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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Conservative Judges in Sixth Circuit Appeals Court “Does Not Bode Well” for HISA

The conservative bent of two of the three judges on the U.S. Court of Appeals for the Sixth Circuit scheduled to hear another case about the constitutionality of the Horseracing Integrity and Safety Act (HISA) “does not bode well” for the near-term future of the act, said appellate law expert Lucinda Finley.

Oral arguments are set for Dec. 7 in the Sixth Circuit Court of Appeals for an appeal of an earlier ruling in U.S. District Court for the Eastern District of Kentucky.

That district court found that HISA was indeed constitutional, and that the Federal Trade Commission (FTC)—the governmental agency charged with ultimately signing off on the law's rules—wields adequate authority over the private entity charged with implementing the law.

If the Sixth Circuit reverses that district court ruling, it would mirror a decision delivered in the United States Court of Appeals for the Fifth Circuit last week, which ruled HISA unconstitutional because it cedes too much governmental authority to a private entity, and too little rule-making input to the FTC.

An overview of the various legal implications from the Fifth Circuit ruling can be read here.

The three-person panel hearing the case in the Sixth Circuit includes in judges Jeffrey Sutton and Richard Griffin “two of the most conservative judges” on the entire circuit court, said Finley—individuals who could perhaps be expected to take a more “skeptical” attitude towards the constitutionality of the law in its current form, she added.

More pointedly, Chief Judge Sutton is an expert on state constitutions, explained Finley. “Given his strong commitment to letting states handle matters themselves, I would not expect him to come at this new federal regulatory scheme openly sympathetic.”

Judge Ransey Guy Cole, the third judge on the panel, is an appointee from the Clinton administration considered moderate to liberal, explained Finley, and could therefore prove more amenable to the arguments from HISA's attorneys.

“This 2-1 slant of extremely conservative judges—and the conservative position these days seems to be against broad federal regulatory schemes—does not bode well for the fate of HISA before the Sixth Circuit,” said Finley.

Finley explained that it was difficult to prognosticate when a ruling on the case—which was brought by various entities such as the States of Oklahoma, West Virginia, and those states' racing commissions—will be issued.

If the panel of judges fails to rule unanimously, “that always takes longer for the decision to come out,” warned Finley.

That said, “The lawyers might say, as part of their oral argument, that this has caused great uncertainty and tumult, and it would be good to have a decision as soon as possible,” said Finley. “But it also depends on something none of us can know, which is for each of the judges on this particular panel, what other cases in the pipeline are they still working on?”

The messy regulatory roadmap for the start of next year, when HISA's Anti-Doping and Medication Control program is scheduled to go into effect, is already looking fraught with potential hazards, especially for trainers and other industry stakeholders with operations in multiple states.

If HISA fails to get a stay granted on the Fifth Circuit decision—something several legal eagles think is a likely scenario—then the ruling goes into effect on Jan. 10, and will apply to those states under the circuit court's decision, namely Texas, Louisiana and Mississippi, said Finley.

Since Friday's Fifth Circuit decision came out, the same circuit court has also lifted an “administrative stay” on a HISA-related ruling allowing an injunction against the plaintiffs to go into effect. As Finley explains, the injunction essentially prevents HISA from “enforcing its rules” in Louisiana and West Virginia.

Other states beyond the Fifth and Sixth Circuits, therefore, must weigh the decision whether or not to continue abiding by HISA's rules against a backdrop of legal uncertainty surrounding the law's constitutionality.

On Monday, Ed Martin, president of the Association of Racing Commissioners International (ARCI) said that some states, like California, will honor a written agreement they have executed with HISA to enforce its 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,” Martin added.

A reversal in the Sixth Circuit of the earlier district court decision would only muddy the waters even more. At the same time, said Finley, consistent rulings between the Fifth and Sixth Circuits would make it “significantly less likely” the Supreme Court would eventually take up the case—what is one of the potential legal options open to HISA.

“But I think if the Sixth Circuit disagrees with the Fifth Circuit, then I think it makes it significantly more likely that the Supreme Court takes the case,” said Finley.

The TDN repeatedly pressed HISA for comment on a series of questions about the pathway forward. HISA responded with a statement by Charles Scheeler, chair of HISA's board of directors, which was first issued last week:

“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. 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.”

Finley also emphasized a previously made comment—that arguably the “most successful” route for HISA to legally undergird the act could be to seek a congressional re-write of the rules to cede greater rule-making authority to the FTC.

When asked if greater FTC oversight of the rule-making process would satisfy the Horsemen's Benevolent and Protective Association (HBPA)—the national organization that has spearheaded the legal push against HISA—the organization's general counsel, Peter Ecabert, demurred, citing other problems with the act as written, such as a lack of transparency in meetings unavailable to the public and in the budgetary process.

