United States Court of Appeals | Horse Racing Free Tips

Vets: HISA Puts Them at ‘Greater Risk than Other Covered Persons’

The North American Association of Racetrack Veterinarians (NAARV) is arguing for the United States Court of Appeals for the Fifth Circuit to overturn the Horseracing Integrity and Safety Act (HISA) on constitutional grounds because the law allegedly “places the racetrack veterinarians at a greater risk than other covered persons” from a due process standpoint.

Chief among the assertions made by the NAARV in a 51-page “friend of the court” brief filed July 14 are that “initial findings of wrongdoing by a member of NAARV, pursuant to HISA, result in a report to the Federal Trade Commission (FTC) and, therefore, a federal violation. A federal violation would inevitably result in the loss of not only the NAARV member's track license, but also the loss of the member's professional license to practice veterinarian medicine.”

In addition, the NAARV alleged that HISA creates a “financial barrier to due process review.”

That's because, according to the NAARV's filing, the ultimate authority, the FTC, isn't obligated to accept any covered person's request for review of a HISA ruling against them.

And if such a request for review is denied, that covered person's only right to appeal is to bring the matter all the way to a United States Court of Appeals, the NAARV stated. There are only 12 such courts in the country, divided regionally.

“Logistically, this is more challenging,” the NAARV filing stated. “Take, for example, a covered person who has an alleged violation in Texas. He or she must now pursue an appeal before the Fifth U.S. Circuit Court of Appeals in New Orleans, Louisiana.

“A person who has allegedly committed a medication violation in Puerto Rico, if he or she decide to appeal, must pursue that appeal before the First U.S. Circuit Court of Appeals in Boston,” the brief continued.

Beyond potential travel burdens, the NAARV pointed out, bringing any legal action to that level of the federal court system isn't cheap.

“The estimated legal cost for a trip to the U.S. Court of Appeals is in excess of $25,000,” the NAARV stated.

“It creates a cost or premium for substantive due process rights that is unobtainable for most NAARV members and thus, results in a denial of their due process rights,” the NAARV stated.

At a different point in the filing, the NAARV explained that veterinarians accused of wrongdoing would no longer be “in a position to 'take the deal' on a minimum violation but instead forced to defend their position to maintain their license and their livelihood.”

The NAARV continued: “Prior to the implementation of HISA, NAARV members were able to negotiate a state violation without necessarily risking their general veterinary license. Under HISA, they are forced to do so in a system [that] deprives them of both substantive and procedural due process.”

The NAARV's assertions were made in support of the appeal led by the National Horsemen's Benevolent and Protective Association (NHBPA) and 12 of its affiliates.

The defendants in the underlying case, which has lingered in the federal court system for 28 months, are personnel from the FTC and the HISA Authority.

The HISA Authority and FTC have an Aug. 4 deadline to file their own briefs with the Fifth Circuit Court.

Oral arguments in the case are tentatively scheduled for the first week in October.

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Sixth Circuit Parties Argue Whether New HISA Law Renders Anti-Constitutionality Claims Moot

Parties on both sides of a Sixth Circuit United States Court of Appeals case that seeks to reverse a lower court's decision to dismiss a constitutional challenge of the Horseracing Integrity and Safety Act (HISA) argued via written briefs Thursday as to whether or not a pro-HISA law passed at the tail end of 2022 renders as “moot” any constitutionality claims in the under-appeal lawsuit.

The Jan. 12 briefs were filed in accordance with a Dec. 30 request from the Sixth Circuit to explain how the Dec. 29 signage of the new law (which amended the operative language of HISA) might affect the oral arguments both sides had made in the Sixth Circuit case Dec. 7.

Not surprisingly, the plaintiffs appealing the lower court's ruling–led by the states of West Virginia, Oklahoma and Louisiana–told the court that the anti-constitutionality claims are still relevant.

The defendants–primarily the HISA Authority and the Federal Trade Commission (FTC)–informed the panel of judges that the new law has smoothed over any alleged constitutional issues and paves the way for HISA to move forward.

