The Congressional amendment to the Horseracing Integrity and Safety Act (HISA) at the end of last year–affording the Federal Trade Commission (FTC) more rule-making governance–has not yielded a pause on the legal maneuverings surrounding the law.
Already this year, the Fifth Circuit Court of Appeals denied a motion by the HISA Authority for that court to vacate its recent opinion that HISA is unconstitutional, and instead sent two different cases back down to the district court level.
In response, the Texas Racing Commission–which has so far barred the federal law from being enforced in its jurisdiction–said the action meant Texas tracks could once again beam their simulcasting signals out-of-state. Sam Houston, which is currently running, has so far refrained from taking that course due to the “many legal complexities” swirling around the matter.
At the end of January, the FTC published HISA’s Anti-Doping and Medication Control (ADMC) rules on the Federal Register, initiating a 14-day public comment period. Should the FTC approve them, HISA has set a program implementation date of March 27.
All the while, two other HISA-related lawsuits are working their way through the courts–one currently before the Sixth Circuit Court of Appeals, and the other in the Texas Northern District Court, Amarillo Division.
To get a handle on where all this leaves HISA, the TDN once again spoke with constitutional law expert Lucinda Finley, Frank Raichle Professor of Trial and Appellate Advocacy, and director of Appellate Advocacy at the University of Buffalo Law School.
The following is heavily edited from a longer interview.
TDN: Can you give an overview of where all the latest legal actions that have come down since we last spoke leave HISA?
LF: No court has yet ruled on whether the newly amended HISA–which gives the FTC greater authority to accept, reject, or modify the HISA Authority’s proposed rules–is constitutional or not. But the congressional amendments to HISA do put it on stronger legal footing on the single issue that the U.S. Court of Appeals for the Fifth Circuit addressed, the private delegation doctrine, or in non-legal parlance, whether HISA granted too much authority to make rules to a private body, instead of the FTC.
The congressional amendments make it clear that the FTC has at least as much regulatory authority as the Securities and Exchange Commission [SEC] does when it considers whether to adopt rules proposed by a private body. The SEC rule making structure has repeatedly been ruled constitutional by many federal courts.
But despite how the congressional amendment responds to the Fifth Circuit concerns about the previous version of the HISA statute, it is not surprising to me that the Fifth Circuit panel refused to consider whether to vacate their opinion or to rehear the case. It is standard appellate procedure for a federal appellate court, after they’ve initially ruled, to send things back to the district court. The district court will be the first one to determine whether the amendments that Congress recently made are sufficient to satisfy the concerns that the Fifth Circuit had.
The other thing that the Fifth Circuit did is to lift a stay or a suspension of an injunction that another district court had issued against enforcing HISA in Louisiana and West Virginia. So, HISA cannot legally enforce its rules in those two states. But what HISA can do is go back to that district court and argue that the recent congressional amendments have satisfied the constitutional concerns raised by the Fifth Circuit–therefore that the amendments make HISA constitutional–so they could ask that district court to remove its injunction against enforcing HISA in West Virginia and Louisiana.
How I interpret the recent Fifth Circuit decision not to vacate its November ruling and not to rehear its November decision is to simply say: Take your arguments back to the district courts, let the district courts consider those arguments in light of our November ruling and in light of the amended statute.
TDN: Do they go back to the same district court?
LF: No, they go back to the district courts in which each case originated. One of them goes back to a district judge who initially found HISA, even before Congress amended it, to be constitutional. The other case, the West Virginia and Louisiana case, goes back to a district judge who expressed grave concerns about HISA’s constitutionality prior to amendment.
TDN: In the district courts, are the plaintiffs likely to challenge other provisions of HISA?
LF: Several of the cases challenging HISA do raise other constitutional challenges in their original complaints, and they can argue all those other challenges back in the district court. If they didn’t raise them [before], they could possibly ask to amend their complaints to raise other constitutional challenges.
In cases against HISA filed around the country, some of them challenge the way members of the private Authority are appointed, arguing that because they are functioning like federal government officials, they should be appointed through the process the constitution and federal statutes lay out for appointing and removing federal officials.
