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Thoro-Graph Sues NYRA Over Disputed $333K in ADW Partnership

A business partnership between performance-figure provider Thoro-Graph, Inc., and the New York Racing Association (NYRA) that had been billed as a “win-win-win” deal for the two parties and advance-deposit wagering (ADW) customers when it first launched in 2017 has gone sour, resulting in a lawsuit filed in New York State Supreme Court.

According to the civil complaint, Thoro-Graph is suing both NYRA and its NYRA Bets ADW platform over the alleged non-payment of at least $333,000 that Thoro-Graph believes is its rightful cut for incentivizing horseplayers to become NYRA Bets customers via a free, membership-based portal called Thoro-Graph Player Services (TGPS).

Thoro-Graph claimed in its complaint that its portal grew NYRA's betting handle by $100 million over a roughly five-year span, “solely through the joint venture resulting in $3 million in revenue” for NYRA.

When the alignment between the two entities was first announced in 2017, the deal was billed as giving Thoro-Graph an ADW partner, while NYRA Bets got a valuable pipeline of new customers.

Horseplayers would benefit too, a TGPS executive explained at the time of the launch, because they would get access to “concierge-level support,” volume-based wagering rebates, on-track visitation amenities and discounts on Thoro-Graph handicapping products.

But according to the lawsuit, “Defendant NYRA failed to perform its part of the bargain [by allegedly not paying] Plaintiff its full 50% share of its Net Revenue,” wrote Karen Murphy, the attorney for Thoro-Graph, in the Dec. 19, 2022, filing.

“That breach has resulted in hundreds of thousands of dollars in losses to date and has impacted the value of Plaintiff's corporation resulting in additional lost profits to Plaintiff,” the complaint stated.

The filing stated that the dispute involves how net revenues are calculated: “Plaintiff is entitled to its full 50% share of defendant NYRA's revenue that is generated from the handle wagered on NYRA races by non-New York residents and paid to defendant NYRA. In failing to do so, defendant NYRA is in material breach of its core financial obligation to pay Plaintiff its full revenue share under the terms of the joint venture.”

The complaint contended that Thoro-Graph attempted “good faith settlement efforts” to square up the purportedly mounting non-payments, including making a written demand for the money on June 13, 2022, and a meeting with NYRA representatives to discuss the issue.

“[NYRA's] response was to intimidate Plaintiff with the threat of termination of the joint venture and not to address the failure to pay Plaintiff its full 50/50 share,” the complaint stated.

NYRA then followed through with a letter Dec. 12 giving a 180-day notice of termination of the partnership. That action, in turn, led to Thoro-Graph's lawsuit one week later seeking “compensatory damages which are no less than $500,000 [and] estimated additional damages for the remainder of the term of the existing Agreement.”

The court has set a Feb. 10 date for the defendants to file a reply. TDN asked a NYRA spokesperson if the racing association or NYRA Bets wished to comment prior to that filing, and also asked how the termination of TGPS might affect horseplayers who use the portal.

“NYRA will honor the terms of confidentiality agreed to by the parties involved and reply to the court by Feb. 10. This contractual dispute does not and will not impact NYRA customers,” Patrick McKenna, NYRA's vice president for communications, wrote in an email.

The “Termination for Convenience” letter that NYRA served Thoro-Graph is scheduled to become effective June 10.

“That notice of termination has now been issued solely because Plaintiff made it clear it would proceed with legal efforts to protect its rights under the Agreements to receive its full share of compensation,” Thoro-Graph's complaint stated.

“Plaintiff performed its obligations under [the contracted terms] by maintaining its website as 'best in class' and offering free and reduced priced Thoro-Graph data which has resulted in NYRA Bets signing up over 1,700 horseplayers. This was accomplished by Plaintiff without any marketing assistance from the NYRA Parties…” the complaint stated.

“In 2017, Plaintiff grew the handle of defendant NYRA Bets by $3.1 million,” Thoro-Graph's court filing stated. “In 2018 Plaintiff's contribution was $10.7 million; in 2019 the contribution went to $15.3 million; in 2020 the contribution was $22.7; in 2021 the contribution reached $24 million; [At the time the Dec. 19 lawsuit was filed] Plaintiff's contribution [was] on track to reach $25 million making the total added handle over $100 million.”

Drilling the alleged non-payment issue down further, the complaint stated that NYRA's deduction of an “import host fee” from the net revenue calculation is a chief bone of contention.

The complaint put it this way: “To be clear, what defendant NYRA is claiming is an “import host fee” is simply money RECEIVED by NYRA Bets solely as a result of “Qualifying Wagers” by non-New York residents on NYRA CONTENT and then passed on to and RECEIVED BY DEFENDANT NYRA AS REVENUE.”

