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Former HBPA Prez On 5th Circuit Appeal: ‘No Matter The Result’ Both Sides Expect Supreme Court To Decide HISA’S Fate

Leroy Gessmann, who served as president of the National Horsemen's Benevolent and Protective Association (HBPA) from 2015 to 2021 and currently works as the Arizona HBPA's executive director, told commissioners at the Arizona Racing Commission (AZRC) meeting Thursday that regardless of the decision gets handed down by the United States Court of Appeals for the Fifth Circuit, both the HBPA and its opponents in a 2 1/2-year-old lawsuit to nullify the Horseracing and Safety Integrity Act (HISA) agree that the nation's highest court will eventually have to be called upon to settle the matter.

Gessmann spoke in the wake of Oct. 4 oral arguments in the Fifth Circuit case that pits the HBPA and 12 of its affiliates against the HISA Authority and the Federal Trade Commission. On May 4, a lower court deemed that the now-in-effect version of HISA is indeed constitutional because a 2022 rewrite of the law fixed constitutionality problems the Fifth Circuit had identified. Shortly after that lower court's ruling came out in the spring, the HBPA plaintiffs then swiftly filed for another appeal back to the Fifth Circuit, which agreed to hear the case on an “expedited” basis.

“Both sides left the [Fifth Circuit] hearing feeling positive that they made good arguments and that they would win,” Gessmann said. “So it's also been stated by both parties, no matter what the result is, the next step is the U.S. Supreme Court. We'll see when we get a ruling. Usually it takes about 30 to 60 days to get a ruling.”

Gessmann then segued into updating the AZRC on a related project spearheaded by the HBPA, which is federal legislation filed Sept. 26 to repeal HISA and replace it with a voluntary interstate compact to govern the nation's Thoroughbred, Standardbred, and Quarter Horse racing.

That bill, named the Racehorse Health and Safety Act (RHSA), would establish a governing body known as the Racehorse Health and Safety Organization (RHSO), which would oversee breed-specific Scientific Medication Control Committees tasked with drafting and recommending drug rules for each breed.

There would also be racetrack safety oversight based on existing standards as set forth by both the National Thoroughbred Racing Association and the model rules of the Association of Racing Commissioners International.

Individual states would decide whether their own racing commission or the RHSO got to enforce the new federal rules, which would supersede existing state statutes. States wouldn't have to opt into the RHSO, but the cost of not doing so would jeopardize their racetracks' ability to simulcast out of state.

“So far, we've got a lot a lot of reviews on it, and it seems to have gained some traction, so hopefully something can be done there,” Gessmann said, adding that the bill has been “well-received and is moving through the process in the legislature in Congress.”

Asked by commissioner Linda York if he had any sense of a timetable for when the bill might make it to the Congressional floor, Gessmann said, “We have not been advised of anything, how quickly it could get there. Unfortunately, the National HBPA doesn't have a very large pack [of lobbyists] to help move things through.”

The RHSA's sponsor is Rep. Clay Higgins, a Louisiana Republican. More than two weeks after its introduction, the bill has not yet been assigned to a committee. It has thus far gained one co-sponsor, Rep. Doug Lamborn, a Colorado Republican.

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Sixth Circuit Parties Argue Whether New HISA Law Renders Anti-Constitutionality Claims Moot

Parties on both sides of a Sixth Circuit United States Court of Appeals case that seeks to reverse a lower court's decision to dismiss a constitutional challenge of the Horseracing Integrity and Safety Act (HISA) argued via written briefs Thursday as to whether or not a pro-HISA law passed at the tail end of 2022 renders as “moot” any constitutionality claims in the under-appeal lawsuit.

The Jan. 12 briefs were filed in accordance with a Dec. 30 request from the Sixth Circuit to explain how the Dec. 29 signage of the new law (which amended the operative language of HISA) might affect the oral arguments both sides had made in the Sixth Circuit case Dec. 7.

Not surprisingly, the plaintiffs appealing the lower court's ruling–led by the states of West Virginia, Oklahoma and Louisiana–told the court that the anti-constitutionality claims are still relevant.

The defendants–primarily the HISA Authority and the Federal Trade Commission (FTC)–informed the panel of judges that the new law has smoothed over any alleged constitutional issues and paves the way for HISA to move forward.

