National Horsemen's Benevolent and Protective Association

HISA, FTC File to Get Fifth Circuit Opinions Vacated, Cases Reheard

Citing the year-end passage into law of a bill that included language giving the Federal Trade Commission (FTC) more rule-making authority in the Horseracing Integrity and Safety Act (HISA), officials from HISA and the FTC who are defendants in two lawsuits before the Fifth Circuit United States Court of Appeals filed four separate documents on Tuesday seeking to vacate two opinions related to constitutionality issues and get rehearings in both cases.

In one lawsuit initiated by the National Horsemen's Benevolent and Protective Association (NHBPA) and 12 of its affiliates against personnel from the HISA Authority and the FTC, the Fifth Circuit ruled on Nov. 18 that HISA was unconstitutional because it “delegates unsupervised government power to a private entity,” and thus “violates the private non-delegation doctrine.” In this case, the defendants fired back with a pair of “emergency” motions and petitions Jan. 3.

Those filings essentially said 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 HISA.

“This is the rare case where critical 'dialogue between and among the branches of Government,' has worked in real time both to advance Congress's pressing policy goals and to address the judiciary's asserted constitutional concerns,” the HISA and FTC defendants stated, referring to how swiftly–just over a month–the legislative and executive branches reacted to the Fifth Circuit's unconstitutionality ruling on HISA.

“Since their July 1 effectiveness date, the new [HISA] regulations have brought much-needed safety reforms to the benefit of horses and horseracing participants and, in turn, have begun to restore integrity to the sport,” the defendants stated.

“A few weeks ago, however, this Court held that HISA violates the private-nondelegation doctrine…. Because (in the panel's view) the FTC lacked 'the final word on the substance of the rules, the panel concluded that the Authority did not 'function subordinately to the agency.'”

The motion to vacate continued: “Congress heard this Court's concern and acted swiftly to resolve it. On Dec. 23 Congress again enacted, and on Dec. 29 President Biden signed into law, bipartisan legislation–this time amending the operative language of HISA to fix the alleged constitutional defect the panel had identified…

“Accordingly, the [Fifth Circuit] panel opinion–predicated on a prior version of HISA that no longer exists and that Congress purposefully replaced–cannot stand. Congress's direct response to the constitutional concern at the heart of the panel opinion–obviating the principal basis for Plaintiffs-Appellants' constitutional objection–strongly supports affirmance of the district court's judgment.

“But regardless of how and when the Court ultimately adjudicates this appeal, the panel should vacate its opinion and the judgment of the Court forthwith to prevent the serious harms that mount each day from the now-moot holding that the former version of the Act is facially unconstitutional…

“The panel should rehear this case in light of the intervening congressional amendment HISA and reverse the district court's grant of a preliminary injunction,” the filing concluded.

That last line refers to a Mar. 31, 2022, ruling in United States District Court (Northern District of Texas) that affirmed HISA's constitutionality by stating “the law as constructed stays within current constitutional limitations as defined by the Supreme Court and the Fifth Circuit.”

The HISA and FTC defendants also made related Jan. 3 filings in a separate Fifth Circuit case. This one involves the states of Louisiana and West Virginia, plus other “covered persons” under HISA, alleging unconstitutionality and federal rulemaking procedure violations.

Unlike the two filings in the above-referenced HBPA case, these were not labelled “emergency” motions or petitions. But they did ask for the panel's previously issued opinion to be vacated, the reinstation of a previously issued stay pending further appeal, and a panel rehearing.

“The district court's order preliminarily enjoining enforcement in Louisiana and West Virginia of all then-existing rules promulgated under HISA directly undermines Congress's goal of providing for uniform regulations to protect horseracing participants (equine and human) and restore integrity to the sport nationwide,” the defendants' filing stated.

“This Court appropriately stayed that order, finding that each of 'the stay elements are met' with respect to the district court's (manifestly flawed) conclusion that the Administrative Procedure Act forecloses the 14-day notice period the FTC formally provided…

“The stay pending appeal was necessary to 'allow [the Court] to bring 'considered judgment' to the matter before [it] and 'responsibly fulfill [its] role in the judicial process.' Yet the panel's subsequent decision to remand the case and lift the stay short-circuits that process, not based on the merits of the district court's order–which have never been adjudicated–but on the sole ground that a panel in a 'separate cases held that 'HISA is facially unconstitutional.'”

