“We're Back in the Courts” : Finley on What's Next for HISA

Lucinda Finley | University of Buffalo photo

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With Congress passing a short-term bill to fund the government for a matter of days, efforts to include in the full-year omnibus spending bill a legislative fix to the constitutional problems dogging the Horseracing Integrity and Safety Act (HISA) is coming down to the crunch, Friday of next week the deadline to pass such a bill before the make-up of Congress changes shape next year.

So, where does this all leave HISA? The answer resembles a puzzle box shaken onto the floor, with HISA offering limited direction as to how all the pieces fit together.

On Monday, after the Federal Trade Commission (FTC) announced that it had disapproved “without prejudice” the program's anti-doping and medication control (ADMC) rules, HISA CEO Lisa Lazarus–someone who has consistently and admirably fielded public queries–provided some useful insights during an impromptu press conference, especially when it comes to money matters.

Since then, however, HISA has been a closed shop.

“The HISA legal team is exploring all possible legal paths forward. Once we determine the best path to protect the integrity and safety of Thoroughbred racing and its participants we will share those plans,” wrote HISA spokesperson, Mandy Minger, after multiple attempts for comment on a series of questions.

And so, the TDN turned once again to constitutional law expert, Lucinda Finley, for her thoughts on the various winding roads leading away from the Act's current crossroads. There are three important cases to note:

One is the Fifth Circuit Court of Appeals, which found in November that the law as written doesn't afford the FTC enough authority in the rule-making process. If HISA fails to get a stay on the ruling, the decision will go into effect Jan. 10.

The second is a ruling pending in the Sixth Circuit Court of Appeals concerning similar constitutional questions to the Fifth Circuit. It is currently unclear when that ruling will land.

The third is a case in the U.S. District Court of Texas–Northern District, Amarillo Division–which raises several constitutional problems with the law, other than FTC rule-making input.

There is also a fourth HISA-related lawsuit initiated by the states of Louisiana and West Virginia, plus the Jockeys' Guild, but there has been no filing activity in that case since Sept. 7.

Is there a key takeaway from the current state of affairs?

Even if Congress does pass language in the omnibus spending bill fixing the problems raised by the Fifth Circuit–in other words, to cede the FTC greater rule-making authority–don't expect the legal fireworks to simmer down, warned Finley.

“We're back in the courts,” Finley said, pinpointing the case before the Amarillo Federal Court as a potentially nasty looking legal blackthorn for HISA.

No Legislative Fix

Let's begin with the scenario that lawmakers fail to insert language to amend HISA into the year-end omnibus spending bill.

Should that happen, a future legislative fix would be unlikely for months, if not a year, due to a looming political environmental where Congress is unlikely to tackle legislation other than what “it absolutely has to act on,” warned Finley.

“What's likely to happen come January when the new Congress is sworn in, the House is going to suddenly be consumed with all these investigations,” said Finley, about the future Republican-led Congress' promise to pursue investigations into Hunter Biden and others. “I don't expect that there will be much in the way of any legislative activity on anything in the first many months.”

With the FTC disapproving HISA's ADMC rules, the current status-quo will remain in effect come Jan. 1–a hybrid world of HISA racetrack safety rules applied alongside individual state medication regulations.

If HISA is unable to get a stay on the Fifth Circuit Court of Appeals ruling, the decision will go into effect Jan. 10.

The question then is: How applicable is the ruling? National? Or just in the states that fall under the Fifth Circuit's jurisdiction, namely Louisiana, Texas and Mississippi.

“HISA is not commenting on legal hypotheticals or speculating on how the ruling might be applied,” wrote Minger, when pressed to provide a clear answer.

According to Finley, the Fifth Circuit ruling applies only in those three states. However, she believes it would be “extremely prudent” for HISA to suspend the racetrack safety rules if indeed a stay is not found on the Fifth Circuit ruling, due to the likelihood of litigation by any sanctioned parties.

“As a practical matter,” said Finley, “it does tie their hands everywhere.”

Failure to gain a legislative fix in the near-term would also place emphasis on the Sixth Circuit's pending ruling.

Should the three-person panel of Sixth Circuit judges rule consistently with the Fifth Circuit, then it is unlikely the Supreme Court would take up the case, given the harmony in Circuit Court decisions.

In other words, there would be no judicial dispute for the Supreme Court to resolve.

A Sixth Circuit ruling favorable to HISA–and in opposition to the Fifth Circuit ruling–would make it more likely the Supreme Court would hear the case, however.

If petitions for a writ of certiorari are filed in both cases–these are the legal devices with which to seek U.S. Supreme Court review of a case–then that court could grant certiorari in one or both.

As for a possible timeframe, if petitions are filed in the spring of 2023 and the Supreme Court decides to review the case, then a final decision might not come until June of 2024.

A Successful Legislative Fix

But let's run with the scenario that next week, lawmakers indeed insert language into the year-end spending bill that affords the FTC greater law-making authority. What then?

First off, HISA could resubmit the ADMC rules with the FTC. It would then take approximately 60 days for these rules to go into effect, “assuming that the FTC was going to approve them substantively,” Lazarus explained, last Monday.

Secondly, it would essentially render the current cases before the Fifth and Sixth Circuits legally moot in a practical sense, and would make the possibility of the Supreme Court taking them up altogether highly unlikely.

Which brings us to the case before the Amarillo Federal Court.

