Arizona Downs v. Arizona Horsemen's Foundation, 15356

• Decision Date: 08 December 1981
• Docket Number: No. 15356,15356
• Parties: , 1981-2 Trade Cases P 64,403 ARIZONA DOWNS, an Arizona Corporation, Appellant, v. ARIZONA HORSEMEN'S FOUNDATION, an Arizona Corporation; Turf Paradise, Inc., an Arizona Corporation and the State of Arizona, Appellees.
• Court: Arizona Supreme Court

Page 1053

637 P.2d 1053

130 Ariz. 550, 1981-2 Trade Cases P 64,403

ARIZONA DOWNS, an Arizona Corporation, Appellant, v. ARIZONA HORSEMEN'S FOUNDATION, an Arizona Corporation; Turf Paradise, Inc., an Arizona Corporation and the State of Arizona, Appellees.

No. 15356.

Supreme Court of Arizona, In Banc.

Dec. 8, 1981.

Rehearing Denied Dec. 29, 1981.

Romley & Sherk by Elias M. Romley, Roger T. Hargrove, Phoenix, for appellant

Snell & Wilmer by George H. Lyons, Robert J. Gibson, Phoenix, for appellee, Arizona Horsemen's Foundation.

Jennings, Strouss & Salmon by David L. White, Lisa B. Hawkins, Phoenix, and Rex E. Lee, Provo, Utah, for appellee, Turf Paradise, Inc.

Robert K. Corbin, Atty. Gen. by Alison B. Swan, David B. Goldstein, Mark Freitag, Charles L. Eger, Asst. Attys. Gen., Phoenix, for appellee, State of Arizona.

HOLOHAN, Vice Chief Justice.

This appeal was brought by Arizona Downs (Downs), an operator of horse racing meetings in Phoenix, Arizona, to challenge the judgment of the superior court declaring unconstitutional several statutes regulating horse racing in Arizona. We assumed jurisdiction. Arizona Constitution Art. VI, § 5; A.R.S. § 12-2101.

Downs and Turf Paradise, Inc. (Turf) have for many years been the holders of permits to conduct horse racing meetings in the Phoenix area. Originally Downs and Turf each owned their own track. In 1956, after completing construction of a new racing track, Turf entered into negotiations with Downs which resulted in a lease agreement whereby Downs agreed to conduct its racing meetings at the new facility of Turf. Thereafter and to the present time, Downs has conducted its horse racing meetings at the track owned by Turf.

In 1977, Arizona Horsemen's Foundation, Inc. (AHF) was organized as a non-profit corporation of Arizona horse owners and breeders to conduct racing meetings. AHF applied to the Arizona Racing Commission in 1977 and 1978 for a permit to conduct a racing meet. The applications were denied because all available dates were allocated to Downs and Turf, who had preferred status pursuant to statute. A.R.S. § 5-110(A).

AHF filed suit against Downs, Turf, and the State of Arizona contending that various sections of the racing statutes were unconstitutional and that the lease between Downs and Turf was in restraint of trade and a violation of the State's antitrust laws. Motions for partial summary judgment were made and granted by the superior court declaring several provisions of the racing statutes unconstitutional and ruling that paragraph 1 of the lease between Downs and Turf, providing for the allocation of racing dates, was a violation of the state antitrust laws. Formal written judgments were signed and filed which contained Rule 54(b) language making the judgments appealable. Rule 54(b), Rules of Civil Procedure.

In this appeal Downs challenges the ruling of the superior court declaring A.R.S. § 5-110(A) and § 5-108.01(C) and (D) unconstitutional ¹. Downs also seeks to set aside the judgment declaring the lease agreement to be in violation of the antitrust laws of Arizona.

For the reasons more fully set forth later, we reverse the judgment of the superior court.

REGULATION OF RACING

Horse racing and wagering on such races has been regulated in Arizona for many years. Since 1935, the statutes have provided for the so-called pari-mutuel system of regulating and accounting for wagering on races run during a racing meeting, O'Neil v. Arizona Horsemen's Ass'n., 57 Ariz. 424, 114 P.2d 894 (1941). The state initially regulated the industry as a revenue measure, but after 1945 the legislature expanded the area of regulation by outlawing all forms of wagering or betting on horse races except those methods authorized by law. See State v. Pelosi, 68 Ariz. 51, 199 P.2d 125 (1948).

The statutory provisions relating to horse racing provide for the regulation and licensing of almost all the participants in racing meetings as well as the places and days for horse racing. See A.R.S. § 5-101 to 115. A commission, known as the Arizona Racing Commission, is charged with the responsibility of administering the statutory system, A.R.S. § 5-101 to 104.

Before a racing meeting may be conducted, the person or corporation intending to hold the racing meeting must obtain a permit from the Racing Commission. A.R.S. § 5-107.01. A permit to conduct a racing meeting differs from the usual type of permits or licenses issued for a year or other defined period. Racing permits are issued for a limited number of racing days within specific months. Since horse races in Arizona are generally not run every day of the week, the number of racing days granted by the Racing Commission literally means the days upon which horse racing may occur.