“One of the things that Congress could do that would be a blessing for the industry would be to fund this,” Ecabert said.

“We all want uniformity,” he added. “But do this in the brightness of the light and not behind closed doors.”

Far from uniformity, however, come the start of 2023 the regulatory playing field could be as fractured, puzzling and complicated as it has ever been for industry participants.

When asked what he would tell the likes of Steve Asmussen and Todd Pletcher—trainers with large sprawling multi-state barns—about operating in this highly confusing environment, Ecabert recommended reaching out to individual state racing commissions.

“Hopefully the racing commissions will give some guidance, or the attorney general for the jurisdiction will say how they're going to treat HISA,” Ecabert said. “It's now a state-specific issue until HISA's ruled to be unconstitutional and unenforceable nationwide.”

Ecabert also pointed to legislation introduced into the U.S. House of Representatives in October of last year seeking to delay the full implementation of HISA until the start of 2024.

HBPA CEO, Eric Hamelback, wrote in a text that the bill currently only has 3 co-sponsors, but that there has been verbal support for the bill among other congressional members, and he expects support to build for it in after Friday's Fifth Circuit decision.

Another plan still in its infancy, Ecabert added, is to introduce into congress a separate and national “medication compact” similar in its framing to the now defunct National Uniform Medication Program (NUMP), but which would mandate “uniformity among the states.”

NUMP ultimately failed, Ecabert conceded. “But we're in a different atmosphere today than we were years ago,” he added. “People now, trainers and owners, have seen how disruptive HISA has been and they're more likely to jump on board.”

 

 

 

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Op/Ed Feedback: Why Is Legality Considered Optional?

by Peter Ecabert

Bill Finley, in his Mar. 17 TDN opinion piece on the National HBPA challenging the legality of the Horseracing Integrity and Safety Act, wrote: “It's hard to imagine that there is one horseman anywhere who cares one bit whether or not HISA is unconstitutional or not.”

To Mr. Finley, it doesn't matter if this legislation, ramrodded through to passage with no Senate Committee discussion or debate as a little-known add-on to December's COVID relief bill, is legal or not. Who cares about the law's legality? he asks. The National HBPA cares.

We believe thousands of horsemen and horsewomen, including HBPA members and those in other racing jurisdictions, care, but many are afraid to say aloud that the emperor has no clothes. If they don't care today, we are confident they will down the road when the harmful consequences of HISA are put into effect.

No reasonable person should take issue with the National HBPA, North America's largest Thoroughbred horsemen's association, doing its due diligence to make sure that any such fundamental change to the running of horse racing has a solid legal foundation. It's the due diligence that should have been done in the first place by the well-funded power-brokers pushing this legislation that raises more questions than answers.

Let's be perfectly clear, the National HBPA is and has remained in favor of uniformity. We demanded safety protocols be the norm, not a half-hearted attempt to service public perception. We have never spoken against USADA (United States Anti-Doping Agency) as a contracted entity to aid in enforcement, and we have never stood in favor of the protection of proven cheaters. To label any horsemen's group with that is misinformed and has no basis in fact. However, we have stood for due process and the protection of horsemen and horsewomen's rights. Rest assured we will continue to call for such protection.

What does it matter if the underpinning of what would oversee medication policy, testing, enforcement and safety measures isn't legal? Here's what: those cheaters Mr. Finley believes that HISA will eliminate will have a get-out-of-jail-free card if the law that set up the process for their sanctions is found to violate the U.S. Constitution.

Mr. Finley writes because no one cares about legality (which is what constitutionality comes down to): “Instead, one is left to connect the dots and after doing so, it wouldn't be hard to reach the conclusion that the only reason to have HISA overturned would be that they prefer the status quo over a new system under the control of USADA.” The fact is, there are no dots here–and that's the problem with HISA. It's illegal and open-ended with more questions than answers.

We believe horse owners and horseplayers likely will be forced, with no say-so, to pick up the cost of HISA's unfunded mandate to create a new bureaucracy.

We also believe thousands of horsemen and horsewomen in the trenches want answers to the many questions before putting their livelihood under control by a group which almost certainly will be indirectly selected by and unduly influenced by the elites (i.e., The Jockey Club, whose largely homogeneous membership of approximately 150 is by invitation only).

For those wanting to portray the National HBPA as being obstructionists for demanding due diligence rather than blind faith, we in turn ask: is it really clear how HISA provides integrity, other than establishing an authority with a vague mission and unchecked power? It's like people are reading the bill title, thinking that's all this is to it and all problems are solved.

The National HBPA along with the Liberty Justice Center went beyond the good-feeling title and read the fine print. That's why we're in court.

Peter Ecabert is General Counsel for the National HBPA and owner of Ecabert Law Offices in Lexington, Ky.

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