Nat'l Horsemen's Benevolent & Protective Ass'n v. Texas

Decision Date04 May 2023
Docket Number5:21-CV-071-H
CourtU.S. District Court — Northern District of Texas


In hopes of standardizing horseracing regulation, the Horseracing Integrity and Safety Act of 2020 (HISA) empowered a private entity to draft nationwide regulations subject to the Federal Trade Commission's review and approval. In response, the plaintiffs claimed that HISA was unconstitutional because it did not give the FTC meaningful oversight-violating the private-nondelegation doctrine. Although this Court recognized that the plaintiffs' concerns were legitimate, it construed binding precedent as permitting Congress's approach in its March 2022 order. The Fifth Circuit disagreed, explaining that precedent could not justify HISA and that it was unconstitutional because the FTC lacked discretion to approve, disapprove, or modify the proposed regulations. Answering the Fifth Circuit's call Congress amended HISA to empower the FTC to “abrogate add to, and modify” the entity's regulations. Nevertheless, the plaintiffs continue to allege constitutional violations. But because Congress remedied the offending provisions and brought the law within the Fifth Circuit's stated requirements, the plaintiffs' claims fail.

Specifically after remand, the original plaintiffs continue to claim that HISA violates the private-nondelegation doctrine under Article I and the Due Process Clause. Dkt. No. 116. Texas and the Texas Racing Commission, as intervenor-plaintiffs, raise the same arguments. Dkt. No. 155 at 22-25. Additionally, also after remand, another court transferred a related case to this Court. Gulf Coast Racing LLC v. Horseracing Integrity & Safety Authority, No. 2:22-CV-146-Z (N.D. Tex.), Dkt. No. 53. Those plaintiffs make the same private-nondelegation claim, but only as an alternative to their primary claim that HISA violates Article II's Appointments Clause and Article I's Vesting Clause. Dkt No. 136. In their view, the private entity at issue-the Horseracing Integrity and Safety Authority-is, in reality, a public entity subject to the same requirements applicable to all public officers. No. 5:23-CV-077, Dkt. No. 36 at 33. They also allege, albeit briefly, that HISA violates the Tenth Amendment's anti-commandeering principles by requiring Texas to do the federal government's bidding. Id. at 57.

In light of Congress's amendment to HISA and the undisputed evidence following a bench trial, each of these arguments falls short. First, the plaintiffs' private-nondelegation argument reveals too much and is barred by precedent. Previously, the plaintiffs argued that “HISA violates the private nondelegation doctrine because the FTC cannot modify the Authority's rules.” Dkt. No. 38 at 26. Now that Congress expressly authorizes the FTC to modify the Authority's rules, the plaintiffs retreat and admit their true view: that there is nothing Congress could do to bring the HISA-Authority arrangement within constitutional bounds. Dkt. No. 182 at 31-33, 37-38. But this argument ignores the long history of the executive branch leveraging-with court approval-expertise from private industry so long as the industry remains subordinate to a supervisory federal agency. E.g., Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 388, 399 (1940) (allowing private parties to participate in price setting because the private entities “function[ed] subordinately to the Commission” and because the Commission retained “pervasive surveillance and authority” over the activities of the private parties); see also Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 386-90 (1995) (detailing the “long history of corporations created and participated in by the United States for the achievement of governmental objectives” beginning in the 18th Century). The Court understands the plaintiffs' concerns with these arrangements, especially given how long horseracing has been regulated at the local level. But because Congress brought HISA within the Constitution's limits as defined by the Fifth Circuit, the Court concludes that HISA does not violate the private non-delegation doctrine.

Second, the plaintiffs' facial and as-applied Fifth Amendment Due Process argument fails for the same reasons this Court explained in its first order rejecting it. The Court finds that the Authority is not a self-interested industry competitor creating a constitutional violation. As a facial matter, HISA explicitly protects against self-interest through structural safeguards while preserving industry representation in the Authority. And the as-applied challenge fails because there is no evidence of actual, unconstitutional self-dealing that has harmed industry competitors.