Now, that argument could be affected by Congress’s recent amendments.
Before HISA was amended, plaintiffs’ main argument was it delegated too much governmental authority to the private Authority, thus the private Authority was really acting like a governmental agency. So, if the courts think the new congressional amendments now leave the FTC with greater final say over what the HISA rules are, a judge may be less likely to accept the challenges to how members of the private Authority and its board are appointed. Again, to compare the HISA structure to the SEC, the way that members of the private body–known as FINRA–that proposes rules to the SEC are appointed has been upheld.
There are also cases bringing constitutional challenges to the private Authority’s investigatory and enforcement powers. They claim that giving so much authority for investigating and punishing violations to a non-governmental body violates due process of law. No court has yet decided that argument.
In my opinion, that constitutional argument is weaker because under the HISA statute, there is a process for appealing any sanction based on an investigation of a rule violation–it can go up through a well-established administrative appeal process with federal administrative law judges, who are the ones hearing the appeal. That means that no punishment is final until it is ruled on by a federal official.
TDN: What you’re saying is the Congressional amendment potentially has influence on the overall constitutionality of HISA beyond that one provision it was designed to fix…
LF: Yes. Congress’s amendments to HISA responded only to what the Fifth Circuit had found to be the problems. But those problems were kind of an umbrella. The fifth Circuit issue was: Did the statute give too much regulatory authority to the private Authority? Congress’s amendment has addressed that and clarified that the FTC is now a lot more than a rubber stamp.
And so, if a judge now decides that that congressional amendment makes the HISA structure much closer to the SEC structure–which has been upheld as constitutional, including the way in which people are appointed to the private entity, FINRA, and in its investigatory authority–then it is more likely that the other challenges to HISA would not be accepted.
Although, let me clarify. There is a difference with the SEC’s process for investigating alleged violations of its rules. The SEC has its own government employees doing the investigations and the initial determinations. Under the HISA statute, the initial investigations and determinations are not done by FTC government employees–they’re done by employees of the private Authority. That is still a potential challenge which has been raised in some of the lawsuits around the country.
TDN: Do you think this action might have any influence on the FTC’s pending decision on whether or not to approve HISA’s ADMC rules?
LF: I don’t think it will. I mean, as soon as Congress amended the statute, the FTC said, ‘now we’re going to go ahead with the rulemaking process on the medication rules.’ That is a strong signal.
Right now, we have a situation where the groups that are opposed to HISA have been throwing every legal argument they can think of at the statute, hoping that something sticks. Well, something did stick with the Fifth Circuit and Congress responded to that. So now, all the groups that are opposed to HISA are going to try to argue back in the district courts that the congressional fix isn’t enough, and to then throw other arguments against HISA.
There’s a long litigation road ahead for the statute and the Authority. I think I’m going to start calling the HISA statute the ‘full employment for the lawyers’ statute. The real people benefiting are the lawyers getting all these cases.
TDN: Given the swirling legal uncertainty, if the FTC approves the ADMC rules and they go into effect, will the Authority be leaving itself open to strong legal challenges when the first medication violation adjudications come rolling in?
LF: Well, let me put it this way. Trainers that have been sanctioned under the old system of each state determining its rules and sanctions have shown a propensity for hiring as many lawyers as they can to appeal and try to get their penalties reduced or vacated. Why would that change just because the penalty is for a HISA rule as opposed to a state commission rule?
TDN: And running up against the federal government is a little different than running up against a state commission?
LF: Yes, and that may be one of the things that the various HBPAs are worried about.
TDN: The Texas Racing Commission stated that the recent Fifth Circuit Court of Appeals action means that HISA has no jurisdictional authority in the state, and therefore, they can beam their simulcasting signal out-of-state once more. The Sam Houston lawyers are more circumspect. Who’s right?
