Berman v. NEW HAMPSHIRE JOCKEY CLUB, INCORPORATED, Civ. A. No. 2855.

Decision Date31 October 1968
Docket NumberCiv. A. No. 2855.
Citation292 F. Supp. 993
PartiesFrank E. BERMAN, Rose R. Berman, and Muriel Winston v. NEW HAMPSHIRE JOCKEY CLUB, INCORPORATED.
CourtU.S. District Court — District of New Hampshire

J. Fleet Cowden, Sudbury, Mass., Lawrence E. Spellman, Sulloway, Hollis, Godfrey & Soden, Concord, N. H., for plaintiffs.

Kenneth F. Graf, McLane, Carleton, Graf, Greene & Brown, Manchester, N. H., for defendant.

ORDER GRANTING MOTION TO DISMISS

BOWNES, District Judge.

The plaintiffs have commenced this action under Federal Rule 23, purportedly as representative members of a class "comprising the licensed owners of * * * horses which * * * have won purses at Rockingham," a racetrack in Salem, New Hampshire, operated by the defendant-licensee. The plaintiffs allege, in substance, that the racetrack has failed to honor in full alleged annual purse agreements dating from 1933; that the violation of the agreements was fraudulently concealed from the plaintiffs; and that the total monies wrongfully withheld from the class exceeds four million dollars when computed over the thirty-four year period. Relief has been sought by way of an accounting, a permanent injunction against further unlawful withholding of monies, and a declaratory judgment determining that the Horseman's Benevolent Protective Association (not named as a party to this action), is not, and has never been, the legal representative of the alleged class.

The defendant-licensee has moved to dismiss on four grounds:

1. lack of jurisdiction by reason of inadequate amount in controversy;

2. failure to state a claim upon which relief can be granted;

3. failure to join a party required by Federal Rule 19; and,

4. impropriety of the action as a class action under Federal Rule 23.

The Court concludes that the first and fourth grounds are dispositive and conclusive and that the motion to dismiss should be granted. A brief explanation and definition of the somewhat esoteric terms and conditions of the horse-racing establishment, both under New Hampshire law, and the operative procedures of the defendant-licensee (as evidenced by the record, uncontradicted statements, and testimony) is necessary to a proper understanding of our findings and rulings.

Breakage. The law of the State of New Hampshire (N.H.Rev.Stat.Ann. ch. 284) permits and the defendant presumably operates its racetrack under the so-called "Pari-Mutuel Pool" system of wagering. N.H.Rev.Stat.Ann. ch. 284: 22. Under this system, the licensee, the state, and the bettors share the total monies wagered in the approximate amounts of seven and one-half per cent, seven and one-half per cent, and eighty-five per cent, respectively.1 The bettors' portion, however, proves slightly less than eighty-five per cent, as payment to winning ticket holders is made in multiples of ten cents (e.g., $6.60, $4.40, $2.20) and if the precise arithmetic amount due each bettor results not in a multiple of ten cents, but in odd cents (e.g., $6.68, $4.45, $2.23) the odd cents are added to the shares of the state and the licensee "fifty-fifty." This additional money (called "breakage") totals several hundred-thousand dollars per year2 and a portion of the track's share of that "breakage" is the money damage sought by the plaintiffs in this action.

Distribution Problems. In addition to an understanding of the nature of "breakage," it is imperative that we outline the manner in which "purses" or money prizes are determined in amount and awarded to the race winners. First, at the beginning of each year (or racing season) a so-called "annual purse agreement" is entered into by the racetrack and the horseowners as a group.3 By that agreement a certain percentage (currently 44.7%) of the track's annual share of money is promised to be paid (in yet undetermined portions) to the horseowners as a class. (Thus for each one-hundred dollars to be retained by the track during the forthcoming year, see footnote 1, supra, forty-four dollars and seventy cents is contractually promised to the race winners.) No specific dollar amount is promised, of course, as the track's share of money (hence, the horsewinners' percentage of that share) must await the subsequent betting during the actual racing season.

Five times during the actual racing season at Rockingham "meet books" are published. A meet-book is actually a schedule of races and listing of dollar amounts ("purses") to be paid to the winners (and various "runner-up" positions) in each race scheduled for the next fifteen or so racing days.4 The dollar amounts are based upon the track's estimated share of the estimated total "handle," i.e., the total of all monies wagered, or, gross receipts. No question has been raised concerning the payment of these published "purses." A problem does arise, however, if the "estimates" made prior to the meet prove to have been conservative (as is frequently the case). The annual agreement requires that 44.7% of the track's share of the "handle" be distributed to the race winners. If, then, the promised and paid "purses," when totalled, do not amount to that required percentage, additional distribution, over and above the "purses," must be, and is made to those winners.