For a number of years the maximum number of days available for conducting horse races was limited to 120 days. In 1980, the legislature increased the number of horse racing days available in counties with populations in excess of four hundred thousand to 150 racing days.

Once a person or corporation has secured a permit to conduct a horse racing meeting, the permittee is granted a statutory preference for the same dates the following year. A.R.S. § 5-110(A). The commission may revoke a racing permit or refuse to renew a permit for any of several specific grounds set forth in the statutes, but the refusal to renew may be made only after full hearing and a finding of good cause. A.R.S. § 5-108(D).

CONSTITUTIONALITY OF A.R.S. § 5-110(A)

The parties to this appeal have focused a major portion of their argument on the constitutionality of A.R.S. § 5-110. The relevant portion of this statute reads:

Permits (for racing) shall be issued for substantially the same dates allotted to permittees during the preceding year ... provided that, in the event there is a conflict in dates requested between two or more permittees in the same county for the same kind of racing, then and in such event, the permittee whose application is for substantially the same dates as were allotted to him in the preceding year shall be entitled thereto in preference to any other permittee. In the event two or more permittees shall have agreed that the dates to be allotted to each of them each year shall be alternated from one year to the next, then and in such event, such agreement shall be recognized by the commission and such permittees shall be accorded preference over any other permittee as to those dates to be allotted to such permittees on an alternating basis. A.R.S. § 5-110(A) (emphasis added).

Appellees claim that the statutory preference of A.R.S. § 5-110(A) violates the United States and Arizona Constitutions on any one of several grounds: (1) that it represents an impermissibly broad delegation of legislative authority to private parties; (2) that it is in violation of constitutional guaranties of due process and equal protection; and (3) that it is an unconstitutional "special law" which grants exclusive privileges and immunities. Each of these claims will be considered in turn.

At the outset, we note that we follow certain general rules of constitutional interpretation. All statutes are presumed to be constitutional and any doubts will be resolved in favor of constitutionality. State v. Arnett, 119 Ariz. 38, 579 P.2d 542 (1978); New Times, Inc. v. Arizona Board of Regents, 110 Ariz. 367, 519 P.2d 169 (1974); McKinley v. Reilly, 96 Ariz. 176, 393 P.2d 268 (1964), appeal dismissed, 381 U.S. 276, 85 S.Ct. 1457, 14 L.Ed.2d 431 (1965). Moreover, the court has a duty to construe a statute so as to give it, if possible, a reasonable and constitutional meaning. Stewart v. Robertson, 45 Ariz. 143, 40 P.2d 979 (1935).

The first challenge to the constitutionality of A.R.S. § 5-110(A) is that the statute provides for an improper delegation of legislative authority to private individuals. The specific challenged area of the statute is that which provides that two or more permittees may agree to alternate their racing dates from year to year, and the racing commission "shall" recognize such an agreement and grant the agreed dates to the permittees.

It is well settled that the Legislature may not delegate its powers to others. Town of Chino Valley v. State Land Dept., 119 Ariz. 243, 580 P.2d 704 (1978); Skaggs Drug Center, Inc. v. United States Time Corp., 101 Ariz. 392, 420 P.2d 177 (1966); Industrial Commission v. C. & D. Pipeline, Inc., 125 Ariz. 64, 607 P.2d 383 (App.1980). The appellees contend that the preference for alternate racing dates is unconstitutional because it places in private parties the power to make governmental decisions without any legislative standards or limitations.

If the challenged portion of A.R.S. § 5-110(A) is read as using "shall" in the mandatory sense, the constitutionality of this part of the enactment would indeed be questionable. We, however, have a duty, whenever possible, to give a construction to a statute which will render it constitutional. Mardian Construction Co. v. Superior Court, 113 Ariz. 489, 557 P.2d 526 (1976). Although the word "shall" usually indicates a mandatory provision, the word has also been construed to indicate desirability, preference, or permission. See Jack Endo Electric, Inc. v. Lear Siegler, Inc., 59 Haw. 612, 585 P.2d 1265 (1978); In re Elliott, 74 Wash.2d 600, 446 P.2d 347 (1968); Morgan v. State, 280 Ala. 414, 194 So.2d 820, appeal dismissed, cert. denied, 389 U.S. 7, 88 S.Ct. 47, 19 L.Ed.2d 6 (1967).

Reading A.R.S. § 5-110(A) as a whole, we believe that a reasonable and constitutional construction of the challenged provision is that the word "shall" is used in a directory sense rather than in a mandatory sense. Thus, when permittees have agreed to alternate dates, the Racing Commission is required to give consideration to the preference of the permittees but the Commission is not compelled to honor such request if it is not in the public interest or convenience.

Although we have concluded...