Jacobson v. New York Racing Ass'n, Inc.

• Decision Date: 05 March 1973
• Citation: 341 N.Y.S.2d 333,41 A.D.2d 87
• Parties: Howard JACOBSON, Respondent, v. The NEW YORK RACING ASSOCIATION, INC., Appellant, et al., Defendant.
• Court: New York Supreme Court — Appellate Division

Page 333

341 N.Y.S.2d 333

41 A.D.2d 87

Howard JACOBSON, Respondent, v. The NEW YORK RACING ASSOCIATION, INC., Appellant, et al., Defendant.

Supreme Court, Appellate Division, Second Department.

March 5, 1973.

Cahill, Gordon, Sonnett, Reindel & Ohl, New York City, David R. Hyde, O. Carlysle McCandless and Roger S. Fine, New York City, of counsel, for appellant.

Jesse Moss, New York City, Sue Wimmershoff-Caplan, New York City, of counsel, for respondent.

Before HOPKINS, Acting P.J., and MUNDER, GULOTTA BRENNAN and BENJAMIN, JJ.

HOPKINS, Acting Presiding Justice.

The respondent, a licensed owner and trainer of thoroughbred horses, has been granted stable space since 1952 at racetracks owned and operated by the appellant. In 1970 the respondent's license was suspended by the Racing Commission of the State of New York for a period of 45 days; the appellant refused to allot stalls to the respondent after the restoration of his license. Alleging injury, the respondent commenced this action for damages. The Special Term has denied the appellant's motion to dismiss the complaint. We agree that the complaint states a cause of action, but we convert the action into a proceeding pursuant to article 78 of the CPLR to review the appellant's refusal.

The respondent's complaint alleges (and we take the allegations to be true for the purposes of the appellant's motion to dismiss) that the appellant has a monopoly of throughbred racing in the state, except for a small racetrack at Canandaigua, New York, and that the appellant's refusal to provide stable space prevented the respondent from pursuing his livelihood as on owner and trainer of horses. The respondent alleges that the appellant's refusal was based on its decision that his character was not approved 'as being sufficiently good to have him racing' at its tracks, a decision unjustified and contrary to law, because the Racing Commission is the sole authority entitled to pass on the character of persons engaged in racing. Moreover, the respondent alleges that the appellant's refusal 'was made maliciously and wantonly to punish plaintiff for his criticisms of certain activities and policies' of the appellant 'and his efforts to correct them, and as a warning to other licensed horsemen not to do so.'

The appellant's primary basis for dismissal of the complaint rests on Madden v. Queens County Jockey Club, 296 N.Y. 249, 72 N.E.2d 697 and cases which follow it (e.g., Matter of Vaintraub v. New York Racing Ass'n, 28 A.D.2d 660, 280 N.Y.S.2d 758; Segal v. Thoroughbred Racing Protective Bur., N.Y.L.J., July 31, 1967, p. 98 Col. 1 (Supreme Ct., N.Y. Cunty); Warfield v. New York Racing Assn., N.Y.L.J., July 28, 1971, p. 11, col. 8 (Supreme Ct., Queens County); Matter of Webster v. Roosevelt Raceway, N.Y.L.J., Aug. 23, 1971, p. 14, col. 6 (Supreme Ct., Nassau County); Rocco v. Saratoga Harness Racing Assn., July 22, 1971 (Supreme Ct., Saratoga County)). Madden held that the owner of a racetrack may exclude any one from his property, because at common law proprietors of places of amusement and resort enjoyed 'an absolute power to serve whom they pleased,' and that the power continued 'until changed by legislative enactment' (Madden v. Queens County Jockey Club, Supra, 296 N.Y. pp. 253, 254, 72 N.E.2d p. 698). The appellant argues that while the Legislature has forbidden discrimination on account of race, color, creed or national origin (Civil Rights Law, § 40), it has not otherwise forbidden the exclusion of persons at racetracks, as it has in the instances of other enterprises (Civil Rights Law, § 40--b).

