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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HISA Board Chair: We Will Be Tough

Addressing the media Wednesday through a Zoom call, Horse Racing Integrity and Safety Authority Chair Charles Scheeler said that the authority will go to great lengths to clean up the sport and its efforts will include increased out-of-competition testing and investigative work that goes beyond the standard methods of drug testing.

When asked whether or not rules and penalties under the authority may be stricter than they are currently with state racing commissions, Scheeler replied: “It's certainly a possibility in some areas.”

He continued: “We need to make it so there is a sufficient deterrent so that the people who would violate these rules will think twice or three times and ultimately won't do it. My firm belief is that no matter how robust the drug testing system is it's not going to be sufficient in and of itself to deter the sort of doping that we want to deter. What we want to add in a very powerful way is an investigative unit to enforce the anti-doping rules. You see in sports that the greatest deterrents all came out of non-test cases, like Balco and Biogenesis and the recent work of Five Stones in horse racing. We intend to have a vigorous component to follow up on the rumors or the syringe that is found in the stall. What you have to come up with is comprehensive package that will significantly decrease usage. Some folks just look at it as, not if I should play fair or not, but through a very cold blooded cost-benefit situation. The costs have to be greater than the rewards.”

To achieve those goals, out-of-competition testing will be increased under the authority.

“There is definitely going to be more emphasis on out-of-competition testing,” Scheeler said. “I would not necessarily assume that it will happen at the expense of after-competition testing, which will remain in a fully robust form.”

During the 30-minute session with the media, Scheeler touched on a number of subjects:

(*) He said that racing will become more popular with the general public once the sport has been cleaned up.

“A cleaner and fairer sport is also going to be a more popular sport,” he said. “Quite frankly, one of the reasons horse racing has lost popularity is that many have been turned off by the fact that you have so many horses breaking down during the course of a racing season.  It is our job to make racing safer for the horses and for the jockeys. It is our premise that if we do so then horse racing will have chance to regain some of the popularity it used to enjoy. It is essential for the long term viability and popularity of the sport that we show we are doing whatever we can to make this sports safer for the participants.”

(*) Lawsuits questioning the constitutionality of HISA are pending and could delay the implementation of the Horseracing Integrity and Safety Act. Scheeler said those lawsuits have not kept the authority from moving forward. HISA is supposed to go into effect July 1, 2022.

“The lawsuits are not stopping the work from going forward,” Scheeler said. “We have started our work and we fully intend to meet the deadlines that are set forth in the act. Not only do we need to be up and running by July, 2022 but also we have to get a whole slew of proposed rules to the Federal Trade Commission so they can provide the public with an opportunity for review and for comment. We have every intention of being up and running in July, 2022 and meeting the deadlines in the act.”

(*) Scheeler cited the ongoing story with Medina Spirit (Protonico) as an example of what's wrong with the current system of policing the sport and enforcing the rules.

“I do think that the situation with Medina Spirit is instructive in a couple of areas,” he said. “One of the problems is that you have different types of penalties in different states for betamethasone and we really need to have a uniform system. It is very confusing to the public that certain levels of different medications are allowed in some jurisdictions and not in others. In this era, horses travel and compete in any number of jurisdictions. What we will bring to the table that will be very helpful in this type of situation is a system whereby the public is going to know what the rules are and that they are going to be the same in every Triple Crown race. The tolerances will be the same, the permitted substances will be the same and that there will also be testing in the same fashion. If there is a sanction it will be applicable across the board and not at some racetracks and not others. What this particular situation really speaks to is importance of having a uniform results management and enforcement structure.”

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Board and Standing Committee of HISA Announced

The Horseracing Integrity and Safety Authority's nominating committee announced its board of directors and standing committees. The process was led by Nancy Cox, University of Kentucky vice president for land-grant engagement and dean of the College of Agriculture, Food and Environment, and Leonard Coleman, former president of the National League of Professional Baseball Clubs.

