Mid-South Indoor Horse Racing, Inc. v. Tennessee State Racing Com'n

• Decision Date: 17 August 1990
• Docket Number: MID-SOUTH
• Citation: 798 S.W.2d 531
• Parties: INDOOR HORSE RACING, INC., Plaintiff/Appellant, v. TENNESSEE STATE RACING COMMISSION, Defendant/Appellee.
• Court: Tennessee Court of Appeals

Page 531

798 S.W.2d 531

MID-SOUTH INDOOR HORSE RACING, INC., Plaintiff/Appellant, v. TENNESSEE STATE RACING COMMISSION, Defendant/Appellee.

Court of Appeals of Tennessee,

Middle Section, at Nashville.

Aug. 17, 1990.

Published in Accordance with

Tenn.Ct.App.R. 11.

William M. Leech, Jr., Howard T. Wall, III, Waller, Lansden, Dortch & Davis, Nashville, for plaintiff/appellant.

John Knox Walkup, Sol. Gen., Gina J. Barham, Albert L. Partee, Asst. Attys. Gen., Charles W. Burson, Atty. Gen. and Reporter, Nashville, for defendant/appellee.

OPINION

KOCH, Judge.

This appeal calls into question the procedure used by the Tennessee State Racing Commission to consider an application to hold hackney pony races in Memphis. The applicant filed a petition for review in the Chancery Court for Davidson County after the commission denied its application, asserting that the commission's procedures deprived it of notice and an opportunity to be heard concerning the matters upon which the commission based its decision. The trial court dismissed the petition for failure to state a claim upon which relief could be granted. The applicant has appealed, still claiming that it was entitled to a contested case hearing or its functional equivalent. We disagree and, therefore, affirm the trial court.

I.

The Tennessee Racing Control Act of 1987 became effective on May 7, 1987. ¹ Five months later, on October 8, 1987, the City of Memphis conducted a referendum pursuant to Tenn.Code Ann. § 4-36-401 in which over sixty percent of the voters approved conducting horse racing with pari-mutual wagering within the city.

By February, 1988, two applicants were seeking a license to conduct horse racing in Memphis, even though the General Assembly had not yet approved the first members of the Tennessee State Racing Commission ("commission"). ² One of these applicants, Mid-South Indoor Horse Racing, Inc. ("Mid-South"), proposed to conduct hackney pony races at the Mid-South Coliseum using robot jockeys. The moving force behind Mid-South was a prominent Memphis businessman named Charles D. McVean who had made a substantial personal investment in developing the robot jockeys or "super jocks" that would be used for the races.

Shortly after the General Assembly approved the commissioners, Mid-South filed two petitions requesting the commission to grant its application without first adopting regulations governing the licensing process or the conduct of racing. The commission, however, decided that it would not accept formal applications until it promulgated licensing rules. Mid-South filed its formal application on August 1, 1988, the day after the commission's licensing rules became effective. ³

Several weeks later, the commission met in Memphis to consider the economic feasibility of both applications and to attend a demonstration of the robot jockeys. At that time, the commission determined that Mid-South's application was substantially complete but requested Mid-South to provide additional information concerning several portions of its application and to provide a working model of the robot jockey for testing. As required by Tenn.Code Ann. § 4-36-302(3), the commission also requested the Tennessee Bureau of Investigation to conduct a background investigation of Mid-South and its principals.

In October, 1988, the commission deferred further consideration of the application until Mid-South provided all the requested information and made a robot jockey available for testing. The commission also decided that it would schedule a public hearing concerning Mid-South's application within ten days after its expert advised that the robot jockey was "operational and secure."

During the next three months, a dispute arose concerning the adequacy of the information Mid-South had provided with regard to a $1.9 million loan to Mr. McVean and disciplinary action the Chicago Board of Trade had taken against Mr. McVean in 1979. Several members of the commission and the commission's staff requested additional details concerning these matters, but Mr. McVean declined to cooperate, insisting that the matters were not relevant to Mid-South's application for a race track license.

The commission's expert tested a prototype of the robot jockey in early January, 1989 and recommended that it be approved subject to the successful completion of a "program and demonstration plan." Accordingly, the commission decided to meet in Memphis on January 24, 1989 to hold a public hearing concerning Mid-South's application.

