Judge: 'Substantial Overlap' of Plaintiffs In Multiple Anti-HISA Suits 'Indicative of Improper Motive'

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A lawsuit spearheaded by the states of Louisiana and West Virginia that is trying to derail the Horseracing Integrity and Safety Act (HISA) via alleged constitutional violations was dealt a setback Wednesday when a federal judge recommended that an amended version of the complaint be stricken from the record.

That recommendation, if it gets put into place by a final order, would bar 14 individual Horsemen's Benevolent and Protective Association (HBPA) affiliates, plus a wide swath of states, racing commissions, and individual racetracks from becoming parties to the 14-month-old lawsuit.

Magistrate Judge David Ayo of the United States District Court (Western District of Louisiana) also recommended in his 13-page report that the original case be stayed pending the outcome of a separate, but similar Fifth Circuit Court appeal that is headed by the National HBPA and is also trying to stop HISA from operating based on other alleged constitutional violations. Oral arguments in that case are scheduled for Oct. 4, but it could then be months before a Fifth Circuit decision gets issued.

The judge minced no words in his Sept. 13 report, which in part scolded the original and would-be plaintiffs for wasting the court's resources with “substantial overlap of parties” and their “multiple suits challenging the Act,” referring to litigation that is either currently swirling in the federal court system or has already been adversely adjudicated against some of the plaintiffs over the course of the last 2 1/2 years.

“After an exhaustive review of the landscape of suits challenging the Act, this Court concludes that Plaintiffs' amended complaint is the result of deliberate strategy and not excusable neglect and, for that reason, is a 'bad faith amendment' within the Fifth Circuit's interpretation of that term,” the judge wrote.

“Additionally, Plaintiffs' amendment is an abuse of procedure and an impermissible use of judicial resources. Finally, there can be no doubt that the shuffling of plaintiffs from one suit to another in this manner prejudices Defendants. This litigation tactic is duplicative and the very definition of 'piecemeal.'”

The original plaintiffs in the June 29, 2022, lawsuit were the state of Louisiana, its racing commission, the Louisiana HBPA, the Louisiana Thoroughbred Breeders Association, the state of West Virginia, its racing commission, and five individuals regulated as “covered persons” under HISA. The Jockeys' Guild was also an original plaintiff, but it opted out of the lawsuit on Dec. 23, 2022, after Congress had just passed and President Biden was about to sign into law the amended version of HISA that is now in effect.

The defendants, who consist of the HISA Authority, the Federal Trade Commission (FTC), and board members and overseers of both entities, are alleged by the plaintiffs to have violated the Fourth, Seventh and Tenth Amendments to the U.S. Constitution, plus the Administrative Procedure Act (APA), which governs the process by which federal agencies develop and issue regulations,

On Feb. 6, 2023, the plaintiffs filed an amended complaint to the lawsuit, with the chief changes being the addition of the broad new slate of new plaintiffs.

After the defendants moved to strike the amended complaint on Mar. 6, the plaintiffs followed up three weeks later by filing a memorandum in support of allowing the new entities.

“Defendants suggest that Plaintiffs engage in something sinister by seeking amendment to request expanded relief,” the plaintiffs' Mar. 27 court filing stated. “But parties across the country routinely amend to seek expanded relief without issue.”

Not so, rebutted the defendants, who in an Apr. 3 court filing characterized the alleged piling-on of plaintiffs as “maneuvering” intended to “piggyback” upon temporary relief from HISA's rules that had already been granted via a stay to the states of Louisiana and West Virginia.

The Sept. 13 report by Judge Ayo explained why he sided with the HISA Authority and the FTC in recommending that the amended complaint be stricken.

“[G]roups of plaintiffs, including the State of Louisiana and the Louisiana HBPA, have already litigated the constitutionality of the Act, as amended, creating substantial overlap among these suits as to parties and claims,” the judge wrote. “To the extent Plaintiffs would draw a distinction between this suit and those now on appeal to or decided by various circuit courts of appeals based on the inclusion of APA claims, this Court concludes that such argument must fail based on considerations of claim splitting.”

In federal courts, a rule against “claim splitting” prohibits parties from simultaneously initiating multiple suits involving the same subject matter against the same defendants. Application of the rule does not require that the claims or parties be identical in each suit. A court may find improper claim splitting where the claims in the more recent suit arise from the “same nucleus of operative facts” as those advanced in a prior suit.

Judge Ayo continued, writing in a footnote at a different point in the report that, “this Court is mindful of the benefit of allowing an issue to 'percolate' in the various district courts and courts of appeals.

But, the magistrate judge added, “Plaintiffs leapfrogging from one case to another in different district and circuit courts in the wake of unfavorable rulings does little to further this objective.”

Judge Ayo's report and recommendations now go to Chief U.S. District Judge Terry Doughty, who is overseeing the underlying lawsuit. Both sides in the case will have 14 days to file specific, written objections, after which Doughty will issue a final decision at the district court level that will be appealable to the U.S. Court of Appeals.

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