“The recent amendment to HISA addresses only one of these many constitutional problems,” stated a joint brief filed by all of the plaintiffs, which also include the Oklahoma and West Virginia racing commissions, three Oklahoma tracks, the Oklahoma Quarter Horse Association, the U.S. Trotting Association, and Hanover Shoe Farms, a Pennsylvania Standardbred breeding entity.

“All of HISA's other constitutional defects, however, remain unremedied,” the plaintiffs contended.

The HISA Authority defendants saw it differently, writing that, “Congress's response obviates the principal basis for Plaintiffs' private nondelegation claim in this case, which is predicated on a prior version of HISA that no longer exists.”

In a separate brief, the FTC defendants put it this way: “Congress's recent amendment eliminates any doubt that the private Horseracing Authority 'function[s] subordinately' to the [FTC] in satisfaction of the private-nondelegation doctrine….Congress's grant of general-rulemaking authority to the [FTC] resolves the 'core constitutional defect' plaintiffs purported to identify in support of their private-nondelegation claim….”

The underlying case that the plaintiffs are trying to get overturned via appeal dates to Apr. 26, 2021, when they alleged in a federal lawsuit that “HISA gives a private corporation broad regulatory authority.”

On June 2, 2022, that claim was dismissed by a judge in U.S. District Court, Eastern District of Kentucky (Lexington) for failure to state a claim of action. The plaintiffs then appealed to the Sixth Circuit.

While that Sixth Circuit appeal was pending, the Fifth Circuit came out with its own decision in a similar case against HISA that was led by the National Horsemen's Benevolent and Protective Association (HBPA).

That Nov. 18 Fifth Circuit ruling stated that HISA is unconstitutional because it “delegates unsupervised government power to a private entity,” and thus “violates the private non-delegation doctrine.” The order remanded the case back to U.S. District Court (Northern District of Texas) for “further proceedings consistent with” the Appeals Court's reversal.

But in the interim after the Fifth Circuit ruled and the Sixth Circuit heard oral arguments, Congress in late December amended the operative language of HISA to fix the alleged constitutional defect the panel had identified, and President Biden signed the measure into law as a tiny part of a vastly larger year-end spending bill.

An expected Jan. 10, 2023, mandate issuance date for the Fifth Circuit to enforce its order, has come and gone without any directive from that court that seeks to enforce its anti-constitutionality ruling against HISA. So now the next major court decision on HISA's constitutionality is expected to come when Sixth Circuit issues its order.

The plaintiffs cited specifics about why they believed the new law doesn't alter HISA's alleged unconstitutionality.

“In particular, the FTC still lacks front-end ability to veto the Authority's proposals for policy reasons, a crucial power that the Securities and Exchange Commission (SEC) enjoys when reviewing proposed rules of the self-regulatory organizations that it supervises…” the brief stated.

“The amendment also continues to permit the Authority to exercise numerous executive powers without any supervision or control by the FTC,” the plaintiffs continued. “The Authority continues to have unfettered discretion to bring enforcement actions in federal court and expand HISA's regulatory scope to include any non-Thoroughbred horse breed.

“Finally, and crucially, the amendment does nothing to cure HISA's anticommandeering violation. HISA still pushes the costs of administering HISA onto the States by requiring them to fund the Authority's operations or lose the ability to collect fees for matters that the Authority isn't even regulating.”

The FTC brief also made a comparison between HISA and the SEC, but in a different light.

Because of the new law, the FTC brief stated, “the [FTC's] oversight power is 'now also materially identical' to that of the SEC, a statutory scheme that 'has been upheld against constitutional challenge on many occasions.'”

At a different point, the FTC wrote, “It is unclear whether plaintiffs will continue to press secondary arguments in support of their private-nondelegation doctrine claim. The government has explained either why those arguments fail on the merits, why plaintiffs lack…standing to press them, or both. If plaintiffs continue to urge their arguments despite Congress's amendment to the statute, the Court should reject them…”

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Letters to the Editor: Ed Martin, President, Association of Racing Commissioners International

For well over a year, we have been told that the HISA Act was legally bulletproof and within the parameters of the US Constitution. According to a unanimous decision of a three judge panel from both political parties issued last week, such assertions may not be so.