The source of the plaintiffs' fundamental procedural difficulty arises from the fact that there is no formula of any kind to determine the manner, amount, or recipient of the additional monies due to the purse winners. The track licensee, in its sole and uncontrolled discretion, increases purses of its own choice. The argument of plaintiffs' attorney at a hearing on the motion (Record, at 17, 18, 19, 20, 22, 23, 25, 27), the plaintiffs' supplemental memorandum (pages 3-6), and the deposition of Max L. White (taken on behalf of plaintiffs) (see pages 23, 42, 44, 45, 46) indicate that these extra payments may be made to any, or all, winners, with no determinative guide but the discretion of the licensee. Therefore, the first-place winner of the third race, the second-place winner of the fifth race, and the first-place winner of the tenth race might be chosen, without contractual injustice, to receive excess monies. (See note, 6, infra.) In other words, the track decides which purse winners are to share in the excess money, over and above the promised purses. The absolute discretionary aspect of the licensee's distribution of excess monies is a critical factor in our order in this case and must be understood: the money must be paid (by virtue of the annual percentage agreement)—the payee, however, as long as he is one, or more, of the purse winners, is chosen without obligation of contract, rule, or regulation—purely upon the mere whim of the licensee. We make no comment upon this practice, either legal or moral. Its existence, however, is critical to an understanding of the issue.

THE ISSUE

The plaintiffs claim that the track's fifty per cent share of the "breakage" (as defined, supra) should be included in the computation of the purse winners' 44.7%—in other words, that payments to the purse winners must total 44.7% of 7½% of the gross "handle" PLUS 44.7% of the "breakage" retained by the track.5 It is their claim that the failure of the track (for thirty-four years) to include the "breakage" fund in the computation of the horseowners' monies is, and was, in breach of their agreement; that knowledge of this omission was fraudulently withheld from them by the track; and, that the track should now be held accountable to the plaintiffs in the amount of $4,168,808.42 (purportedly 44.7% of the track's retained breakage during the alleged period of wrongdoing.) Therefore, according to the plaintiffs' theory, the "matter in controversy" is well in excess of ten-thousand dollars, hence, clearly a sufficient jurisdictional amount under 28 U. S.C. § 1332(a). Impliedly, of course, the plaintiffs are treating the jurisdictional amount as the collective or aggregated sum allegedly due to the entire class.

By answer, the defendants deny to the plaintiffs the right to consider the aggregated amount as fulfilling the jurisdictional requirement, and maintain that each member of the plaintiff class must establish his own ten-thousand dollar claim, separate and distinct from the claim of any other plaintiff. Their argument is simple in terms: the plaintiffs are not a class under Federal Rule 23 and its preferable case law, and even if they were, they are not the type of class that can aggregate claims in diversity cases to satisfy the jurisdictional amount requirement of 28 U.S.C. § 1332(a).

Unfortunately, the argument is not as simple in substance as it seems in form. We are faced with the construction of a recently-amended, vaguely-defined, and hotly-contested federal rule. In addition, we are confronted with an issue of aggregation of claims, a problem born long before the federal rules, and certain to be extended in its eventual resolution. After diligent and painful study of the pleadings, papers, and hearings on the matter, and through exhaustive independent research sua sponte, we have concluded and so rule: that the pleadings of the plaintiff, on their face, have not established the jurisdiction of this Court. Further, in determining the jurisdictional question, we have found it necessary to delve into the propriety of the action as a proper class action under Federal Rule 23, and although our primary basis for dismissal is failure of jurisdiction, we must note the correlative involvement of considerations of Federal Rule 23 and will include so much of that consideration as we feel will lend clarity to our decision.

ARGUMENT
A. Jurisdictional Amount

The plaintiffs in the instant case make an uncontested allegation of diversity of citizenship. The jurisdictional statute upon which they rely requires, as well, that the "matter in controversy exceeds the sum or value of $10,000 * * *." 28 U.S.C. § 1332(a). Elementary as this recital may seem, we feel compelled to so state, for our inquiry...

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4 cases
  • Berman v. Narragansett Racing Association, 7245-7247.
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    • U.S. Court of Appeals — First Circuit
    • July 31, 1969
    ...chosen without obligation of contract, rule, or regulation — purely upon the mere whim of the licensee." Berman v. New Hampshire Jockey Club, Inc., 292 F.Supp. 993, 996 (D.N.H.1968). Turning to the question of jurisdiction, we note that any argument that plaintiffs may have made in the dist......
  • Kale v. Combined Ins. Co. of America
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    • May 1, 1990
    ...(1st Cir.1987). Kale made no formal allegation that he had met the jurisdictional amount requirement. See Berman v. New Hampshire Jockey Club, Inc., 292 F.Supp. 993, 998 (D.N.H.1968). Moreover, the only specific monetary claim in the complaint which could colorably satisfy the jurisdictiona......
  • Reader v. Magma-Superior Copper Co.
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    ...317 F.Supp. 1022--1023 (E.D.Pa.1970), Purdes v. Carvel Hall, Inc., 301 F.Supp. 1256, 1259 (S.D. Iowa 1969), Berman v. N. H. Jockey Club, Inc., 292 F.Supp. 993, 1000 (D.N.H.1968), rev'd, 414 F.2d 311 (1 Cir. 1969), School District of Philadelphia v. Harper & Row Publishers, Inc., 267 F.Supp.......
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    ...the validity of PWM 3241. III The trial court has broad discretion in deciding whether to certify a class. Berman v. New Hampshire Jockey Club, Inc., 292 F.Supp. 993 (D.N.H.1968), reversed on other grounds, sub nom., Berman v. Narragansett Racing Ass'n, 414 F.2d 311 (1st Cir. 1969), cert. d......

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