Q and A With Constitutional Law Expert Lucinda Finley

Lucinda Finley | University of Buffalo


The latest tumultuous turn in the unfolding saga of the Horseracing Integrity and Safety Act (HISA) was delivered in the United States Court of Appeals for the Fifth Circuit Friday, when the court ruled the law unconstitutional because it cedes too much governmental authority to a private entity, and too little rule-making input to the Federal Trade Commission (FTC), which is charged with ultimately signing off on the law's rules.

In the immediate aftermath of the decision, three legal experts weighed in for the TDN on the legal avenues open to HISA, besides asking for a stay on the ruling. They include seeking an “en banc” hearing before the full Fifth Circuit panel of judges, possibly taking the case to the U.S. Supreme Court, or a Congressional re-write of the rules to afford the FTC greater input in the rule-making process.

Another important date for HISA's near-term future looms on Dec. 7, when a case that raises similar constitutional questions of the law is scheduled to be argued in the U.S. Court of Appeals for the Sixth Circuit.

To discuss these issues more closely, the TDN spoke with Lucinda Finley, Frank Raichle Professor of Trial and Appellate Advocacy, and director of Appellate Advocacy at the University of Buffalo Law School. In her work as a litigator and appellate advocate in federal courts, Finley frequently testifies before the U.S. Congress and state legislative committees. She has also argued cases before the U.S. Supreme Court.

Intriguingly, Finley–sister of TDN writer Bill Finley–believes Friday's ruling is legally binding only in the three states under the Fifth Circuit's jurisdiction.

Finley's interpretation mirrors that of Bennett Liebman, a legal scholar routinely cited in the TDN, but runs counter to what has been to date the overarching response to the ruling, which has been to regard it as nationally applicable.


TDN: Were you surprised by the Fifth Circuit decision?

Finley: No, I wasn't for several reasons. First, the Fifth Circuit is probably the most conservative group of circuit court judges in the country. The conservative judges that have been appointed in the last few years are known to be hostile to broad regulatory schemes.

Second, I wasn't surprised because I think it's actually a very close legal question–whether the HISA statute gives too much rule-making authority to the private entity.

On the law, I think the ruling makes many important points that perhaps the HISA statute went too far in giving too much authority to the private entity and not enough regulatory authority to the FTC.


TDN: Does the Fifth Circuit ruling apply nationally, or just to the states under their jurisdictional umbrella, i.e., Louisiana, Texas, and…?

 Finley: …Mississippi.

It has binding legal effect only in those three states. However, it will have important precedential impact on courts in other states, including the Sixth Circuit U.S. Court of Appeals that is considering a case raising the identical constitutional issues.


TDN: Yes, how does that case in the Sixth Circuit affect things?

Finley: We don't know until the Sixth Circuit rules. If the Sixth Circuit were to disagree with the Fifth Circuit and conclude that HISA is constitutional, we will have two different federal courts saying the exact opposite about the constitutionality of a federal statute.

In that event, the U.S. Supreme Court would be very likely to agree to hear the case and come up with one uniform national ruling on whether or not HISA is constitutional.


TDN: What would happen if they ruled in unison?

 Finley: The same way as the Fifth Circuit? That might make it less likely that the U.S. Supreme Court would agree to hear the case.

[The Supreme Court] is most likely to take a case when there are conflicting decisions in different U.S. Courts of Appeals because they realize you really can't have the federal law be completely different in some regions of the country compared to others. If the U.S. Courts of Appeals are in agreement, the Supreme Court sees that there is no uncertainty about the federal law that they need to resolve.


TDN: In Friday's TDN, various legal experts discussed two main legal routes available to HISA, including to seek an “en banc” hearing before the full Fifth Circuit Court, or to take the case to the Supreme Court. Which do you think is the likeliest scenario?

Finley: I think that, first, the HISA lawyers are likely to ask the Fifth Circuit panel of judges, the three that decided the case, to stay the effective date of their decision to give them time to pursue further appeals. I think it is unlikely that the panel of Fifth Circuit judges will grant a stay. They were very, very strong in their conclusion that HISA is unconstitutional.