“The recent amendment to HISA addresses only one of these many constitutional problems,” stated a joint brief filed by all of the plaintiffs, which also include the Oklahoma and West Virginia racing commissions, three Oklahoma tracks, the Oklahoma Quarter Horse Association, the U.S. Trotting Association, and Hanover Shoe Farms, a Pennsylvania Standardbred breeding entity.

“All of HISA's other constitutional defects, however, remain unremedied,” the plaintiffs contended.

The HISA Authority defendants saw it differently, writing that, “Congress's response obviates the principal basis for Plaintiffs' private nondelegation claim in this case, which is predicated on a prior version of HISA that no longer exists.”

In a separate brief, the FTC defendants put it this way: “Congress's recent amendment eliminates any doubt that the private Horseracing Authority 'function[s] subordinately' to the [FTC] in satisfaction of the private-nondelegation doctrine….Congress's grant of general-rulemaking authority to the [FTC] resolves the 'core constitutional defect' plaintiffs purported to identify in support of their private-nondelegation claim….”

The underlying case that the plaintiffs are trying to get overturned via appeal dates to Apr. 26, 2021, when they alleged in a federal lawsuit that “HISA gives a private corporation broad regulatory authority.”

On June 2, 2022, that claim was dismissed by a judge in U.S. District Court, Eastern District of Kentucky (Lexington) for failure to state a claim of action. The plaintiffs then appealed to the Sixth Circuit.

While that Sixth Circuit appeal was pending, the Fifth Circuit came out with its own decision in a similar case against HISA that was led by the National Horsemen's Benevolent and Protective Association (HBPA).

That Nov. 18 Fifth Circuit ruling stated that HISA is unconstitutional because it “delegates unsupervised government power to a private entity,” and thus “violates the private non-delegation doctrine.” The order remanded the case back to U.S. District Court (Northern District of Texas) for “further proceedings consistent with” the Appeals Court's reversal.

But in the interim after the Fifth Circuit ruled and the Sixth Circuit heard oral arguments, Congress in late December amended the operative language of HISA to fix the alleged constitutional defect the panel had identified, and President Biden signed the measure into law as a tiny part of a vastly larger year-end spending bill.

An expected Jan. 10, 2023, mandate issuance date for the Fifth Circuit to enforce its order, has come and gone without any directive from that court that seeks to enforce its anti-constitutionality ruling against HISA. So now the next major court decision on HISA's constitutionality is expected to come when Sixth Circuit issues its order.

The plaintiffs cited specifics about why they believed the new law doesn't alter HISA's alleged unconstitutionality.

“In particular, the FTC still lacks front-end ability to veto the Authority's proposals for policy reasons, a crucial power that the Securities and Exchange Commission (SEC) enjoys when reviewing proposed rules of the self-regulatory organizations that it supervises…” the brief stated.

“The amendment also continues to permit the Authority to exercise numerous executive powers without any supervision or control by the FTC,” the plaintiffs continued. “The Authority continues to have unfettered discretion to bring enforcement actions in federal court and expand HISA's regulatory scope to include any non-Thoroughbred horse breed.

“Finally, and crucially, the amendment does nothing to cure HISA's anticommandeering violation. HISA still pushes the costs of administering HISA onto the States by requiring them to fund the Authority's operations or lose the ability to collect fees for matters that the Authority isn't even regulating.”

The FTC brief also made a comparison between HISA and the SEC, but in a different light.

Because of the new law, the FTC brief stated, “the [FTC's] oversight power is 'now also materially identical' to that of the SEC, a statutory scheme that 'has been upheld against constitutional challenge on many occasions.'”

At a different point, the FTC wrote, “It is unclear whether plaintiffs will continue to press secondary arguments in support of their private-nondelegation doctrine claim. The government has explained either why those arguments fail on the merits, why plaintiffs lack…standing to press them, or both. If plaintiffs continue to urge their arguments despite Congress's amendment to the statute, the Court should reject them…”

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Oral Arguments In Sixth Circuit HISA Case Heard Wednesday

CINCINNATI, OHIO — The latest challenge to the Horseracing Integrity and Safety Act (HISA) was the first case before the three judges selected to weigh in on the law's constitutionality Wednesday in the United States Court of Appeals for the Sixth Circuit, in Cincinnati.