On January 9, 1989, Mid-South filed a statement of expenditures with the commission outlining over $8 million in expenditures between 1985 and 1988. The statement, which was neither itemized nor documented, included $805,000 for "professional fees," $678,000 for "promotions and special events," $352,000 for "contributions," and $736,000 in "other" expenditures. It also stated that it did "not include expenditures regarding the 1987 Memphis, Tennessee pari-mutual referendum." ⁴

Numerous persons appeared before the commission on January 24, 1989 to speak in favor of and in opposition to Mid-South's application. One of them, a state senator, told the commission that Mid-South had hired him as a consultant to help pass the October, 1987 racing referendum. At the conclusion of the hearing, the commission decided, over Mr. McVean's vehement objections, to defer action on Mid-South's application until February 10, 1989.

On January 26, 1989, a lobbyist named William Don ("Donnie") Walker pleaded guilty in the Criminal Court for Davidson County to an indictment charging him with attempting to bribe a member of the state Senate to vote for the Racing Control Act of 1987. It came out at that time that Mr. McVean had retained Mr. Walker to help pass the Racing Control Act of 1987 and that he had given Mr. Walker a $24,000 check the day before the Senate passed the bill. Mr. McVean denied any wrongdoing with regard to Mr. Walker. He was also quoted in the press as stating that he had paid more than $200,000 between 1987 and 1988 to state and federal politicians, political consultants, and lobbyists to gain passage of the Racing Control Act of 1987 and to obtain a license for Mid-South.

The revelations surrounding Mr. Walker's guilty plea caused several commissioners to question the advisability of proceeding with the February 10 hearing. However, since Mid-South insisted on holding the hearing as scheduled, the commission decided to proceed even though the Walker investigation had not been completed.

Even though Mid-South had requested an advance copy of the TBI's report, the TBI did not provide either the commission or Mid-South with the report until the February 10 meeting. After recessing to enable everyone to read the report, the commission's staff, the commissioners, and one of Mid-South's lawyers questioned the TBI agent who prepared the report. Then the commission permitted one of Mid-South's lawyers to read Mr. McVean's affidavit concerning his dealings with Mr. Walker. Mr. McVean, although present, declined to answer questions about the Walker matter because of the ongoing criminal investigation.

The TBI agent explained that the background investigation was incomplete because of Mr. McVean's lack of cooperation and because its investigation into Mr. McVean's dealings with Mr. Walker had not been concluded. The agent stated that Mid-South and Mr. McVean had not complied fully with its request for detailed information concerning (1) expenditures prior to the Racing Control Act of 1987, (2) expenditures prior to the Memphis referendum, (3) expenditures for the development and promotion of the robot jockey, and (4) the 1979 investigation by the Chicago Board of Trade. The agent also pointed to discrepancies between Mr. McVean's statements and other testimony concerning various payments, including those to Mr. Walker.

The commission deliberated publicly after the evidentiary record was closed. Five commissioners voted against Mid-South's application, while two voted in favor of it. All the commissioners explained the reasons for their votes as they cast them. Those voting against the application did so because they were concerned about the appearance of the integrity of Mid-South's application. ⁵ They pointed to the fact that the TBI investigation was not complete and to Mid-South's and Mr. McVean's reluctance to make detailed, itemized disclosures concerning various expenditures with regard to the development of the robot jockeys and the passage of the legislation and the ordinance permitting horse racing in Memphis.

On March 31, 1989, the commission denied Mid-South's petition to reconsider its decision. Later, on May 15, 1989, it denied Mid-South's request for a contested case hearing under the Uniform Administrative Procedures Act. Thereafter, Mid-South commenced these review proceedings.

II.

At the outset, we must identify the proper standard for reviewing the commission's denial of an application for an initial race meeting license. Mid-South would have us apply the Uniform Administrative Procedures Act's ("UAPA") standard of review found in Tenn.Code Ann. § 4-5-322 (Supp.1989). Its reliance on the UAPA is misplaced for two reasons. First, the commission's consideration of applications for initial race meeting licenses is not governed by the UAPA. Second, the Racing Control Act prescribes the standard by which these decisions should be reviewed.

A.

The General Assembly enacted the UAPA in 1974 ⁶ in response to the proliferation of state boards and agencies. Blank, Scope of the Tennessee Uniform Administrative Procedures Act, 6 Mem.St.U.L.Rev. 159, 159 (1976). The growth in the number of agencies had created an "incoherent, and indeed incomprehensible hodgepodge" of procedures and a "very fragmented" judicial review process. See Sanford, The Development of the Tennessee Uniform Administrative Procedures Act, 6 Mem.St.U.L.Rev. 151, 157 (1976); Sewell,...