Churchill Downs Inc. and the New York Racing Association allege in a lawsuit the Horseracing Integrity and Safety Authority is threatening to shut them down unless they pay fees they do not owe.
The suit cites a section of the United States Code that provides assessment fees are to be paid to HISA by racetracks based on HISA’s budget for the following year and “the projected amount of covered racing starts for the year in each State.” CDI and NYRA claim that, instead, HISA is using “an assessment methodology that imposes fees based largely on the size of a racetrack’s purses, i.e., the total prize money paid to race winners, rather than a State’s share of racing starts.”
According to the complaint filed Dec. 4 in U.S. District Court for the Western District of Kentucky and first reported by Horse Racing Nation, CDI and NYRA have been paying assessments based only on the number-of-starts methodology set out in the U. S. Code.
“The Authority endorsed this arrangement for nearly two years,” the complaint says, “until its ever-increasing budget and fiscal mismanagement prompted it to change course and demand that CDI and NYRA immediately remit all fees due under the illegal purse-based methodology. When CDI and NYRA refused to accede to the Authority’s unlawful demands, the Authority … (threatened) to prohibit them from conducting any horseraces until the fees due under the Authority’s illegal assessment methodology are paid in full.”
The suit goes on to allege the enforcement action itself is being handled illegally.
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“Worse, the Authority is illegally conducting its enforcement action through an internal disciplinary process before its Board of Directors,” the complaint says. “The Act does not empower the private Authority to adjudicate fee-collection disputes in-house but rather envisions that the Authority would exercise its statutory power to bring a civil action in federal court.”
CDI and NYRA ask the court to declare that HISA’s purse-based assessment methodology is illegal; that approval of the methodology by the Federal Trade Commission, HISA’s government umbrella agency, is unlawful; that the enforcement procedure being used against the tracks is not authorized by law; and that further actions in this matter outside the courts by HISA and FTC be enjoined.
While the facial constitutionality of HISA has been challenged in the courts of multiple states, CDI and NYRA have complied with HISA’s regulatory schemes. The only constitutional challenge to HISA brought in Kentucky was not instigated by CDI or any of its tracks, and no challenges were filed in New York. Now the companies find themselves at odds with the way the regulator is running itself.
HISA issued a press release in response to the filing of the lawsuit saying it “will aggressively defend itself” and calling the legal case an “attempt to avoid paying their fair share of HISA’s fees. … The rule was created to properly and equitably allocate the costs of HISA’s operations to state racing commissions and/or covered persons involved with covered horse races. CDI and NYRA are the only two racing organizations subject to this rule that have refused to remit their share of fees.”
In a statement HISA CEO Lisa Lazarus called the lawsuit “meritless.”
“Our rules, including the Assessment Methodology Rule, were developed after thorough consideration and many opportunities for input from racing participants, and have been approved by the Federal Trade Commission,” Lazarus said. “CDI and NYRA have both benefited greatly from HISA’s uniform safety rules, expertise and oversight, particularly over the past two years. That uniformity must extend to cost assessments as well. To do otherwise would be unfair to other tracks and industry participants who are paying their fair share.”
A NYRA release reiterated its support of HISA’s mission but doubled down on its legal allegations.
“NYRA is strongly supportive of the Horseracing Integrity and Safety Authority’s regulatory mission,” a spokesperson wrote BloodHorse. “This lawsuit narrowly targets the unlawful, excessive, and disproportionate financial assessments that HISA’s authority is attempting to impose on NYRA.”
According to the complaint, a federal court in Louisiana has already ruled HISA’s assessment methodology is unlawful. That court’s record shows the ruling is not final and has not been reviewed on appeal.
Byron King also contributed to this story.
