Under the amended HISA the Federal Trade Commission (FTC) still cannot initiate new rules and still cannot second-guess their substance beyond 'consistency review.' And though it can now modify promulgated rules, the Authority's rules will govern for a while even if the FTC eventually changes them,” the response stated.

“In addition, the amendment reduces the FTC's oversight by eliminating the commission's power to issue interim final rules [and] ultimately, the overall purpose of HISA remains to delegate legislative power to a private corporation to 'develop and implement' programs to regulate the horseracing industry,” the filing stated.

“The prior [Fifth Circuit] opinion was a correct statement of the law and the facts at the time it was issued, and the Authority has not borne its substantial burden to show the 'extraordinary remedy' of vacatur is equitable in this instance,” the response stated.

The underlying lawsuit was initiated by the NHBPA and 12 of its affiliates against personnel from the HISA Authority and the FTC on Mar. 15, 2021, bringing anti-constitutionality claims under the private-nondelegation doctrine, public nondelegation doctrine, Appointments Clause, and the Due Process Clause.

On Mar. 31, 2022, a U.S. District Court judge dismissed that suit, writing in an order that “despite its novelty, [HISA] as constructed stays within current constitutional limitations as defined by the Supreme Court and the Fifth Circuit.”

The HBPA plaintiffs appealed that decision, leading to the Fifth Circuit's reversal on Nov. 18.

But by amending HISA and passing it into law as part of a much broader year-end spending bill, the HISA Authority argued in its Jan. 3, 2023, “motion to vacate” that Congress and the President have done their parts to clear up any lingering constitutional ambiguity, and now the Fifth Circuit is obliged to do its duty to “say what the law is” with regard to the rewritten HISA.

Also on Jan. 13, the state of Texas and its racing commission (both of which had been allowed to join the plaintiffs as “intervenors” with an interest in the outcome), filed a separate response to the HISA Authority's motion to vacate.

“This Court should deny the Authority's motion,” the Texas plaintiffs stated. “Because the Authority tellingly does not assert that Congress's amendment moots this lawsuit…immediate vacatur is not warranted. Instead, as this Court has already remanded the case for further proceedings in the district court, this Court likely should follow its ordinary practice, issue its mandate, and allow the district court to consider the HISA amendment's impact on the merits of this suit in the first instance.”

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Bennett Liebman: New Fifth Circuit Ruling ‘Uphill Fight’ for HISA

With just over a month before the racetrack safety component of the Horseracing Integrity and Safety Act (HISA) is set to go into effect, two separate lawsuits cast looming shadows over the program's legal and operational future.

One of the suits challenging HISA's constitutionality was filed by the National Horsemen's Benevolent and Protective Association (NHBPA).

In March, United States District Court Judge James Wesley Hendrix dismissed the suit finding that while HISA pushes boundaries of public-private collaboration, the law as constructed stays within the current constitutional limitation. The NHBPA subsequently filed an appeal with the Fifth Circuit Court of Appeals.

The other federal lawsuit was filed by the state of Oklahoma in the United States District Court, Eastern Division of Kentucky. That case has yet to be adjudicated.

To get the skinny on the status of the two cases, along with the implications from the ruling in the HBPA case, TDN spoke with Bennett Liebman, government lawyer in residence at the Government Law Center of Albany Law School. He previously served as the deputy secretary for gaming and racing for Governor Andrew Cuomo and was a member of the state's Racing and Wagering Board.

The biggest takeaway from the conversation? Liebman said that a ruling from earlier in the week in the Fifth Circuit Court of Appeals concerning the Securities and Exchange Commission (SEC) has essentially thrown HISA a curveball.

In short, the Fifth Circuit judges ruled that Congress' delegation of legislative power to the SEC was unconstitutional as it failed to “provide an intelligible principle by which the SEC would exercise the delegated power.”

Substitute the SEC with the Federal Trade Commission (FTC)–the government body given ultimate oversight over HISA–and the ruling has connotations for the HBPA case as it awaits adjudication before the Fifth Circuit, said Liebman.

TDN: Where do the two lawsuits currently stand?
BL: The national HBPA case has been appealed to the 5th Circuit. The other case, the Oklahoma case, is still before the district court in Kentucky.

TDN: You mentioned there's a new ruling in the 5th Circuit that you say could prove very problematic for HISA. What is that case and why could it prove problematic?
BL: The Fifth Circuit in a decision in the case of Jarkesy versus the Security and Exchange Commission found that Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle under which the SEC could utilize its power. These powers have traditionally been regarded as constitutional.
Now, the delegation to HISA–what appears to be a non-government agency–is really broader than the delegation to the SEC. So, at least as far as the Fifth Circuit, which is generally considered to be the most conservative of the federal circuits, HISA's constitutionality is going to face a very, very difficult battle.
By this, I mean their delegation standard would be very, very difficult for the supporters of HISA to maintain. HISA's going to have an uphill fight in the Fifth circuit.