The plaintiffs comprise the state of Louisiana; Oklahoma and its racing commission, plus West Virginia and its racing commission. Three Oklahoma tracks-Remington Park, Will Rogers Downs, and Fair Meadows-are also plaintiffs, as are the Oklahoma Quarter Horse Association, the U.S. Trotting Association, and Hanover Shoe Farms, a Pennsylvania Standardbred breeding entity.

On the other side of the aisle are the United States of America, the HISA Authority, and six individuals acting in their official capacities for the Federal Trade Commission (FTC).

Whether the brisk winter gloom that cloaked the austere courthouse in Downtown Cincinnati Wednesday morning was a good omen for the federal law, or a portent of further legal trouble ahead, is undecided for now, the three-judge panel offering no obvious tip of the hat as to which way it will rule as a body, though with some important clues as to their individual preferences.

The two conservative judges on the panel–Jeffrey Sutton and Richard Griffin–were the most vocal in grilling lawyers from both sides, who each were originally given 15 minutes to argue their cases, with the clock running well over time.

Judge Ransey Guy Cole, the most liberal judge on the panel, remained the quietest, largely staying away from hard constitutional questions.

Sutton–an expert on state constitutionality–was the most vociferous of the three judges, repeatedly drilling down on both sides into whether the FTC has sufficient rule making power over the Horseracing Integrity and Safety Authority, the private entity charged with developing rules related to medication control and racetrack safety, and otherwise just known as the Authority.

The key issues surrounded the FTC's interim rule making power, and whether that was enough of an independent mechanism to keep it from being subordinate to the Authority– key problem, in the eyes of the conservative judges.

In other words, the Authority appears to wield a lot of “discretion” in the rule-making process “not reviewable” by the FTC, said Sutton. “And that's a worry,” he added.

Towards the end of the oral arguments in the Sixth Circuit–which has legal jurisdiction over the states of Kentucky, Michigan, Ohio and Tennessee–Griffin's mind appeared firmly set against the constitutionality of the law, as written.

“The Authority has so much broad power that is not subject to review by the FTC” other than in its ability to review a proposed rule's consistency with the statutes, said Griffin.

Sutton, however, appeared somewhat swayed by the earlier arguments of attorney Pratik Shah, representing the FTC.

In pre-hearing court filings, lawyers representing the plaintiffs cite the recent ruling in the Fifth Circuit Court of Appeals, which reversed an earlier Northern District of Texas's decision that had found HISA constitutional.

The plaintiffs point out that the Fifth Circuit found HISA fundamentally different from another important relationship between a governmental agency and a private entity–that between the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA)–because the SEC has the power to “abrogate, add to, and delete from FINRA rules as the SEC deems necessary or appropriate.'”

In contrast, “HISA unambiguously and 'explicitly limits agency review to 'consistency,'” wrote the plaintiffs, adding that, “In sum, that court explained that 'the Constitution vests federal power only in the three branches of the federal government,' but HISA 'defies this basic safeguard by vesting government power in a private entity not accountable to the people,'” wrote the plaintiffs.

On Wednesday, Shah argued that the makeup of the rule-making relationship between the FTC and the Authority indeed mirrored that between the SEC and FINRA.

In being limited to reviewing the consistency of the Authority's proposed rules, the FTC was very similar to “a lot of law” in the relationship between the SEC and FINRA, Shah said.

Furthermore, Shah argued that the FTC's ability to write and promulgate interim final rules, many of which would go into permanent effect, is indeed enough of an independent mechanism–in the vein of the SEC–to counter concerns that the FTC has no ability to modify rules proposed by the Authority.

Attorney Matthew McGill, representing the plaintiffs, challenged that notion, arguing that the Authority has broad discretion to write its own rules, “and the FTC is utterly powerless to modify that.”