The filing summed up: “This Court should vacate its panel opinion and judgment, and reinstate the Court's stay pending further adjudication of this appeal…. The Court should grant [a] panel rehearing and reverse the district court's grant of a preliminary injunction.”

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Attorney, Trainer Vienna Joins Epistolary Exchanges on HISA

As the deadline looms for congress to insert language into the full year-end omnibus spending bill to fix constitutional question marks surrounding the Horseracing Integrity and Safety Act (HISA), proponents and critics of the law have taken to an epistolary standoff.

Last week, trainers Wesley Ward and Larry Rivelli issued a letter through the National Horsemen's Benevolent and Protective Association (HBPA) critiquing various aspects of the national program for “too many flaws, missteps and costs that could have been averted with true inclusion and transparency in its development.”

Earlier this week, HISA CEO Lisa Lazarus conducted a zoom conference with Ward, along with attorney and former trainer Darrell Vienna, to grapple with the points raised in Ward's letter.

Issued Wednesday, Vienna released his own open letter to Lazarus, addressing six main points that he said were discussed during Monday's zoom conference.

The topics cover Vienna's thoughts on the financial assessments, the way in which therapeutic and illegal substances have been divided, the new system of detection times and screening limits vs. the old system of withdrawal guidelines and thresholds, HISA's environmental contamination policy, industry input into HISA's working framework, and the new whip rules.

Substantively speaking, Vienna's letter overlaps the contents of an open letter Charles Scheeler, the chair of the HISA board of directors, issued Tuesday addressing what he sees as “misinformation” about the law, in the process arguing that HISA's drug testing program protects “good-faith horsemen,” that HISA's rules “seek to protect” small racetracks and racing jurisdictions, and that HISA has “consistently sought feedback from horsemen” across the country. Read Scheeler's full letter here.

In his open letter, Vienna writes that there is “an apparent and obvious inequity” in the way HISA has calculated its fee assessments.

“For example,” writes Vienna, “Charles Town's annual purse money ($35,000,000) and Keeneland's annual purse money ($32,000,000) are similar; however, Keeneland's HISA Assessment is half of Charles Town's HISA assessment.”

Vienna also takes issue with HISA's environmental contamination protocols, which appear to include only a slim number of substances.

“The vast majority of prohibited substances are not subject to the Atypical Findings Policy. The Policy only applies to initial findings of HISA specified substances, endogenous substances, ractopamine, zilpaterol, and substances not listed on the Prohibited Substances list,” Vienna writes.

“Contrary to HISA's assertion of trainer friendliness, HISA's policy is among the most trainer unfriendly contamination policies in horseracing because it excludes a vast number of substances from the Atypical Findings Policy,” Vienna adds.

Ultimately, writes Vienna, “HISA rules have not been so tested and do not appear superior to ARCI model rules. Rather than rewriting the book, it may be better to see those model rules adopted and enforced uniformly throughout racing jurisdictions. If there was a concerted effort toward that goal, I believe that uniform racing and medication rules would already be the law of the land.”

Read Vienna's full letter here.

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Language Amending HISA in Omnibus Spending Bill

Draft language has been inserted into the full-year omnibus spending bill designed to fix a constitutional problem with the Horseracing Integrity and Safety Act (HISA) identified by the Fifth Circuit Court of Appeals, which found in November that the law as written doesn't afford the Federal Trade Commission (FTC) enough authority in the rule-making process.

In short, the draft omnibus spending bill cedes the FTC–the governmental agency which ultimately signs off on any new HISA rule–new autonomy to remove, add to and tweak language in the rules constructed by the Horseracing Integrity and Safety Authority, the private entity given broad umbrella power over implementing the act. Previously, the FTC could only accept or reject a proposed rule.