The question before us essentially is whether the common-law doctrine recognized by Madden has been changed by legislative action. The appellant now owns and operates Aqueduct Race Track (which is the place from which the patron in Madden was excluded) and other racetracks by virtue of statutes adopted in 1955--some eight years after Madden was decided (see Horse Racing Act, § 7--a; L.1955, ch. 812, § 2; Pari-Mutuel Revenue Law, § 4--a; L.1940, ch. 254, as amd. by L.1955, ch. 813, § 1, McKinney's Unconsol.Laws, Book 65, §§ 7910, 7954). Under those statutes the appellant received a franchise good for 25 years to conduct races with pari-mutuel betting at the Aqueduct, Belmont and Saratoga racetracks. As a nonprofit racing corporation, the appellant must secure the approval of its trustees by the Racing Commission and must dismiss on the request of the Racing Commission any member of its board or executive officer on certain specified grounds (Id., § 1--a; L.1926, ch. 440, as amd. by L.1955, ch 812, § 7902, subd. 3). The State receives as a franchise fee all the taxable income of the appellant after provision for the payment of Federal taxes and the amortization of debt contracted with the approval of the Racing Commission (Id., § 7--a; L.1955, ch. 812, § 2; McKinney's Unconsol.Laws, § 7910). Upon dissolution of the appellant, its assets must be transferred to one or more exempt organizations defined under the Federal Internal Revenue Code as may be designated by the Governor (Id., § 1--a; L.1955, ch. 812, § 1; § 7902, subd. 2). The Racing Commission exercises strict supervisory control over the appellant, including the approval of the acquisition of real property and facilities (Id., § 7--b; L.1955, ch. 812, § 3), the right to examine its books (Id., § 6--a; L.1955, ch. 15, § 3; § 7--a; L.1955, ch. 812, § 2; McKinney's Unconsol.Laws, §§ 7908, 7910), the appointment of one of the three stewards in charge of the racing (Id., § 9--a; L.1955, ch. 15, § 5; McKinney's Unconsol.Laws § 7914), the power to make rules for the conduct of pari-mutuel betting (Id., Pari-Mutuel Revenue Law, § 7; L.1940, ch. 254, as amd. by L.1945, ch. 121, § 1; McKinney's Unconsol.Laws, § 7957) and the fixation of admission charges (Id., § 15; L.1940, ch. 254, as amd. by L.1955, ch. 58, § 1; McKinney's Unconsol.Laws, § 7965).

We think that the aggregate weight of these circumstances demonstrates that the respondent cannot be deprived of a facility hitherto granted to him by an arbitrary refusal of the appellant. The requirements of due process must be met whenever 'the State has so far insinuated itself into a position of interdependence * * * that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have been so 'purely private' as to fall without the scope of the Fourteenth Amendment' (Burton v. Wilmington Parking Auth., 365 U.S. 715, 725, 81 S.Ct. 856, 862, 6 L.Ed.2d 45). Granted that the demands of due process are directed toward State action and not individual action (Civil Rights Cases, 109 U.S. 3, 11, 3 S.Ct. 18, 27 L.Ed.2d 835), when the two merge as the result of the exercise of a public function or the identification of the State with the private enterprise, the action of the union takes on the character of State action.

Though the doctrine of State action has been initially considered in terms of racial discrimination (e.g., Shelley v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161; Department of Conservation & Development v. Tate, 4 Cir., 231 F.2d 615, cert. den. 352 U.S. 838, 77 S.Ct. 58, 1 L.Ed.2d 56), it clearly applies to all cases of arbitrary decision. Thus, State action has been found to exist when a public utility broadcasts music on public buses (Public Utilities Comm. of Dist. of Columbia v. Pollak, 343 U.S. 451, 72 S.Ct. 813, 96 L.Ed. 1068), a private college sought to discipline students (Coleman v. Wagner Coll., 2 Cir., 429 F.2d 1120), a landlord tried to oust tenants (Matter of Fuller v. Urstadt, 28 N.Y.2d 315, 321 N.Y.S.2d 601, 270 N.E.2d 321) and a corporation operating a company town excluded one distributing religious pamphlets (Marsh v. Alabama, 326 U.S. 501, 66 S.Ct. 276, 90 L.Ed. 265). In all of these examples, the criterion was whether the State or Federal government had 'become so involved in the conduct of these otherwise private bodies that their activities are also the activities of these governments and performed under their aegis' (Simkins v. Moses H. Cone Mem. Hosp., 4 Cir., 323 F.2d 959, 966; see, also, Smith v. Holiday Inns of Amer., 6 Cir., 336 F.2d 630). As in many cases of constitutional issues, State action is a calculation of degree of State intervention or presence; when the State moves into the private domain, it brings with it the burdens borne by the State, as well as the benefits obtained.

It is not necessary in determining whether State action is present to find that a State function, such as housing, is being performed (cf. Matter of Vinson v. Greenburgh Housing Auth., 29 A.D.2d 338, 288 N.Y.S.2d 159, affd. 27 N.Y.2d 675, 314 N.Y.S.2d 1, 262 N.E.2d 211). That was not the case in Coleman v. Wagner Coll. (429 F.2d 1120, Supra), where a private college was the subject of the litigation, or in Marsh v. Alabama 326 U.S. 501, 66 S.Ct. 276, Supra (see, also, Amalgamated Food Employees Union Local 590 v. Logan Valley Plaza, 391 U.S. 308, 88 S.Ct. 1601, 20 L.Ed.2d 603), where a private corporation was the party against whom the claim of constitutional deprivation was aimed. A public function is but one of the evidences of State action; public regulation, public financial assistance and the use of publicly delegated powers (cf. Brotherhood of R. R. Trainmen v. Howard, 343 U.S. 768, 72 S.Ct. 1022, 96 L.Ed. 1283) are other indicia. But it is not entirely beyond reason to put racing into a form of a public function, given the revenue-raising purpose it serves for the State, not only as a direct source through on-track pari-mutuel betting, but also as the means by which off-track betting is conducted. In short, racing can be reasonably viewed as an amusement now turned into a revenue-raising enterprise for the benefit of the State (cf. Saratoga Harness Racing Ass'n v. Agriculture & New York State Horse Breeding Development Fund, 22 N.Y.2d 119, 123, 127, 291 N.Y.S.2d 335, 337,...