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Federal Judge in Texas Delays ADMC Thirty Days

A federal judge in Texas has issued a 30-day waiting period before the rules of HISA's Anti-Doping Medication and Control (ADMC) can take effect. Those rules went into effect Monday, Mar. 27.

During the month of April, therefore, HISA will turn back the job of collecting samples and testing back to the states, said Lisa Lazarus on a Friday night media call.

The ruling, issued Friday, was the latest in a long back-and-forth bitter struggle between pro-HISA and anti-HISA forces.

The ruling, issued Friday by the United States District Court, Northern District of Texas, Lubbock Division, was issued in response to a motion filed by the National HBPA arguing that the rule violated a provision of the Administrative Procedures Act (APA), which governs the process by which federal agencies develop and issue regulations. It includes requirements for publishing notices of proposed and final rulemaking in the Federal Register, and provides opportunities for the public to comment on notices of proposed rulemaking. The APA requires most rules to have a 30-day delayed effective date. The judge in the case only partially agreed.

After HISA was found unconstitutional by the Fifth Circuit Court, the group went back to the Federal Trade Commission to amend language that addressed that court's concerns.

“When Congress changes a statute in response to a court's opinion, the result is usually a second wave of litigation: Was the attempted remedy sufficient? What new arguments arise?” wrote the court. “But those larger questions are not yet before the Court. Currently, the plaintiffs make a narrow procedural claim that a new anti-doping rule violates the Administrative Procedure Act because not enough time passed between when the rule was published as final and when the rule took effect. When an agency issues a substantive rule—the type of rule that controls our behavior—it must ordinarily wait 30 days between when the final rule is issued and when it takes effect. This ensures that regulated parties have the time to challenge the rule's validity or bring themselves into compliance. But the anti-doping rule took effect the same day that it was published as final. As a result, the rule issued in violation of the APA, so the plaintiffs—and everyone else—will get their 30 days. The Court enjoins implementation or enforcement of the anti-doping rule until May 1, 2023.”

But the court only addressed that 30-day rule required by the APA, and not the HBPA's larger claims that HISA remains unconstitutional despite the added language.

“Plaintiffs' only new argument is that section 553(d), absent good cause, requires an agency rule to take effect 30 days after the final rule is published. In the interest of judicial economy—and because the plaintiffs only seek emergency relief as to the anti-doping rule—the Court will limit its analysis to the sole issue at hand: whether the FTC failed to comply with section 553's required 30-day waiting period and, if so, whether the plaintiffs are entitled to equitable relief,” the ruling reads.

“We launched Monday, for the most part things ran really smoothly,” said Lazarus. “We collected about 700 tests over the course of the week, obviously we're disappointed by the decision out of the Lubbock court, but it has to do with the FTC process, it's not strictly related to HISA. As a result, we're going to suspend operations for a few days, and get ready to go again on May 1, and hand it over back to the states to essentially run the programs. We're providing all the assistance we can to the states while respecting the federal order.”

The National HBPA issued a statement about the ruling Friday night.

“We are very pleased that the National HBPA has defeated HISA in the courts yet again,” said National HBPA CEO Eric Hamelback. “It was reckless and irresponsible of the Authority and the FTC to rush to implement these brand-new rules this weekend. Horsemen need time, and we were glad to stand for them once again. The Fifth Circuit Court of Appeals ruled that HISA was unconstitutional in our lawsuit before, and we expect they will do so again.”

HISA's outside counsel John Roach pointed out that states covered by HISA were using the same drug collectors they had been using before Mar. 27, and that they thought the confusion would be limited.

Lazarus said that HISA had considered and rejected the idea of trying to get the 30-day injunction overturned. “Ultimately we're here to serve the industry, and at this point it just creates chaos,” she said. “At this point, it's just 30 days, so we can plan for that, communicate that. So in weighing all the interests, we thought it was best to accept the decision, communicate it, plan for it and use this 30 days to continue to improve our processes. The ruling does make it clear that as of May 1, we're operational again. But I can take a 30-day break better than I can take real questions as to the validity.”

