Judge Strikes Down ‘Jail’ Rule; Effect On Claiming Rules Unclear

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Jerry Jamgotchian | Keeneland photo

By T. D. Thornton

A federal judge in Indiana struck down a version of the Thoroughbred industry’s long-standing “jail” rule on Wednesday that prohibits claimed horses from racing outside the state for 60 days.

District Judge William T. Lawrence (Southern District of Indiana, Indianapolis Division) wrote in a Sept. 20 summary judgment that an Indiana Horse Racing Commission (IHRC) rule restricting where and when claimed horses can run is an impermissible restriction of interstate commerce.

The judge’s order bars the IHRC from taking any action to implement or enforce the jail rule upon the plaintiff in the civil lawsuit, horse owner Jerry Jamgotchian, and it also prevents the IHRC from applying the rule to other Indiana-licensed owners or trainers.

Yet even though Jamgotchian, in a prepared statement, declared the federal court’s decision a “victory for every horse owner in America,” the federal ruling doesn’t mean jail rules that are similarly in effect in dozens of other states will change overnight.

In theory, Wednesday’s ruling striking down the jail restrictions for claimed horses sets a legal precedent. But even Jamgotchian’s own attorney in the case, Kentucky-based Barry Hunter, acknowledged that other owners and trainers might have to file similar lawsuits to get racing commissions in other states to roll back their own versions of jail rules.

“This ruling technically only applies in Indiana. So yes, unless [other states change their rules] voluntarily, trainers or owners would have to bring claims in those states,” Hunter said in a phone interview several hours after the ruling was handed down.

So-called jail rules have been on the books for decades in America as a protective policy to keep horses claimed locally from being transferred to other racetracks. Since the dawn of the racino era about two decades ago, and especially since the North American foal crop has plummeted in recent years, individual racetracks have been especially leery of what they believe are “poaching” practices, which can cause tracks with lower purses to lose claimed horses to other circuits that offer more purse money for the same claiming prices.

After failing to get a similar jail rule overturned by the Kentucky Supreme Court in a 2011 suit that dragged on for five years, Jamgotchian, on Aug. 31, 2016, challenged Indiana’s rule at the federal level after stewards at Indiana Grand racetrack refused permission for him to run several claimed horses outside the state before the IHRC-mandated 60-day period expired.

The crux of Jamgotchian’s legal argument was that Indiana’s jail rule violated the “dormant commerce clause” that broadly prohibits discrimination against interstate commerce.

The IHRC defended its jail rule by arguing that it was not protectionist discrimination, and that it “is part of a larger, non-discriminatory racing regulation, not a trade regulation.” The IHRC further cited a goal to “protect horse racing’s integrity and to promote fairness.”

But, as Judge Lawrence wrote, “they fail[ed] to explain how allowing a horse to race within Indiana, but prohibiting it from racing outside of Indiana accomplishes this goal.”

Another murky legal aspect in the wake of Wednesday’s ruling is that it remains unclear whether the new federal order also applies to “house rules” about claiming horses in instances where privately owned individual racetracks, and not state racing commissions, establish the jail rules.

“I don’t know the answer to that candidly. I haven’t looked at that,” Hunter said when queried about the judgment’s applicability to house rules.

Hunter continued, “If this decision is followed, and certainly we think it’s a sensible decision, it means that the rule in most states is unconstitutional. The commerce clause cases make it clear that you can’t favor in-state businesses over out-of-state businesses. If you have a rule that says that you can only run horses at tracks in the state and not at tracks out of the state, it’s hard to see how that doesn’t run afoul of the rule.”

Andrew Mollica, a New York-based attorney who specializes in horse racing, told TDN that he agreed with the federal ruling, but he underscored how difficult it will be for owners and trainers in other states to get racing commissions and tracks to abide by the legal precedent.

“The judge is right. The dormant commerce cause is clear. States, racing commissions, racetracks–you can’t do anything to impede interstate commerce,” Mollica said.

“[Jamgotchian] put up his money. He bought the horse. He’s got every right to run that horse wherever he wants to,” Mollica continued. “The protectionist argument that has permeated racing for all these years, it’s just like a lot of things we do on the racetrack–nobody challenges it. I understand the racetracks’ protectionist position. But it’s unconstitutional. The dormant commerce clause, it’s first-year-of-law-school stuff, you know?”

As far as the federal order’s effect on rules set by other racing commissions, Mollica said this: “What [racing commissions nationwide] will do is what most racing commissions will do. They’ll do nothing; continue to the beat of their own drum until somebody challenges them. You know how the racetrack works–commissions think they can do whatever they want, and they’ve had that farcical view for far too long.’

Jamgotchian’s statement, emailed to news outlets after his long-fought victory, had a more idealistic tone.

“This landmark ruling will make horse racing much more owner-friendly and [it] puts every state on legal notice that commerce clause violations will no longer be tolerated,” Jamgotchian wrote. “It’s time for the tracks and racing commissions to stop controlling our horses…. Economic protectionism will not be tolerated by horse owners any longer and aggressive litigation will be commenced against any state and racing commission [that] ignore[s] this district court ruling.”

Representatives from the IHRC could not be reached to find out whether the commission plans to appeal the ruling.

@thorntontd

 

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