The FTC may now “abrogate, add to, and modify the rules of the Authority promulgated in accordance with this Act as the Commission finds necessary or appropriate to ensure the fair administration of the Authority, to conform the rules of the Authority to requirements of this Act and applicable rules approved by the Commission, or otherwise in furtherance of the purposes of this Act,” the language states.

The news was first reported by the Paulick Report. Lawmakers have until Friday to pass the spending bill before the make-up of Congress changes shape next year.

After this draft language was released, The National Horsemen's Benevolent and Protective Association (HBPA) CEO Eric Hamelback and General Counsel Peter Ecabert released a joint statement, taking aim at legislation they say was “crafted in the dark of night with no public hearings and virtually no industry input.”

“This amendment does not address other substantive issues, nor does it address the funding disaster that remains in the flawed Act. It is clear from the issues raised in the various lawsuits contesting the legal validity of HISA that this one-sentence 'fix' does not alleviate the glaring constitutional infirmities this law has created.

“The constitutional defects still include a non-federal private entity granted the power to levy taxes in violation of Article I, Tenth Amendment violations for anti-commandeering of states powers, Fourth and Seventh Amendment violations for lack of due process, and violations of the Administrative Procedures Act,” wrote Hamelback and Ecabert.

Hamelback and Ecabert added that, “For all the reasons we state above, the Act itself remains unconstitutional by handing the regulation of an entire industry over to an unelected, unaccountable private corporation. This fight is not over, and the National HBPA will go all the way to the Supreme Court if we have to, in order to protect the interests of horsemen across the country.”

In a rare move for the chair of the HISA board of directors, Charles Scheeler issued his own statement Tuesday, addressing what he sees as “misinformation” about the law, in the process arguing that HISA's drug testing program protects “good-faith horsemen,” that HISA's rules “seek to protect” small racetracks and racing jurisdictions, and that HISA has “consistently sought feedback from horsemen” across the country.

“Some horsemen have recently expressed a desire to scrap the substantial progress made over the last two years and start from scratch on safety and integrity reform. But after failing for decades to create uniform standards, we've finally made real progress and have momentum. In fact, early indications suggest that racing is already getting safer for horses. Starting over would be to risk losing all of that,” wrote Scheeler.

“Getting a federal law passed was a monumental accomplishment, and the progress and momentum since then has been astounding. Thoroughbred racing must take advantage of this moment. Change can be uncomfortable and often comes with growing pains, but the future of the sport depends on its evolution. Let's find the courage to do this together,” Scheeler added.

The year-end omnibus spending bill left the Senate and House Appropriations Committees Tuesday morning, and must now be finalized before this Friday, to avert a governmental shut-down.

During that process, the amendment to HISA could still be removed, though sources say that is extremely unlikely. If this language remains in the bill, however, there are a few different scenarios at play.

Last week, FTC announced that it had disapproved “without prejudice” the program's anti-doping and medication control (ADMC) rules.

But with this new language, HISA could resubmit the ADMC rules with the FTC. It would then take approximately 60 days for these rules to go into effect, “assuming that the FTC was going to approve them substantively,” HISA CEO Lisa Lazarus previously explained.

There remains a ruling pending in the Sixth Circuit Court of Appeals concerning similar constitutional questions to the Fifth Circuit. It is currently unclear when that ruling will land.

But the current language in the omnibus spending bill would essentially render the current cases before the Fifth and Sixth Circuits legally moot in a practical sense, and would make the possibility of the Supreme Court taking them up altogether highly unlikely.

Even then, don't expect the legal fireworks to end, with a case in the U.S. District Court of Texas-Northern District, Amarillo Division-a potentially nasty looking legal blackthorn for the law.

Constitutional law expert Lucinda Finley recently told the TDN that the case raises several additional constitutional arguments that the Fifth and Sixth Circuits did not rule on, including HISA's investigative, subpoena and punishment power as a private body, and the way in which individuals on the HISA board are appointed.

“It argues that the whole structure is a delegation of not only too much executive authority, but can amount to a delegation of legislative and judicial authority as well,” Finley explained.

If the judge in the case agrees that HISA indeed delegates too much power to a private entity, the plaintiffs in the case are seeking an injunction to suspend enforcement of the law.

