HISA Unconstitutional, 6th Circuit rules next; McConnell seeks fix in Congress

[Kasept]

U.S. appeals court rules HISA is unconstitutional

Matt Hegarty | Nov 18, 2022

A U.S. appeals court has ruled that the Horseracing Integrity and Safety Authority is “facially unconstitutional,” reversing a lower court’s opinion that the authority met constitutional standards of federal oversight.

The ruling by the Fifth Circuit Court of Appeals delivers a critical blow to the authority, a private, non-profit company established by federal legislation passed in 2020, at a time when HISA is preparing to roll out a national medication and anti-doping program, scheduled for Jan. 1. While HISA has faced multiple challenges to its constitutionality in various jurisdictions, the Fifth Circuit decision is the first to rule that the legislation establishing the Federal Trade Commission as its overseer lacked constitutional merit.

“A cardinal constitutional principle is that federal power can be wielded only by the federal government,” the ruling stated. “Private entities may do so only if they are subordinate to any agency. But the authority is not subordinate to the FTC. The reverse is true. The Authority, rather than the FTC, has been give final say over HISA’s programs.”

Charles Scheeler, the chairman of HISA, said in a statement in response to the ruling that HISA “will be seeking further review of this case.”

“We are focused on continuing our critical work to protect the safety and integrity of Thoroughbred racing,” the statement said.

The Fifth Circuit decision will not go into force until the court issues a so-called mandate of its ruling. That is scheduled to occur on Jan. 10.

The ruling was decided by a three-judge panel of the court. HISA’s options in pursuing an appeal of the ruling could include a request for the entire Fifth Circuit to rehear the case, a procedure known as an “en banc” hearing. HISA could also ask the U.S. Supreme Court to hear the case. Any appeal would likely be accompanied by a request for a stay of the mandate that will be forthcoming from the Fifth Circuit.

Because the ruling affects legislation passed by Congress and involves a federal agency, officials of the Justice Department are likely to weigh legal options for an appeal of the ruling as well.

A separate lawsuit that challenges HISA's constitutionality is currently before the Sixth Circuit Court of Appeals after being dismissed by a district court in Kentucky. The case is scheduled to be heard on Dec. 7, and the outcome of that case could have significant impacts on any appeal of the Fifth Circuit decision.

The specific challenge to HISA’s constitutionality considered by the Fifth Circuit was launched by the National Horsemen’s Benevolent and Protective Association, which filed a lawsuit in Texas Northern District Court in March of 2021, prior to any of HISA’s rules going into force. That court had dismissed the lawsuit, but the National HBPA appealed the dismissal.

“From HISA’s onset, we have thoroughly and fairly examined the HISA corporations impact on our industry and its constitutionality,” said Eric Hamelback, the chief executive of the National HBPA, in a statement released in reaction to the ruling. “We operated in good faith and did our due diligence to appropriately weigh the pros and cons. We have been saying for years this law and defined Authority itself are unconstitutional and we are pleased the court unanimously sided with our position.”

Supporters of HISA had hired several legal experts to analyze the constitutionality of its enabling legislation prior to the bill being introduced, and they had expressed confidence that the bill could survive a constitutional challenge, citing the formation of private regulatory groups such as the Financial Industry Regulatory Authority, or FINRA, a private company that oversees brokerages and exchange markets.

Several lower courts had initially agreed with that interpretation, but since then, a court in Louisiana ruled that HISA’s jurisdiction should be enjoined in both Louisiana and West Virginia while legal concerns over HISA’s rule-making authority were ironed out. That ruling was later stayed after an appeal by HISA.

The ruling by the Fifth Circuit cast extensive doubt on the FTC’s ability to oversee the authority.

“The FTC concedes it cannot review the Authority’s policy choices,” the judges wrote. “When the public has disagreed with those policies, the FTC has disclaimed any review and instead told the public to ‘engage with the Authority.’ An agency does not have meaningful oversight if it does not write the rules, cannot change them, and cannot second-guess their substance.”