Griffin appeared sympathetic towards that argument, noting unfavorably that the FTC still remains “much more limited” in its scope to write interim final rules than the Authority's rule-making discretion.

In wrapping up his arguments, Shah referenced the defendants' own court documents–in the process, sign-posting a possible endpoint for the case.

In court documents, the defendants claim that the Fifth Circuit's ruling from last month “contradicts (without addressing) the FTC's interpretation of its independent rulemaking authority under section 3053(e), FTC Br. 32-35, and turns constitutional avoidance on its head.

“The panel's holding also overlooks that the Coal Commission in Sunshine Anthracite Coal Company v. Adkins could modify proposed minimum prices only 'to conform to the requirements' of the statute, not at its freewheeling discretion, Authority Br. 37-38–yet that scheme was 'unquestionably valid,'” the defendants write.

“For both reasons, the Fifth Circuit panel's decision is wrong–and stands at odds with not only the two other federal courts that have upheld HISA, but also 80 years of precedent from the Supreme Court (Adkins) and the courts of appeals (uniformly upholding the SEC-FINRA model). Accordingly, this Court should reject the Fifth Circuit's wayward decision,” the defendants wrote.

On Wednesday, Shah called the Adkins case “the most factually analogous” to the one before the Sixth Circuit, saying that it's “up to the Supreme Court to overturn Adkins.”

Mention of the Supreme Court raises the possibility that the highest court in the land potentially hears this case, or the one before the Fifth Circuit. For that to happen, a number of dominoes must first fall, however.

Constitutional law experts say that the Supreme Court would be more inclined to hear a HISA-related case in the event of conflicting rulings between the different appeals courts–in other words, if the Sixth Circuit finds that HISA is indeed constitutional as written.

In the interim, HISA's proponents are apparently seeking a congressional re-write of the rules, to cede the FTC greater input on the rule making process.

Last week, it was reported that Kentucky Senator Mitch McConnell–who was so instrumental in pushing HISA through in 2020–is seeking that fix to be included in the full-year omnibus spending bill, which could pass later this month.

Whether or not that happens, HISA's anti-doping and medication control program is scheduled to go into effect on Jan. 1 in the vast majority of states that conduct pari-mutuel wagering.

If a congressional fix isn't sought soon, however, and if the defendants fail to get a stay in the Fifth Circuit decision, HISA will no longer be legally binding in the states of Louisiana, Texas and Mississippi come Jan. 10 next year.

Rarely if ever has the industry been in such flux–cold comfort for the thousands of trainers, jockeys, grooms, hotwalkers, exercise riders, breeders, farriers and assortment of other industry stakeholders that rely on it for their living.

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Temporary Stay From August Lifted in Different HISA Suit

The United States Court of Appeals for the Fifth Circuit, which on Friday issued the landmark order declaring that the Horseracing Integrity and Safety Act (HISA) is unconstitutional, has made a second HISA-related ruling in a separate case.

This order, which was also filed Nov. 18 but got overshadowed by the broader ramifications of the non-constitutionally ruling, lifts an “administrative stay” that had been issued back in August in a case in which Louisiana, West Virginia, the Jockeys' Guild, and other parties sued the HISA Authority, the Federal Trade Commission (FTC), and board members and overseers of both entities, also over alleged non-constitutionality issues.

The plaintiffs had sued in District Court for an injunction against implementation of the HISA rules until a final decision was made on constitutionality. That injunction was granted, but HISA and the FTC then went to the Fifth Circuit and lodged an appeal that stayed the injunction.

Now that stay has been lifted, allowing the injunction against HISA regulations to become active for the plaintiffs once again.

“In a separate case decided today, our court has ruled that HISA is facially unconstitutional under the private non-delegation doctrine,” the Nov. 18 order stated. “Accordingly, we remand this case to the district court for further proceedings in light of [the other referenced case].”

A footnote in the ruling further explained that, “The stay suspended the injunction to the extent the district court found the rules generally violated the [Administrative Procedure Act's] notice-and-comment requirements. The stay left the injunction in place, however, as to three specific rules that the district court found exceeded the FTC's authority under HISA.”

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