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1/ST Internships for Ed Brown Fellow and Scholar

The second round of 1/ST interns placed through the Ed Brown Scholars-Fellows program will be Zaharia Selman and Shaska Davis. The two will spend the next 10 weeks at Gulfstream Park, Santa Anita Park, and Pimlico Race Course.

Ed Brown Fellow Selman graduated Magna Cum Laude from the University of Georgia last year with a Bachelor of Science degree in Animal Science.

Ed Brown Scholar Davis will graduate this summer from Kentucky State University with a Bachelor of Arts degree in Mass Communications.

“We are very excited to embark upon year two of our groundbreaking partnership with 1/ST and to facilitate this tremendous opportunity for Zaharia and Shaska, as they undoubtedly gain professional experience that will place them on the pathway to successful careers in the Thoroughbred industry,” said Ed Brown Society Chairman Greg Harbut.

The Ed Brown Society, founded in 2020, celebrates the rich history of African-Americans in the Thoroughbred industry and creates opportunities for young people of color that will qualify them for professional careers in the industry. 1/ST became the first member of the Ed Brown Partnership in January 2022.

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Klaravich’s Randomized In Order At Aqueduct

1st-Aqueduct, $80,000, Msw, 3-31, 3yo/up, f/m, 1m, 1:36.48, ft, 5 1/2 lengths.
RANDOMIZED (f, 3, Nyquist–French Passport, by Elusive Quality), last seen at Saratoga July 24 when she was third sprinting on debut behind Kaling (Practical Joke), made her presence felt from the start at Aqueduct when the 3-2 second choice powered confidently to the front as she was stalked by favorite Gifted (Tapit). As the pair began to separate themselves from the rest of the field, they briefly dueled around the far turn, but it was Randomized who was keen to the task at the top of the lane and striding away she won geared down by 5 1/2-lengths. Second dam Air France (French Deputy) produced MGSW Smooth Air (Smooth Jazz), GSW Overdriven (Tale of the Cat), while her Super Phoebe (Malabar Gold) is responsible for MGISW Got Stormy (Get Stormy). The winner's unraced dam has a 2-year-old colt by Justify and a yearling filly by Frosted. She visited Maxfield last year. Sales History: $420,000 Ylg '21 KEESEP. Lifetime Record: 2-1-0-1, $56,600. Click for the Equibase.com chart or VIDEO, sponsored by TVG.
O-Klaravich Stables, Inc.; B-Cove Springs, LLC (KY); T-Chad C. Brown.

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Judge Rules Belterra Owes Ohio HBPA $2.7M In ‘Deprived’ VLT Money

A money disagreement that has simmered for nearly a decade got a step closer to settlement Thursday when a federal judge ruled the Ohio Horsemen's Benevolent and Protective Association (OHBPA) is entitled to $2,769,652 in gaming revenues that the present and former owners of Belterra Park withheld between 2014 and 2018.

The dispute arose from Belterra's failure to pay the OHBPA its share of net-win video lottery terminal (VLT) commission from Belterra Park. The quarrel was exacerbated when the two sides disagreed over the rate that was supposed to be the horsemen's lawful cut and whether or not retroactivity applied to that rate, with the OHBPA alleging that Belterra's withholding of money over a four-year period amounted to “unjust enrichment.”

The Mar. 30 order by Judge Algenon Marbley in United States District Court for the Southern District of Ohio (Eastern Division) is not a final judgment. But the judge did write that, “this Court finds that statute requires Defendants to pay Plaintiff the [higher] 9.95% rate from May 1, 2014, to June 30, 2018 [and that] having found that no reasonable jury could find for Defendants on Plaintiff's unjust enrichment claim, this Court GRANTS summary judgment on this issue.”

Dave Basler, the OHBPA's executive director, told TDN via phone Friday morning that the horsemen were pleased with the ruling.

“We felt throughout that that was money that was owed to the horsemen, and felt strongly that that was something that we needed to pursue legally until it was resolved,” Basler said. “The money obviously would be a benefit to our purse account.”