HISA has submitted multiple batches of rules for FTC review. Its racetrack safety and welfare rules, which went into effect on July 1 of this year, were returned by the FTC to HISA in substantially the same form as they were submitted, with little comment.

HISA was designed to create a national regulator for horse racing and align the sport’s rules in all U.S. racing jurisdictions. Many state racing commissions have chafed at the authority’s sweeping control, and several states have filed or joined in the lawsuits challenging HISA’s constitutionality.

[blackthroatedwind]

How do you feel about them finding the most conservative court possible that was the most likely to reject HISA? If you liked HISA, would think this was acceptable?

[Kasept]

Politics makes strange bedfellows. What’s remarkable is that the arch conservatives behind the HISA concept find themselves hoisted on their own petard. Funny how they’re for small government except in this case where it suits their interests to control the industry.

[blackthroatedwind]

Originally Posted by Kasept

Politics makes strange bedfellows. What’s remarkable is that the arch conservatives behind the HISA concept find themselves hoisted on their own petard. Funny how they’re for small government except in this case where it suits their interests to control the industry.

This may all be true but not an answer to my question:-)

[Kasept]

Originally Posted by blackthroatedwind

This may all be true but not an answer to my question:-)

Well, the lawsuit sought the path of least resistance, just as HISA initiators sought a Congressional path via an omnibus bill that guaranteed no discussion or debate about it. I’d say everybody should be satisfied with how they’ve managed their courses of action.

[Kasept]

Upcoming circuit court appeal crucial to fate of HISA
Matt Hegarty | Dec 02, 2022

The short-term fate of the Horseracing Integrity and Safety Authority rests in the Sixth Circuit Court of Appeals, while the long-term fate of the fledgling organization may lie in the hands of the Supreme Court.

In the two weeks following a ruling by a three-judge panel of the U.S. Fifth Circuit Court of Appeals that HISA’s enabling legislation was unconstitutional, HISA supporters have pinned their hopes on the Sixth Circuit, where an appeal of a lower court’s ruling on the validity of HISA will be heard Wednesday. If the Sixth Circuit upholds the lower court’s ruling, then the constitutionality of the 2020 legislation forming HISA will have two opposing opinions, making it ripe for review by the Supreme Court.

The Fifth Circuit ruling will not go into effect until the court issues a so-called mandate on Jan. 10, just 10 days after HISA is expected to roll out its Anti-Doping and Medication Control program, which will entail a massive effort by HISA to take responsibility for sampling collection, drug-testing, and enforcement of drug rules in 12 states – the only states that are holding live horse racing in January and where HISA will have jurisdiction at the start of the year.

HISA officials have said they are unbowed by the Fifth Circuit ruling and are moving forward to implement their new programs on Jan. 1. At the same time, HISA has filed a brief with the Sixth Circuit in advance of the Wednesday hearing, contending that the Fifth Circuit erred in its interpretation of the statute and the role of the Federal Trade Commission in overseeing HISA’s authority.

“The Fifth Circuit ruling has not affected our preparations for this moment, nor our day-to-day operations,” said Lisa Lazarus, chief executive of HISA, in a newsletter distributed by HISA on Friday, referring to the Jan. 1 roll-out. “Our focus remains on the task at hand.”

Although HISA has not yet taken a direct course of action to counter the Fifth Circuit decision, it is expected to weigh a handful of options in the next month, including whether to ask the entire Fifth Circuit to re-hear the case, known as a request for an en banc hearing; whether to ask for a stay of the ruling until the Sixth Circuit rules; and whether to seek legislative redress through Congress. None of those options is a sure thing.

“HISA continues to explore all possible legal options related to the Fifth Circuit opinion,” HISA said in a statement in response to questions about what legal course it is considering.

The Fifth Circuit ruled that HISA is “not subordinate” to the Federal Trade Commission, its nominal overseer. By constitutional requirement, the FTC must oversee HISA for Congress to delegate power to HISA, a private, non-profit company created by legislation passed late in 2020. The legislation allowed HISA to formulate its rules for its national regulatory program, but it required HISA to submit those rules for review and approval by the FTC.