The ARCI has not taken sides in this legal dispute, although some of our member agencies have as there are serious issues involving States rights, taxation without representation and commandeering that are at stake. The final outcome of the legal process may not be known for quite some time, creating an uncertainty for everyone involved with thoroughbred horseracing.

Conflicting legal opinions will determine what happens next in the individual States.

Some States, like California, will honor a written agreement they have executed with HISA to enforce their racetrack safety rules. Other States, upon the advice of counsel or Attorney General, will revert to state rules that remain on the books, not wanting to jeopardize the outcome of a court challenge to any enforcement action.

Not all states have written agreements. Many have sent letters informing HISA as to what they will or will not do. Those can be withdrawn or modified at any point if a State believes it's a roll of the dice as to whether enforcement actions will hold should the current ruling stand.

Last Friday, most US racing commissions participated in an emergency meeting convened by the ARCI. The commissions have and continue to work with HISA and HIWU representatives in a cooperative effort. While that will not change it should not be assumed that there are no concerns or limitations as to what an individual commission may or may not do.

What happens next is unknown and there currently is a storm cloud hanging over regulatory actions taken by HISA. It is not unreasonable to expect that those sanctioned for HISA crop rule violations will go to court as there now is reason to question the legality of the HISA Act itself.

We are but a few weeks away from when HISA plans to take over the anti-doping and medication control enforcement. That's huge and state regulators are concerned about whether a HISA drug violation levied after January 1, 2023 is valid if HISA itself is not legal.

Most State Racing Commissions believe the HISA Act is in need of modification to restore the financial, operational and rulemaking transparency and accountability this industry has now lost with the private entity. In addressing this Congress can eliminate the legal problems as well as mitigate the enormous cost about to be levied on the thoroughbred racetracks, owners, and horsemen. I was on a panel in August with Lisa Lazarus and proposed that HISA and its proponents get “everyone” in a room and reach an agreement in order to make this work to avoid the mess we are now in.

We should all be working together to salvage the many good things that can come out of this. But that might require an amendment to the HISA Act or short-term delay. Some people refuse to even consider that.

There are many who believe the current animosity of the US political divide is killing the country. We should not let that happen to this great sport.

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Fifth Circuit Court of Appeals Finds HISA Unconstitutional

The United States Court of Appeals for the Fifth Circuit on Friday ruled that the Horseracing Integrity and Safety Act (HISA) is unconstitutional because it “delegates unsupervised government power to a private entity,” and thus “violates the private non-delegation doctrine.”

The Appeals Court order by a panel of three judges reverses a lower court's decision earlier this year that dismissed a constitutionality lawsuit initiated in 2021 by the National Horsemen's Benevolent and Protective Association (NHBPA).

The Nov. 18 order also remands the case back to U.S. District Court (Northern District of Texas) for “further proceedings consistent with” the Appeals Court's reversal.

The immediate ramifications of how this order will affect the day-to-day operations of HISA and its Authority are still unclear. TDN is in the process of obtaining further comment from stakeholders on both side of the issue, and this story will be updated.

On Mar. 15, 2021, the NHBPA and 12 of its affiliates (later joined by the state of Texas and its racing commission) sued the Federal Trade Commission (FTC), its commissioners, the HISA Authority, and its nominating committee members, bringing claims under the private-nondelegation doctrine, public nondelegation doctrine, Appointments Clause, and the Due Process Clause, seeking to permanently enjoin the defendants from implementing HISA and to enjoin the Nominating Committee members from appointing the Authority's board of directors.

“The plaintiffs argued HISA is facially unconstitutional because it delegates government power to a private entity without sufficient agency supervision,” the Appeals Court order stated. “The district court acknowledged that the plaintiffs' 'concerns are legitimate,' that HISA has 'unique features,' and that its structure 'pushes the boundaries of public-private collaboration. Nonetheless, the court rejected the private non-delegation challenge, concluding HISA stays within current constitutional limitations as defined by the Supreme Court and the Fifth Circuit.'

“We cannot agree,” the Appeals Court order stated. “While we admire the district court's meticulous opinion, we conclude that HISA is facially unconstitutional. A cardinal constitutional principle is that federal power can be wielded only by the federal government. Private entities may do so only if they are subordinate to an agency. But the Authority is not subordinate to the FTC. The reverse is true. The Authority, rather than the FTC, has been given final say over HISA's programs.”