TDN: For people like me and some of our readers scratching our heads about the intelligible principle, could you just outline what the intelligible principle is, why it's important?
BL: Since 1928, the United States Supreme Court has said that while only Congress can make a law, Congress can also delegate its powers to the president and to administrative agencies. So long as there is an intelligible principle under which the president or the administrative authorities act, the delegation is valid. This standard has not been considered to be an onerous requirement. Since the Depression era, the Supreme Court has not struck down a statute for failure to state an intelligible principle.
Normally, in the horse racing world a delegation “in the best interest of horse racing” suffices at a governmental level to be an intelligible principle. But this [new ruling] is a very in-depth look at limiting delegations of authority [by Congress]. And it could, especially as it pertains to the HBPA case, prove problematic for HISA.

TDN: Essentially what you're saying is this ruling could act as a precedent as and when the Fifth Circuit adjudicates the HBPA's appeal?
BL: Yes, definitely. This is a very broad ruling basically limiting delegation by Congress to agencies, as well as to non-governmental agencies that are affiliated with [government] agencies, as HISA is with the FTC.
It really could prove troublesome for HISA. Other circuits might not agree. But at least at the Fifth Circuit level, this has now become a very difficult case for the supporters of HISA's constitutionality.

TDN: Could this prove the death knell for HISA? Or are there changes they can make to adjust, and sort of fix, its operating framework?
BL: They could try to make adjustments. Even if the [courts] do find HISA unconstitutional, they might be able to get a stay. They might try to find some way to move it to the Supreme Court as quickly as possible. It's obviously not the death knell, but it's truly troublesome.

TDN: In regards the HBPA's appeal, what are some of the potential outcomes?
BL: They could affirm the trial court's decision. They could find it totally unconstitutional. They could find parts of it unconstitutional and sever those parts from the rest of the law. Look, the [Fifth Circuit] decision yesterday really is truly potentially very damaging to HISA. I don't think I can understate it.

TDN: Could either the SEC case or the HBPA case eventually go before the Supreme Court?
BL: They certainly could, and if they did, we might have a better understanding of the Supreme Court's view of the delegation of powers to administrative agencies and agencies like HISA.
The fact is, there's now a majority of Supreme Court justices that have come out against the intelligible principle test under which almost all delegations have been found constitutional for the last 85 years. And so, you know, you don't know what could come out of a Supreme Court review of HISA.

TDN: But again, are there fixes that can be made to HISA's structural framework?
BL: My thought was that even if the Supreme Court or a court of appeals found aspects of HISA unconstitutional, then it might be able to be fixed by certain legislative actions.
Right now, the FTC does not have power to promulgate its own rules on drugs and safety. You could give them [that] power. You could give the FTC power over the terms and ethics of the members of HISA. You could add more non-affiliated, independent members to the authority.
The other problem, of course, is we don't have a rational congressional system that could make these fixes that would keep HISA running. So, as always in the law, we just don't know what's going to happen next.

TDN: Does this ruling from yesterday or the prior decision in the HBPA's case have any impact on the Oklahoma case?
BL: The Kentucky court looking at the Oklahoma case could certainly cite the lower court decision in the HBPA case and use that as a precedent for upholding HISA. I don't think they would go into the Fifth Circuit's decision on the Securities and Exchange Commission.

TDN: Has a date been set for the appeal hearing by the 5th Circuit?
BL: Not that I can determine. I'm restricted to a very limited review of documents that have been submitted. I mean, the parties to the case would know what's going on.

TDN: Prior to the SEC ruling this week, which of the two cases, the Oklahoma case or the HBPA case, did you think was more likely to go before the Supreme Court?
BL: It had looked as if the Oklahoma case was perhaps the more significant case. Look at all the parties involved in that case, including all the amicus curiae briefs submitted by everybody, from the sponsors of the legislation, the Jockey Club, prominent owners, prominent breeders, against on the other side a ton of states and the United States Trotting Association. I had thought that there would be more significant legal interest in the Oklahoma case.
I think I pointed out in the speech I gave to the ARCI that the name of the case was Oklahoma against the United States, but that there were actually more parties in that case than there are characters in the musical, Oklahoma.

TDN: But now you're saying all bets are off thanks to yesterday's ruling?
BL: Yes. I mean, as far as I can see this is really a major decision by the Fifth Circuit on the limits of how Congress goes about apportioning power to administrative agencies.

TDN: As you had said earlier, the current makeup of the Supreme Court is such that there…
BL: There is a majority that have at various points rejected–and that doesn't include justice [Amy Coney] Barrett–the reliance on the intelligible principle standard. But will they go as far as the Fifth Circuit? Who knows?

TDN: If they did, this could all take years to play out though, right? What happens to HISA in the meantime?
BL: Oh God, who knows? It's law; it's not something you should bet on.

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