Would such an injunction apply nationwide or just in Texas?

“You've actually asked what is one of the most raging controversies in U.S. law,” Finley replied, leaving the answer open-ended.

The state of West Virginia is a plaintiff in two lawsuits against HISA that allege unconstitutionality. During a Tuesday morning meeting, the West Virginia Racing Commission (WVRC) discussed the ramifications of the pro-HISA language being added to the federal omnibus spending bill.

“This amendment appears to try to flip the rulemaking authority back to the FTC in a way that HISA can make suggested rules to the FTC, [which would] have the ultimate authority as to whether or not to approve them,” said WVRC commissioner J.B. Akers, who is an attorney.

“On its face, [this] could potentially resolve the constitutional issues, some or all, that were present in the Fifth Circuit case,” Akers said. “What's clear here is that someone has influenced the staffers or politicians who were responsible for writing this 4,000-plus page legislation to put a couple of paragraphs [in the bill] where they're now attempting to 'fix' the Fifth Circuit constitutional analysis so that the FTC has its mandated authority back. Whether or not that would satisfy those constitutional concerns,” Akers added, is unclear.

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HISA: Five Key Areas and Related Questions

Time is barreling onwards towards July 1, when the Horseracing Integrity and Safety Act (HISA) is scheduled to go into effect, and the pulse of the industry appears to be one of growing trepidation over what promises to be a sweeping reorder of its working mechanics.

That is hardly surprising, given the program still lacks a central enforcement agency, thanks to stalled talks towards the end of last year with the United States Anti-Doping Agency (USADA).

What's more, in Lisa Lazarus, the board of directors has only just formally instated its chief executive officer. Lazarus started her tenure last week.

Under the crunch, the Horseracing Integrity and Safety Authority–the non-profit umbrella established by HISA to broadly oversee the program–has taken mitigating steps by staggering implementation.

While the racetrack safety program prong of the law is set to begin July 1, the anti-doping and medication control (ADMC) rules aren't expected to go into effect until early 2023.

What does this mean for the industry, on the proviso that pending litigation doesn't further stall HISA's implementation? A quick answer is that there is no clear answer.

The TDN sent the Authority a series of detailed questions, receiving brief answers to several of them, but not all.

The following has been pieced together from those responses, from the latest version of the rules which can be found here, and from background conversations with individuals–including industry and state officials–familiar with the process.

Because of the current lack of specifics, the following is far from a comprehensive overview of where matters stand and is in large part a speculative exercise designed to prompt a dialogue on key parts of this federal bill.

1 – LAWSUITS

There are two main lawsuits seeking to strike HISA down.

The first suit, led by the National Horsemen's Benevolent and Protective Association (HBPA), is joined by Arizona, Arkansas, Indiana, Illinois, Louisiana, Nebraska, Oklahoma, Oregon, Pennsylvania, Washington, and West Virginia.

The suit takes aim at HISA's constitutionality on several grounds, including that in the Authority, HISA cedes governance to a private organization of unelected individuals, and that the Federal Trade Commission (FTC) isn't granted the necessary regulatory autonomy as an oversight body.

The defendants–including HISA and the FTC–dispute this reading of the law and the constitution on various grounds, including that the plaintiffs have misinterpreted the legal precedents underpinning their arguments.

Oral arguments were heard Wednesday in a hearing in the United States District Court for the Northern District of Texas. Given the July 1 deadline, legal experts say that Judge James Wesley Hendrix could make a ruling within weeks.

If he rules in the plaintiffs' favor, he could grant a stay on appeal, and the law could still go into effect July 1. However the judge rules, appeals are likely and will head to the United States Fifth Circuit Court of Appeals.

The second suit, filed in the United States District Court Eastern District of Kentucky, is led by the state of Oklahoma, and is joined by several entities, including the states of Alaska, Arkansas, Idaho, Louisiana, Mississippi, and Nebraska, Ohio and West Virginia.

Similar to the litigation led by the HBPA, this second lawsuit–filed in April of last year–questions HISA's constitutionality on various grounds, and argues that HISA's broad regulatory and taxation powers violate the Constitution's non-delegation doctrine.