The order continued: “While acknowledging the Authority's 'sweeping' power, the district court thought it was balanced by the FTC's 'equally' sweeping oversight. Not so. HISA restricts FTC review of the Authority's proposed rules. If those rules are 'consistent' with HISA's broad principles, the FTC must approve them. And even if it finds inconsistency, the FTC can only suggest changes.

“What's more, the FTC concedes it cannot review the Authority's policy choices. When the public has disagreed with those policies, the FTC has disclaimed any review and instead told the public to 'engag[e] with the Authority.' An agency does not have meaningful oversight if it does not write the rules, cannot change them, and cannot second-guess their substance. As the district court correctly put it: 'Only an Act of Congress could permanently amend any Authority rule or divest it of its powers. The FTC may never command the Authority to change its rules or divest it of its powers.'”

“The end result is that Congress has given a private entity the last word over what rules govern our nation's thoroughbred horseracing industry. The Constitution forbids that. For good reason, the Constitution vests federal power only in the three branches of the federal government. Congress defies this basic safeguard by vesting government power in a private entity not accountable to the people. That is what it has done in HISA,” the order stated.

“It is the duty of the National Horsemen's Benevolent and Protective Association to protect horsemen across the country and that is not a responsibility I take lightly,” said Eric Hamelback, CEO of the NHBPA. “From HISA's onset, we have thoroughly and fairly examined the HISA corporation's impact on our industry and its constitutionality. We operated in good faith and did our due diligence to appropriately weigh the pros and cons. We have been saying for years this law and the defined Authority itself are unconstitutional and we are pleased the court has unanimously sided with our position, an outcome many in our industry thought was impossible. Today's unanimous ruling clearly states the entity constructed under HISA is an unconstitutional body and should not hold governing power over our industry, a position we have long supported. On behalf of the NHBPA, I can assure you that we will be following this development closely and support the power reverting back into the hands of the State Racing Commissions. I will keep our members updated as more details come to the surface. We are very appreciative of the 5th Circuit Court of Appeals for the thorough analysis and opinion. We also thank the many industry stakeholders who supported us in our effort to ensure that horsemen are not subject to an unconstitutional law.”

“While HISA is disappointed by the Fifth Circuit's decision, we remain confident in HISA's constitutionality and will be seeking further review of this case,” said Charles Scheeler, Chair HISA Board of Director. “If today's ruling were to stand, it would not go into effect until January 10, 2023 at the earliest. We are focused on continuing our critical work to protect the safety and integrity of Thoroughbred racing, including the launch of HISA's Anti-Doping and Medication Control Program on January 1, 2023.”

At a different point in the order, the Appeals Court delved deeper into the issue of rulemaking.

“For instance, HISA broadly instructs the Authority to create a program that includes '[a] uniform set of training and safety standards and protocols consistent with the humane treatment of covered horses,' while leaving the policy details up to the Authority…. Keep in mind, moreover, that we are not considering here whether the 'considerations' provide a sufficiently intelligible principle to satisfy the public non-delegation doctrine. Instead, we are deciding whether the Authority is subordinate to the agency. And, on its face, HISA's generous grant of authority to the Authority to craft entire industry 'programs' strongly suggests it is the Authority, not the FTC, that is in the saddle…”

The order continued: “If the FTC cannot review the policy choices behind the rules, then logically the FTC cannot make the Authority modify those policies. That is again confirmed by HISA's plain terms. The modification power the Act gives the FTC is limited in two ways. It pertains only to whether a rule is 'consistent' with the Act and does not include review of the policies informing the rule…”

“The Authority's power outstrips any private delegation the Supreme Court or our court has allowed. We must therefore declare HISA facially unconstitutional. In doing so, we do not question Congress's judgment about problems in the horseracing industry. That political call falls outside our lane. Nor do we forget that '[t]he judicial power to declare a law unconstitutional should never be lightly invoked.' We only apply, as our duty demands, the settled constitutional principle that forbids private entities from exercising unchecked government power.”

The NHBPA lawsuit is separate from a similar HISA complaint over alleged constitutional issues brought by racing commissions and attorneys general in a number of opposing states. That case, too, was dismissed earlier this year but has a motion to dismiss pending.

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