In that event, the HISA lawyers could ask the U.S. Supreme Court to stay or suspend the effective date of the Fifth Circuit decision to give them time to take an appeal to the U.S. Supreme Court. Whether the Supreme Court would grant that stay is, I think, something nobody can predict. Nobody has a crystal ball in that one.

It is certainly a worthwhile and likely step for the HISA lawyers to seek first in the Fifth Circuit itself and then in the US Supreme Court a stay of the effective date of the decision, just to give more time for appeals.

Then they could seek what's known as an “en banc” review where they ask all of the judges of the Fifth Circuit to consider the case. I think that's a real long shot that the judges would agree to. I think it would just delay the timing of trying to get to the U.S. Supreme Court.

However, an advantage of seeking the “en banc” review is, if it is granted, that suspends the effective date of the panel decision. When the entire court, sitting what we call en banc, agrees to rehear a case, it has the effect of wiping out the panel decision. If the Fifth Circuit were to grant that request for en banc review, it would mean that HISA was back in business, at least until the entire Fifth Circuit ruled.

The next step after that would be to take it to the U.S. Supreme Court and ask them to agree to hear the case.


TDN: Let's step back a step. As you stated earlier, the Fifth Circuit ruling applies only to those states within its jurisdiction. Why have quite a lot of other people considered it nationally applicable?

Finley: I don't know why somebody would think that. There was no injunction in this Fifth Circuit decision, meaning they haven't issued an order stopping anyone from doing anything. There's nothing in the order itself that says it has national effect.

The traditional rule is that a U.S. Court of Appeals decision only is binding in that circuit, otherwise, there wouldn't be 11 different Federal Circuit Appeals Courts if the ruling of one would affect the whole country. You would basically just have one huge U.S. Court of Appeals that made decisions for the whole country. That's not the structure of our Court of Appeals federal system.

As I said earlier, it certainly has a powerful precedential effect. I think it means that it would be very unwise for HISA to continue with its regulatory program in other states because of the risk of constantly being sued. Everyone will cite the Fifth Circuit decision. [But] saying that it might have persuasive impact on judges in other parts of the country is different from saying that it is automatically legally binding on judges in other parts of the country.

For example, to show you why it's not binding in the whole country, as we noted, the U.S. Court of Appeals for the Sixth Circuit is about to hear a case raising the same issues. The Sixth Circuit is free to disagree with the Fifth Circuit.


TDN: What way does the Sixth Circuit Court lean?

Finley: They are a more mixed court. They have a more equal number of judges appointed by Democratic presidents and Republican presidents. I think, in the Sixth Circuit, it's really going to depend on which three judges are assigned to hear the appeal.


TDN: Do you see HISA as being in some kind of legal jeopardy nationwide, moving forward, if they continue to issue rulings?

Finley: Yes, I do. With the Fifth Circuit having said they think the entire statute is unconstitutional, anyone who gets an investigation or ruling from HISA would most likely file a lawsuit asking the court to issue an injunction against HISA, investigating them or nullifying the ruling, making the exact same argument that all their rules are unconstitutional, and citing to the Fifth Circuit decisions.


TDN: Does this also apply retroactively to all rulings that they've issued since July 1?

 Finley: Court decisions usually do not apply retroactively. [But] people still have the right to appeal the decisions that have been made against them, and to challenge them in court. They can, now, raise the argument that the whole statute is unconstitutional, and as I said, ask the judge to agree with the Fifth Circuit.

As the Fifth Circuit itself said, in its ruling, “Without the constitutional right to even make the rules, HISA's enforcement and investigative powers are null and void.” So, I would think anyone who is a subject of a HISA investigation, or ruling against them, will now go to court and make the argument that they can't enforce their rules because their rules are unconstitutional.


TDN: So, from everything that you've laid out, if no stays are issued on the Fifth Circuit ruling and it goes into effect on Jan. 10, and the Sixth Circuit makes some kind of ruling that mirrors the Fifth Circuit ruling, theoretically, you could see a potential scenario whereby HISA is nullified in those jurisdictions—the states that fall under the Fifth and Sixth Circuits—but is in effect in states beyond that?