The TDN understands that no hearing has yet been scheduled on this second lawsuit.

2 – COST

What is the deadline for figuring out overall cost?

According to the law, the Authority needs to alert individual states as to their estimated costs by Apr. 1. Individual states then have until May 2 to decide whether they want to remit their fees according to this calculation.

That calculation–recently posted on the federal register–is a little complicated. Essentially, the rules don't break costs down on a fee-per-start basis, but on a proportionate calculation which includes a state's overall purses:

“For example, if all starts in all races at all tracks were treated equally, West Virginia would have a larger proportionate share than Kentucky, even though the purses and entry fees generated by the Kentucky races dwarf those generated by West Virginia races. Instead, the Authority defined Annual Covered Racing Starts in a manner that is consistent with an equitable allocation of the funding needs of the Authority,” the posted rules state.

There are some important caveats. For one, no state's respective annual allocation shall exceed 10% of the total amount of purses in that state.

“All amounts in excess of the 10% maximum shall be allocated proportionally to all States that do not exceed the maximum, based on each State's respective percentage of the Annual Covered Racing Starts,” the posted rules state.

If a state chooses not to remit fees this first way, it'll still have to do so via separate monthly chunks determined by the Authority, and prefaced broadly on the following calculation:

Monthly starts

Total starts per year X Annual Calculation

Vital questions, therefore, appear to be these:

Q: When it comes to final numbers, does the calculation actually disproportionately impact the high purse states (like California, New York and Kentucky) as compared to the high-volume, low-purse racing jurisdictions (like the aforementioned West Virginia)?

Q: If the safety program goes into effect July 1 this year, and the ADMC program at the start of 2023, how does the Authority plan to distribute its available funds between those two very different six-month periods?

As a useful guide, the industry (minus New York) spent in 2019 a little more than $24 million on medication testing, according to a Jockey Club breakdown of those costs.

Q: And finally, what exactly will the funds be used for and how? Will they also be used, for example, to renumerate legal costs and any debts the Authority might have already accrued?

3 – ENFORCEMENT AGENCY

When USADA announced that it had stepped away from the negotiation table, they left the door ajar for reconciliation.

“Though we are unsure what the future holds for USADA–if any–in this effort, we have offered to assist the Authority and others in the industry to ensure that the sport gets the program it needs and that the horses deserve,” said USADA CEO, Travis Tygart, in his statement on the matter.

No further announcements have been made as to USADA's involvement, if any, in ongoing HISA enforcement agency talks. What other organizations could fit the bill?

The Authority declines to comment on what agencies have been approached, if any.

Could the Federation Equestre International (FEI)–the international governing body for equestrian sports–step into the breach, given new CEO Lazarus's pedigree as the agency's former general counsel, therefore? Or would the United States Equestrian Federation (USEF), which oversees equine sports on home soils, be a better fit?

Could another option–one admittedly fraught with possible conflict of interest issues–be that the eventual enforcement agency sub-contracts portions of the ADMC program to organizations with focused experience in a particular field?

Given how Racing Medication and Testing Consortium (RMTC)-accredited laboratories will still be used when the ADMC program goes into effect, could the Authority sub-contract out lab accreditation to the RMTC on a more permanent basis?

In that same vein, is there room for the Association of Racing Commissioners International (RCI) to assume a role? Could management of the nations' racetrack veterinarians fall to the American Association of Equine Practitioners (AAEP)?

Given how inchoate the enforcement agency agenda is right now, specifics are light. Even so:

Q: What will the working relationship between the Authority and the enforcement agency specifically look like? Will they be a service agency, working primarily at the behest of the Authority, or a separate autonomous beast?

Q: Given USADA's emphasis on increased out-of-competition testing under HISA–typically a more expensive endeavour than post-race testing–how will the eventual enforcement agency approach that vital prong of the ADMC program, especially in the beginning when available funds will presumably be tight?

4 – ANTIDOPING AND MEDICATION CONTROL PROGRAM (ADMC)

During its time as an enforcement agency hopeful, USADA didn't sit idly by, putting together program materials, including a proposed results management process, a set of possible sanctions, and an outline of a binary approach to classifying substances, breaking them into primary and secondary substances.