Attorney Murphy, when reached by the TDN, said, “For now, we will let the complaint speak for itself. We will have more to say after NYRA's response.”

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Texas Denied Permission to Join Anti-HISA Suit

A federal judge in Texas overseeing one of four lawsuits seeking to derail the Horseracing Integrity and Safety Act Authority (HISA) on alleged anti-constitutionality grounds ruled Friday that the State of Texas and its racing commission can't join a case spearheaded by the owners of Lone Star Park as an “intervenor,” in part because they “cannot show their interests are inadequately represented” and also because they had already been granted intervenor status in a similar case.

An “intervenor” designation allows outside parties that have a personal stake in the outcome of a civil suit to participate in a lawsuit, even if their interests don't align exactly with those of the original plaintiffs.

United States District Judge Matthew Kacsmaryk (Northern District of Texas, Amarillo Division) explained the reasons for his denial in an Oct. 21 order:

“Seven months before filing the Motion, State Intervenors intervened in a similar challenge in this Court's Lubbock Division against the same Defendants,” Kacsmaryk wrote. “Simply put, State Intervenors were warned that intervening in the Lubbock Action could preclude them from intervening in a similar action. That warning had teeth.

“For the same reason, intervention would unduly prejudice [HISA's] right not to have to defend against serial litigation,” Kacsmaryk continued. “Additionally, State Intervenors' interests are adequately represented by Plaintiffs. And intervention is unlikely to contribute significantly to the underlying factual issues because State Intervenors' proposed complaint has added nothing to this case…. Plaintiffs already press every claim State Intervenors wish to bring.”

The plaintiffs in the case are Global Gaming LSP, a limited liability company that owns Lone Star Park; Gulf Coast Racing LLC, the owner of a greyhound track in Nueces County, and both LRP Group Ltd. and Valle De Los Tesoros, which are two limited partnerships separately looking to operate new horse tracks in south Texas. They collectively filed their suit July 29, seeking declaratory and injunctive relief and a preliminary injunction against HISA.

The previous suit referenced by the judge that Texas and its racing commission had joined was initiated by the National Horsemen's Benevolent and Protective Association (NHBPA) back in 2021. That case was dismissed by a federal judge Mar. 31, 2022, but the plaintiffs have appealed that decision.

And that NHBPA lawsuit is separate from a similar 2021 anti-HISA complaint, again over alleged constitutional issues, headed by racing commissions and attorneys general in Oklahoma and West Virginia. That case, too, was dismissed by a federal judge on June 3, 2022, but that decision is also under appeal.

A fourth lawsuit, in which both HISA and the Federal Trade Commission are defendants in a complaint initiated by the states of Louisiana and West Virginia, plus the Jockeys' Guild, alleges unconstitutionality and federal rulemaking procedure violations regarding HISA's initial framework of regulations that went into effect July 1.

That case is currently undergoing a different sort of appeal. At issue is whether a lower court (U.S. District Court, Western District of Louisiana) erred in preliminarily enjoining HISA regulations that were purportedly harming the plaintiffs. The issuance of that preliminary injunction favored the plaintiffs, but HISA and the FTC have appealed that decision to a higher court.

There are also intervenors wanting to join that suit as plaintiffs. Led by 14 affiliates of the HBPA, plus four racetracks, that alliance of entities seeks protection from the alleged harms of HISA.

According to the court docket in the case initiated by the Texas tracks, the next step in the process is for the plaintiffs to file a motion for summary judgment, which must be done within 30 days from the Oct. 21 order denying the intervenors' participation.

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Jamgotchian Sues CHRB Over Name Controversy

Thoroughbred owner Jerry Jamgotchian, who has a decades-long history as both a plaintiff and defendant in lawsuits involving horse racing entities, went after the California Horse Racing Board (CHRB) in federal court on Monday, claiming that his constitutional and civil rights were violated when the stewards at Los Alamitos Race Course denied entry to one of his horses this past summer over its purportedly controversial name.

Although the Oct. 17 United States District Court (Central District, Southern Division) civil complaint puts forth a legal argument based on whether the horse Malpractice Meuser (GB) {Helmet (AUS)}had the proper registration documentation to be allowed to race, the subtext of the case is predicated on claims that Jamgotchian's naming of the horse allegedly equates to intentional trolling or harassment of a Kentucky-based lawyer who shares that surname.

And even though that attorney was not specifically referenced in any of the court documents filed by Jamgotchian, the Louisville Courier-Journal reported as far back as May 28, 2021, that a court battle was brewing over Jamgotchian's desire to name horses that allegedly “tweak” the well-publicized legal troubles of trainer Bob Baffert.