The nine-person board includes five members from outside of the Thoroughbred industry and four industry representatives. The two chairs of the Authority's standing committees serve on the board of directors, and the board is expected to select the board chair at its first meeting. The board of directors includes:

  • Steve Beshear, Kentucky (independent director)
  • Leonard Coleman, Florida (independent director)
  • Ellen McClain, New York (independent director)
  • Charles Scheeler, Maryland (independent director)
  • Adolpho Birch, chair of the Anti-Doping and Medication Control standing committee, Tennessee (independent director)
  • Joseph De Francis, Maryland (industry director)
  • Susan Stover, chair of the Racetrack Safety standing committee, California (industry director)
  • Bill Thomason, Kentucky (industry director)
  • DG Van Clief, Virginia (industry director)

The members of the Anti-Doping and Medication Control Standing Committee are:

  • Adolpho Birch, chair (Tennessee, independent director)
  • Jeff Novitzky, Nevada (independent member)
  • Kathleen Stroia, Florida (independent member)
  • Jerry Yon, Florida (independent member)
  • Jeff Blea, California (industry member)
  • Mary Scollay, Kentucky (industry member)
  • Scott Stanley, Kentucky (industry member)

The members of the Racetrack Safety Standing Committee are:

  • Susan Stover, chair (California, industry director)
  • Lisa Fortier, New York (independent member)
  • Peter Hester, Kentucky (independent member)
  • Paul Lunn, North Carolina (independent member)
  • Carl Mattacola, North Carolina (independent member)
  • Glen Kozak, New York (industry member)
  • John Velazquez, New York (industry member)

The 2020 Horseracing Integrity and Safety Act created the Authority as the independent governing structure charged with proposing and enforcing health-and-safety standards subject to consideration and adoption by the Federal Trade Commission over Thoroughbred racing in the United States.

“On May 5, the Horseracing Integrity and Safety Authority Nominating Committee put forward a list of individuals charged with oversight of the Thoroughbred racing industry moving forward,” said Eric Hamelback, CEO of the National HBPA. “Yet not surprisingly this group of professionally diverse individuals still lacks the independence and non-conflict of interest that has repeatedly been promised. Are we surprised not one member of a representative horsemen's organization or a horseplayers' representative were appointed? No, we are not. While we appreciate the efforts put forth to this point, there remains the issue of HISA's legality. There are two legal challenges now, with possibly more to come. I suggest some of the focus of this appointed Authority be to spend some time resolving the concerns of many in the industry.”

“The HISA Authority and standing committee appointments announced today include a diverse group of individuals with the right combination of independence and relevant experience necessary to establish uniform national anti-doping and racetrack safety standards as well as implement the tough but fair enforcement procedures essential to ensuring compliance with these standards,” said Alex Waldrop, CEO & President of the NTRA.

Under the authority and oversight of the Federal Trade Commission, the Authority board and standing committee members are responsible for developing, implementing and enforcing a series of uniform anti-doping, medication control, racetrack safety and operational rules to enhance equine safety and protect the integrity of the sport.

“The Horse Racing Integrity and Safety Act (HISA) is a monumental step forward that will help secure the future of thoroughbred racing in the United States,” said David O'Rourke, President & CEO of NYRA. “The appointment of the HISA Authority Board of Directors marks the next step in the implementation of this crucial legislation, and NYRA looks forward to working closely with the well qualified individuals announced today.”

Members of the board of directors and standing committees underwent a comprehensive screening process, and the members of the board of directors and any independent member of a standing committee are subject to HISA's strict conflict of interest restrictions to ensure the Authority's independence and integrity.

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Letter to the Editor: Jeff Bowen

I read with complete bewilderment and disgust about the new HBPA suit against the Horseracing Integrity and Safety Act. I've been involved as a breeder and owner for the last 20+ years.

Over this time, I've watched our sport get black eye after black eye, while many with an authoritative voice (like the National and state HBPA's) continue to  argue amongst themselves and bury their heads in the sand. Cheating has become a matter of routine with negligible consequences to those who get caught.  Horse safety is scrutinized on a daily basis at a national level and needs constant improvement efforts. Horseracing is a national sport that needs to act like one to survive.

What exactly have these groups done to address and improve the situation? Whatever it's been, the facts confirm abject failure.

The HISA, while imperfect like any legislation, is a major step in the right direction.

Jeff Bowen, Greenville, DE

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