While two lower courts dismissed challenges to the legislation, the Fifth Circuit reversed one of the rulings on appeal, focusing on an interpretation that under the law the FTC “cannot review the Authority’s policy choices,” in the words of the three-panel judge that decided the case.

“An agency does not have meaningful oversight if it does not write the rules, cannot change them, and cannot second-guess their substance,” the panel wrote.

HISA’s brief to the Sxith Circuit said that the Fifth Circuit decision was based on “two fundamentally mistaken premises,” contending that the Fifth Circuit judges misread the legislation. In the brief, HISA attorneys said that the FTC “ultimately decides” the validity of the HISA-proposed rules, and that the FTC unquestionably has the power to modify rules submitted by HISA.

The Fifth Circuit decision also has limited scope, in that the decision only applies to those jurisdictions it oversees – Louisiana, Texas, and Mississippi. As a result, HISA could choose to roll out its new rules Jan. 1 in all jurisdictions other than those directly impacted by the decision, but that could trigger legal challenges in other states opposed to HISA in lawsuits directly citing the Fifth Circuit ruling.

In fact, the only jurisdiction that would be affected is Louisiana – Mississippi has no racetracks, and Texas earlier this year declined to submit to HISA’s jurisdictional authority, going so far as to refuse to validate a racetrack’s out-of-state simulcasting application so that HISA’s rules could not be enforced. (HISA’s enabling legislation was crafted in a way to limit its jurisdiction to horse races that are available for wagering across state lines.)

Should the Sixth Circuit rule that HISA’s enabling legislation survives the constitutional test, that will likely set up an appeal to the Supreme Court to decide the issue. It also would likely accelerate efforts by HISA to obtain legislative relief that would clarify the FTC’s role in overseeing the authority, as a way to dodge any adverse ruling by the Supreme Court, where conservatives wary of federal power hold a 6-3 majority.

[Kasept]

U.S. Senator McConnell pushing for legislative fix to safety law
Sat, December 3, 2022
By Rory Carroll

https://www.yahoo.com/news/exclusive...001444551.html

(Reuters) - U.S. Senate Republican leader Mitch McConnell is pushing for a legislative fix to a law designed to make horse racing safer after an appeals court last month ruled it unconstitutional, a source with direct knowledge of the negotiations told Reuters.

The changes to the law, which would provide greater federal oversight of the board charged with writing and implementing safety rules, would be included in a full-year spending bill, known as an omnibus, which could pass later this month.

The Horseracing Integrity and Safety Authority (HISA) was created by Congress in 2020 to replace the state-by-state patchwork of regulations with national rules following a series of high-profile doping scandals and horse deaths that rocked the industry.

But the law was ruled unconstitutional by a federal appeals court in Louisiana, which said there was insufficient government oversight of the new authority in a case brought by various horse racing associations and some states.

McConnell, who hails from the horse racing stronghold of Kentucky, played a key role in getting the law passed and will seek changes to enhance the Federal Trade Commission’s (FTC) oversight of HISA, the source who spoke directly with the lawmaker said.

The source asked not to be identified to speak freely about the negotiations. McConnell's office did not immediately respond to a request for comment on Saturday.

If the changes are adopted as part of the spending bill, the law's backers say there should be no interruption to the implementation of HISA's rules, including the anticipated launch of its anti-doping and medication control program next month.

Supporters say the law is necessary to protect horses, jockeys and the sport as a whole, which they argue could fall out of favor with the public permanently if horses continue to die in training and competition.

Opponents argue that HISA would replace states' regulatory structures and allow new fees to be imposed on the industry.

While not guaranteed, McConnell told the source there is the political will in the Senate to pass the full-year spending bill as two key members of the Appropriations Committee – chair Patrick Leahy (D-Vermont) and ranking member Richard Shelby (R-Alabama) – are set to retire and want to leave with the bill done.

(Reporting by Rory Carroll in Los Angeles; Editing by Ken Ferris)