That case raises several additional constitutional arguments that the Fifth and Sixth Circuits did not rule on, including HISA's investigative, subpoena and punishment power as a private body, and the way in which individuals on the HISA board are appointed, said Finley.

“It argues that the whole structure is a delegation of not only too much executive authority, but can amount to a delegation of legislative and judicial authority as well,” Finley explained.

What's more, the district court judge in question, Matthew Kacsmaryk, is one of the “most extreme right-wing” of President Trump's appointed judges.

This leads to an important legal wrinkle in this case with potentially huge implications for HISA.

If judge Kacsmaryk agrees that HISA indeed delegates too much power to a private entity, the plaintiffs in the case are seeking an injunction to suspend enforcement of the law, said Finley.

Would such an injunction apply nationwide or just in Texas?

“You've actually asked what is one of the most raging controversies in U.S. law,” Finley replied. “It used to be extremely rare for a district court federal judge to enjoin the enforcement of a statute or regulatory scheme throughout the whole country,” she said. “They would traditionally just issue an injunction that pertained to the parties in the case.”

Come President Obama's tenure, however, “Republican state attorneys general started suing to stop various programs that the Obama administration wanted to implement. They went to what they thought were favorable district courts, and they started asking them to issue a nationwide injunction saying, 'Look judge, if the statute is unconstitutional or the rules are in violation of federal law, well, we shouldn't allow them to go into effect anywhere,'” explained Finley.

“And judges started buying this argument,” Finley added, explaining that during the Biden administration, Republican attorneys general have attempted to introduce in U.S. district courts nationwide injunctions on cases related to vaccine mandates and immigration rules.

“Groups that want to challenge whatever federal statute or regulatory scheme know what judges they can get their case before to maximize their chances of getting the statute declared unconstitutional, and with a nationwide injunction,” said Finley. “This judge in Amarillo is one of them.”

It appears likely the case currently before the Amarillo Federal Court will end up before the Fifth Circuit Court of Appeals–and then, potentially, the Supreme Court.

“You could get a very different panel,” Finley responded, when asked which way the Fifth Circuit would rule in that case. “But looming over any subsequent appeal to the Fifth Circuit is the fact that it already found a significant part of the [HISA] statute to be unconstitutional.”

The Horizon?

Finley suspects that if HISA's proponents remain firmly resolved to the pursuit of uniformity through a federal body, ongoing legal challenges to HISA might ultimately lead to an end point even more unpalatable to the law's critics–a governmental commission insulated from industry wants and concerns.

“This goes back to my initial point,” said Finley. “Be careful what you wish for.”

As an example, Finley pointed to the relationship between the governmental Securities and Exchange Commission (SEC) and the private Financial Industry Regulatory Authority (FINRA), together providing a watchdog over the nation's financial institutions.

While FINRA provides the SEC with input in the rule-making process, the SEC wields tremendous independent authority with its own enforcement and investigatory staff of government lawyers, Finley explained.

“The more these legal challenges to the HISA statute on the grounds that it delegates too much rulemaking or investigation and enforcement authority to a private body,” said Finley, “it means that the proponents of uniform national regulation are left with the option of creating a government agency to do that uniform regulation and enforcement.”

Critics of HISA, however, are keen that never happens.

The National Horsemen's Benevolent and Protective Association (HBPA) issued an open letter to the industry Thursday, taking aim at HISA and the private Authority for “too many flaws, missteps and costs that could have been averted with true inclusion and transparency in its development.”

The HBPA urged industry stakeholders to build its own set of uniform rules, independent of HISA.

“That includes the National HBPA, America's largest organization representing Thoroughbred owners and trainers; the Association of Racing Commissioners International [ARCI], whose years of hard work on model rules should be the starting point rather than largely ignored; the racetrack veterinarians, and the Jockeys' Guild,” the letter states.

Those in agreement are urged to sign onto the open letter here.

Kentucky lawmaker, Damon Thayer, is looking to resuscitate a bill passed into law by the state legislature in 2011. “It allows Kentucky to participate in an interstate compact, where a group of states can work together on laws pertaining to horseracing,” said Thayer.

The 2011 Kentucky bill allows member states “to act jointly and cooperatively to create more uniform, effective, and efficient practices, programs, rules, and regulations relating to live pari-mutuel horse or greyhound racing and to pari-mutuel wagering activities, both on-track and off-track, that occur in or affect a member state.”

To join on, each individual state would have to pass a similar interstate compact law.

“We could just take a handful of states to start off,” Thayer said, pointing to the major racing jurisdictions of Kentucky, California, New York and Florida.

“If we could get the ARCI or the National HBPA to take the lead on this, we could get something going,” he added. “I don't just want to be a critic of HISA. I want to be a critic of HISA who's offering another alternative.”

How would this venture differ from previously failed attempts at full nationwide uniformity, like the National Uniform Medication Program (NUMP)?

“That would be a good place to start,” Thayer replied, about the NUMP rules as a baseline for the compact's medication program. “But I think now that we've seen the other option, which is of federal legislation–now that it's here, they might be motivated to try something different that's led by the states.”

At the end of the day, warned Finley, the longer the industry continues without uniformity, the more susceptible it grows to attacks from outside groups on its ethical integrity.

As Finley says, “it's about convincing the public that there are national regulations with their focus on equine and human safety and welfare, and that there is serious meaningful enforcement of those rules at a national level with real investigatory power behind it.”

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