LF: The Fifth Circuit did not issue an injunction against the statute and rules. It was just what’s called a declaratory judgment. So, there is not currently any binding legal order that applies in Texas that prohibits HISA from acting. The HISA statute applies to any entity that simulcasts into other states, so if any Texas track does start sending its signal to other states, it will be subject to HISA unless a court issues an injunction prohibiting HISA from acting.
But should HISA try to enforce any regulations in Texas, whoever was the target of any enforcement could sue to get an injunction saying, ‘you can’t enforce your rules if this circuit said you’re unconstitutional.’ So, in a roundabout way, the Texas Racing Commission is correct but–and this is a big but–only for the superseded version of HISA before the congressional amendments. If the courts rule that the congressional amendments fix the problem found by the Fifth Circuit then they would not enjoin HISA from acting in Texas. So I think the circumspection of the lawyers for Sam Houston is warranted.
Eventually, where is this all going in Texas or any other objecting state? It’s becoming a game of whack-a-mole. The Fifth Circuit says this part of HISA is unconstitutional. Congress fixes it. Now, some other court says, ‘another part of HISA is unconstitutional.’ Well, Congress could then fix that. All of the challenges to HISA are delaying implementation, but ultimately, I do not think they will stop the movement towards uniform national rules for the multi-state business of horse racing.
TDN: There’s another case in the Northern District of Texas, Amarillo. Do you know what’s happening with the case-and do you still think this could prove a major headache for HISA this year?
LF: There’s been no further decisions in that court. That judge has to follow the Fifth Circuit decision on the challenge to the previous version of HISA about the allocation of responsibility between the FTC and the private Authority. Before that Judge, HISA and the FTC will argue that the newly amended statute satisfies the Fifth Circuit concerns, and that judge could allow the newly amended rules to go into effect. But as I said in our previous conversation, that case in Amarillo does have a lot of other challenges to HISA, such as to the way members of the Authority are appointed and the investigatory process and powers given to HISA.
If you file a case in the Amarillo branch of the Federal District Court for that part of Texas, you get Judge [Matthew] Kacsmaryk. He has quickly gained a reputation based on his rulings for being very hostile to broad federal regulation, and he has all kinds of hot button issues being brought to him, asking him to undo often decades of federal regulatory schemes. So, that’s why I said it’s the case that could become a major headache for HISA, because that case would get appealed to the Fifth Circuit which has already shown scepticism about the extent to which Congress delegates federal power to a private entity.
TDN: Where does this leave the pending ruling in the Sixth Circuit?
LF: The Sixth Circuit, because they haven’t ruled yet, has more options before them based on the congressional amendment. The Sixth Circuit asked the lawyers to submit briefs addressing how the congressional amendment affected the appeal. The Sixth Circuit could say, ‘well, the HISA statute has changed in significant ways. We want to let the district court start afresh and assess the parties’ arguments based on the new statute.’
There really doesn’t seem to be a lot of point for the Sixth Circuit to issue an opinion about whether they think a now superseded version of the statute is constitutional. So, I think it is likely that the Sixth Circuit will decide the appeal before them is moot and send it back to the district court, where the HISA and FTC lawyers will try to persuade the district court judge that the congressional amendments do solve all the constitutional concerns that the Fifth Circuit raised.
TDN: Do you think HISA is right to forge on with implementation of the full program (pending FTC approval), or do you think it would behoove them to put the brakes on while all the legal shenanigans play out?
LF: This is asking for my personal opinion–I’m trying to provide an impartial legal view. But I think that yes, the HISA Authority is pursuing the right course. Remember, several states have voluntarily agreed to follow their rules. So, for those states who’ve said, ‘we participate in this, we want to follow your rules,’ these rules need to be developed.
This is maybe getting a little too deep into the weeds, but the judge in Amarillo is famous for issuing nationwide injunctions. If the judge in Amarillo were to do that, then HISA would be legally prohibited from implementing its rules anywhere. But in the meantime, there isn’t a national injunction, so, why wouldn’t they continue knowing that there are a substantial number of states–including some of the most prestigious racetracks and racing circuits in the country–that want to follow their uniform rules?
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