The initial complaint filed Dec. 18, 2020, explained that when VLT gaming was first legalized by Ohio in 2009, the state authorized racinos to retain 66.5% of revenues, with “between 9% and 11%” of those net-win proceeds to then be paid to Thoroughbred and Standardbred entities.

That range of percentages was set five years before any actual VLT gaming happened at Belterra, and in 2012 the state authorized the Ohio State Racing Commission to set the actual rate that would go to the horsemen. But until a new, firm rate got set, 9% was to be used as the placeholder to determine purse proceeds, according to an escrow agreement negotiated between Belterra and the commission.

Belterra didn't open for VLT gaming until May 1, 2014, largely because the track formerly known as River Downs was undergoing a substantial renovation to rebrand the property as Belterra Park Gaming & Entertainment Center. The capital expenditures for that project were to be a factor in determining the new calculation rate for purse money, but the complaint alleged that Belterra stalled and tried to overstate the costs it incurred fixing up the property, an allegation that Belterra denied.

Eventually, on June 27, 2018, the racing commission set the percentage of Belterra Park's net-win VLT commission that it owed to the OHBPA at 9.95%. The OHBPA interpreted that rate to mean both retroactively and moving forward, while Belterra argued that the OHBPA was not due any retroactive funds, because Belterra and the commission had negotiated over the catch-up payments and had factored that aspect into the escrow agreement.

Four days after that final rate was established, the OHBPA did, in fact, begin receiving its full 9.95% from Belterra. But the bone of contention that led to the lawsuit had to do with the retroactivity surrounding the remaining .95% beyond the 9% stipulated in the escrow agreement. The OHBPA argued that Belterra never made good on the four-year difference between the placeholder rate and the revised rate, which is how the plaintiffs arrived at the $2,769,652 figure.

“Here, Plaintiff argues, because Belterra Park was the only racino in the state with which Plaintiff failed to reach agreement on the VLT commission rate, the parties entered a temporary 'escrow agreement' of 9% pending an administrative ruling by the Racing Commission,” the Mar. 30 order stated.

“Plaintiff maintains that the Escrow Agreement was only meant to be temporary; it could not set the commission rate because it was not a method authorized by the statute. As such, Plaintiff argues, the 9.95% commission rate must be backdated because the statute considers only one fixed rate that is to be applied from the moment the first coin is dropped,” the order stated.

The judge agreed with the HBPA's reasoning, explaining the decision this way: “This Court finds the best way to apply the statute is to do so based on its plain meaning. Plaintiff was due payment using a rate determined by the Racing Commission in the absence of an agreement with Belterra Park. The Racing Commission did eventually determine a commission rate of 9.95%. This commission rate is thus applicable for the entire period that Belterra Park operated its VLT gaming.

“Indeed, the statute provides that the Racing Commission must set the rate within six months. This did not happen. No authority indicates, however, that the Racing Commission's tardiness has any relevance to this case. As such, this Court finds that statute requires Defendants to pay Plaintiff the 9.95% rate from May 1, 2014, to June 30, 2018,” the order stated.

The OHBPA had also asked to be paid prejudgment interest on the outstanding payment. But the judge denied that request at the Mar. 30 summary judgment stage on a legal technicality because the plaintiffs failed to state whether they sought the interest “pursuant to statute or common law.”

The order did state, though, that the OHBPA could file a separate motion for prejudgment interest, which leaves that aspect of the case open for the time being.

Also unknown at this stage is whether the defendants plan to appeal. There are multiple parties involved on that side of the case.

Belterra Park itself is named as a defendant, as is the racino's current owner/operator, Boyd Gaming Corporation.

Pinnacle Entertainment, Inc., (which, according to the suit, owned Belterra between 2011 and 2018) and Penn National Gaming, Inc. (which, according to the suit, briefly had an ownership interest in Belterra in 2018), are also listed as defendants.

David Strow, Boyd's vice president of corporate communications, answered a Friday query from TDN about a possible appeal by emailing that the company did not wish to comment on the court order at this time.

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