According to the Authority, HISA owns the materials drafted by USADA, which are still posted on USADA's website.

When asked what components of USADA's ADMC program could be kept and what might be jettisoned, the Authority replied with the following:

“The draft ADMC documents developed with USADA provide a strong foundation that reflects significant input from the industry and other experts and this additional time has enabled us to collaborate further with industry stakeholders. Our goal is to build on the progress that has been made to-date with our future independent enforcement agency,” wrote a spokesperson for the Authority.

Ultimately, final say on the ADMC program will surely fall to the future enforcement agency.

While that position remains vacant, it's once again hard to nail down any specifics. Nevertheless, the following appear two important questions, among many.

Q: Will the enforcement agency maintain USADA's binary approach to regulated drugs, treating them all the same despite differences in potency? Or will it choose an alphanumeric system, like that outlined in the ARCI's model rules?

Q: Information management will be key to the enforcement agency's overall efficiency. And so, how far along is the creation of a centralized database capable of handling a vast amount of data?

5 – SAFETY PROGRAM

The public comment period for HISA's racetrack safety program closed on Jan. 19. Provided no drastic revisions occur, there are several key certainties come July 1.

Racetracks already accredited by the National Thoroughbred Racing Association (NTRA) will receive interim Racetrack Safety Accreditation, while non-NTRA accredited racetracks get provisional status. These designations survive at least until the safety committee completes a formal accreditation assessment.

This official accreditation assessment will encompass several areas, including the following:

Expanded veterinary oversight, both pre- and post-race
Void claim rule
Transfer of claimed horses' medical records
Surface maintenance and measurement standards
Enhanced reporting standards
Data reporting: medications, treatments, injuries and fatalities
Jockey concussions and medical care reporting

There's wriggle room written into the rules for those jurisdictions and tracks likely to struggle enacting various components of the accreditation program.

“If the accreditation assessment concludes that the applicable Racetrack has not reached full compliance with the accreditation regulations, the Committee may grant provisional accreditation for one year and may extend such provisional accreditation if the subject racetrack is undertaking good-faith efforts to comply with the accreditation requirements and achieve Accreditation,” the rules state.

They also allow jurisdictions to share individuals who fill the role of safety director, responsible for overseeing racetrack risk assessment and risk management, among other duties.

Key questions:

Q: When will the formal accreditation process start? In other words, how long do racetracks and jurisdictions have to get up to speed? And who exactly will conduct these assessments?

When it comes to the adjudication of offenses that fall under HISA's racetrack safety program, there are three broad categories, at least as originally proposed.

One:

The safety committee will seek to enter into voluntary agreements with individual jurisdictions to allow their existing state stewards to adjudicate a first set of rules pertaining to things like use of the whip, the carrying of illegal electronic devices, and the use of shockwave therapy devices.

If the Safety Committee doesn't enter into a voluntary agreement with a state, a separate set of stewards under HISA will adjudicate them instead.

Q: How far along is the Authority in entering into agreements with the individual states to allow their existing stewards to remain?

Two:

The second set of infractions concerns those that don't fall under HISA's wheelhouse, including dangerous riding and minor backstretch violations. These will continue to be adjudicated by stewards within each state.

Three:

According to background conversations the TDN conducted with safety committee officials at the end of last year, there is a third set of infractions which includes prohibited practices like the performing of chemical neurectomies (to desensitize the leg), pin firing and freeze firing.

When it comes to these violations, the racetrack safety committee will decide whether to:

1 – Send the case back to the state stewards

2 – Hear the matter themselves

3 – Refer the case to the independent arbitrators

4 – Or refer the case to the national stewards panel

Q: Given how the ADMC program is responsible for establishing a national panel of arbitrators and stewards, how will the staggered implementation of HISA impact the management of these offenses, if indeed this third prong of the adjudication process remains?

Stepping back to look at the looming implementation of HISA in its entirely, however, perhaps the most pertinent question for the industry isn't rooted in specificity but much more widely encompassing:

When will the Authority and its committees more freely open up lines of communication with stakeholders?

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