At that time, reporter Tim Sullivan wrote that “Jamgotchian wants to call one of his colts Bad Test Bob-a jab at Baffert's recent rash of drug positives.” He also reported that Jamgotchian had paid “$1,000 to challenge the Jockey Club's refusal to sanction Malpractice Meuser, a name previously approved in the United Kingdom and inspired by one of Baffert's attorneys, Michael Meuser.”

As Jamgotchian stated in that Courier-Journal story, “As soon as we get through this, I'm going to federal district court and filing a civil rights action…And they're going to get smoked.”

Now, nearly a year and a half later, Jamgotchian has followed through on that threat of litigation, with the CHRB as the defendant. The colt's breeder, Theta Holding I, Inc., is a co-plaintiff.

The complaint alleges the CHRB violated First, Fifth and Fourteenth Amendment rights, plus federal civil rights and California state constitution rights. Among the remedies Jamgotchian seeks via jury trial are damages in excess of $250,000, plus a ruling allowing Malpractice Meuser to race in California.

Via spokesperson Mike Marten, the CHRB declined the opportunity to tell its side of the story, citing a policy of not commenting on pending litigation.

When the Bad Test Bob name got rejected by The Jockey Club, Jamgotchian told the Courier-Journal that it was not a jab at Baffert, but instead referred to “one Bob Dreyfuss of Chatsworth, Calif., and his test for COVID-19.”

In Monday's court filing, Jamgotchian asserted that under free speech laws, “Even if Malpractice Meuser's approved name might refer to a living or deceased individual with a name that includes 'Meuser, 'or refers to no one at all, it is not a valid ground to prohibit the use of such name.”

Jamgotchian's complaint stated that Malpractice Meuser had the proper Jockey Club certification from Great Britain, where the colt was foaled, and subsequently got registered as a “covered horse” once the new federal Horseracing Integrity and Safety Act requirements became active in 2022.

But, the suit stated, when Jamgotchian wanted to enter Malpractice Meuser at Los Alamitos, “The sole reason for denial of the entry was the lack of a certificate of registration for Malpractice Meuser from The Jockey Club of New York, a private club which is not a governmental entity. [And] the sole reason, in turn, the New York Private Club refused to issue a certificate of registration was the name Malpractice Meuser.”

Malpractice Meuser has raced twice in his career, but has now been off for over a year. He finished third in his Mountaineer Park debut on June 30, 2021, then fifth at Indiana Grand on Oct. 14, 2021, for trainer Eric Reed and jockey Sonny Leon.

Both times, the court filings stated, “There was no public disturbance due to the name of Malpractice Meuser when he raced.”

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HISA Appeal to be Argued Aug. 30; Judge Denies Contempt Motion

The United States Court of Appeals for the Fifth Circuit will now hear oral arguments Aug. 30–slightly earlier than expected–in the injunction appeal brought by the Horseracing Integrity and Safety Act Authority (HISA) and the Federal Trade Commission (FTC).

Both entities are defendants in an underlying lawsuit that alleges unconstitutionality and federal rulemaking procedure violations regarding HISA's initial framework of regulations that went into effect July 1.

The Appeals Court docket previously indicated a September oral argument date was being planned.

At issue in the appeal is whether a lower court (U.S. District Court, Western District of Louisiana) erred in preliminarily enjoining HISA regulations that were purportedly harming the plaintiffs, who are led by the states of Louisiana and West Virginia, plus the Jockeys' Guild.

The Appeals Court ordered Aug. 8 that with the exception of three specifically contested HISA rules, HISA's legal authority would once again be valid in the two plaintiff states until that court heard “expedited” oral arguments from the two sides.

What happens in the Appeals Court will affect other actions in the lower court that are currently pending.

One such motion that had been outstanding was the plaintiffs' motion for the defendants to be held in contempt of court for allegedly violating terms of the preliminary injunction.

But on Aug. 15, Judge Terry Doughty of the district court denied that motion on the basis that, “The filing of a notice of appeal confers jurisdiction on the Court of Appeals and divests this Court over their aspects of the case. Once jurisdiction has divested, this Court may not take any action that would alter the status of the case as it rests before the Court of Appeals. Because the appeal involves the Preliminary Injunction at issue, this Court lacks jurisdiction to enforce the preliminary injunction or hold Defendants in contempt.”

Separately, a Tuesday filing in the district court stated that a pending “motion to intervene” involving 14 affiliates of the Horsemen's Benevolent and Protective Association and several other entities that want to join the lawsuit as plaintiffs has been assigned an Oct. 13 court date.

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