Finley: Potentially. I expect that the legally prudent thing for HISA to do right now is to suspend their investigations and enforcement of their rules until the constitutionality of the statute is sorted out, perhaps in the Supreme Court, or until they convince Congress to amend the statute to fix the problems that the Fifth Circuit found.


TDN: Do you think that's the easiest route, a congressional rewrite of the rules?

Finley: Easy? None of the routes are easy. But, I think it is the route that is likely to have the most success in saving the goal of national rules for racing.

The reason I think that is because there's a very strong chance that if the Supreme Court did take the case, they would agree with the Fifth Circuit and say that HISA is unconstitutional because it gives too much governmental rule making authority to the private body. Congress could easily fix that by giving the FTC more authority to change, add to, delete, or reject the proposed rules that HISA develops.

Since HISA itself had such strong bipartisan support, and two of its biggest champions in the House and the Senate are Republicans from Kentucky who understand that preserving the public perception that horse racing is kind to horses and has integrity is essential to preserving the entire breeding and racing industry. I think there's a chance that, fairly quickly, Congress may want to fix the problems in the statute. It's not the kind of issue that's going to get caught up in partisan politics.


TDN: You think there's the political will right now to do this?

Finley: What will it take to of reignite the fire in Congress? Just one more fatal breakdown of a horse that maybe should have been on the vet's list, but it was in a lax state. One more drug scandal. That's all it's going to take for Congress to say, “Maybe we better go back to the drawing board and save this national structure.”

What do you think are the odds in horse racing that over the next few months there'll be one more fatal breakdown of a horse that probably should have been on the vet's list, or one more drug scandal?


TDN: What are some of the broader implications if the case does eventually end up at the Supreme Court, with its current make up?

Finley: This current court has signaled that there are at least four, perhaps five, justices who would like to curtail the power of regulatory agencies, broadly. This case could present a vehicle for them to do that, to cut back not only on the ability of agencies to use private bodies that have expertise to help them develop their rules, but potentially to cut back on the rule making authority of regulatory agencies, in general.

Potentially, even if the court were to simply cut back on the ability of regulatory agencies to use the expertise of private advisory bodies, that would have major implications because many regulatory agencies do call on expert advisory bodies to develop their rules and policies, including the Securities and Exchange Commission.

The [Food and Drug Administration] convenes expert panels of scientists to assess the safety, or risks, of various drugs. The Medicare and Medicaid agencies often, in some states, look to experts from the health insurance industry to help them determine reimbursement rates and policies.

There are all kinds of examples throughout our entire regulatory system where agencies rely on private expertise. If the Supreme Court takes the case, it would really be about much more than just HISA.


TDN: Who would've thought that horse racing would be positioned in this way.

Finley: That's a very interesting observation.

It could become the vehicle for altering a lot of our current federal regulatory law, but in particular, the branch of it involved in this case, which is a somewhat obscure but important doctrine known as the Private Delegation Doctrine. In other words, “When can a federal governmental agency delegate some of its ability to make rules to a private, i.e., non-governmental, entity?”

As I said, it would have implications in securities exchanges, in pharmaceutical product regulation, in financial regulation, in healthcare regulations.


TDN: Where does all this lead for HISA?

Finley: It may turn out to be a pyrrhic victory [for the plaintiffs]. If your whole argument as to why HISA is unconstitutional is that it doesn't give the FTC bureaucrats enough authority to set your rules, guess what's going to happen? FTC bureaucrats will now have the authority to set your rules instead of people that are much more receptive to your concerns.

   [Industry stakeholders] get a lot more input and flexibility in making adjustments from HISA–as we've already seen–than they will from some federal bureaucrats at the FTC in Washington who will say, `Oh, you don't like our rules? Go sue.' And the case will take five years. I don't think the FTC would be nearly as open and receptive to being so flexible with stakeholder concerns.

So, be careful what you wish for.

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