Third, the plaintiffs' appointment and removal arguments fail for a simple reason- the challenged entity at issue (the Authority) is not a public, governmental actor subject to these constitutional limitations. The Fifth Circuit held as much in its panel opinion, so the plaintiffs' assertion otherwise at this point is both contrary to the law of the case and foreclosed by precedent. Moreover, even assuming that the Fifth Circuit left this issue open, precedent makes clear that the Authority is private because it was not created by the government, and it retains for itself permanent authority to appoint its directors.

Finally, the plaintiffs lack standing to raise their Tenth Amendment argument that HISA unconstitutionally commandeers the states. Although private plaintiffs are not automatically barred from bringing Tenth Amendment claims, they must still demonstrate injury that is traceable to the defendant's conduct and redressable by the Court. But the private plaintiffs have no traceable, redressable injury to assert because HISA allows Texas to either elect to collect fees of covered persons or, if not, the Authority will. HISA allows states to “elect[] to assess and collect fees on covered persons. 15 U.S.C. § 3052(f)(2)(A). But if the state does not make such an election, then the Authority steps in to do so. § 3052(f)(3). In this way, covered persons like the Gulf Coast plaintiffs will be regulated and subject to assessments even if they were to succeed on the anti-commandeering claim. Although the private plaintiffs clearly prefer to be regulated by Texas instead of the Authority, the preference alone is insufficient to establish a redressable injury.

For all these reasons, the Court rejects the plaintiffs' arguments and conclude that Congress cured the unconstitutional aspects of HISA's original approach. Given the parties' desire for an expeditious resolution, the Court's opinion is sufficient to permit appellate review but does not exhaust every possible vein of analysis.[1]

1. Findings of Fact

Following remand from the Fifth Circuit, the plaintiffs filed multiple motions for a preliminary injunction. Dkt. Nos. 116; 124; 139. Given the plaintiffs' requests for expedited treatment and temporary emergency relief, the Court consolidated the hearing on the plaintiffs' motions for preliminary injunction with the trial on the merits. Dkt. No. 135; See also Fed.R.Civ.P. 65(a)(2). The Court finds the following facts.

A. Congress enacts HISA with broad bipartisan support.

American horseracing has existed for centuries, and throughout it “has been regulated by the States, local communities, and private organizations.” Nat'l Horsemen's Benevolent & Protective Ass'n v. Black, 53 F.4th 869, 873 (5th Cir. 2022). Although popular even in the colonial era, the growth of American horseracing in the 1850s was met with “a growing interest in the formation of a national governing board to regulate racing.” Joan S. Howland, Let's Not “Spit the Bit” in Defense of “The Law of the Horse”: The Historical and Legal Development of American Thoroughbred Racing, 14 MARQ. SPORTS. L. REV. 473, 483 (2004). But it would take more than 170 years for the first national horseracing legislation to be signed into law. Nat'l Horsemen's, 53 F.4th at 873.

After an increase in doping scandals and racetrack fatalities, Congress passed HISA with broad bipartisan support. Pub. L. No. 116-260, §§ 1201-12, 134 Stat. 1182, 3252-75 (2020) (codified at 15 U.S.C. §§ 3051-60). On December 27, 2020, HISA was signed into law. Id. For the first time in the long history of American horseracing, HISA established a framework for national regulation of certain aspects of the industry. 15 U.S.C. §§ 3051-60. Specifically, HISA aims to establish nationwide rules over racetrack safety and anti-doping and medication control (ADMC). Nat'l Horsemen's, 53 F.4th at 873. HISA applies to all covered horses (thoroughbreds (§ 3051(4)), covered persons (all trainers, owners, breeders, jockeys, racetracks, and veterinarians, among others (§ 3051(6)), and covered horseraces (those horseraces with a substantial effect on interstate commerce (§ 3051(5)). In other words, [t]he Act's reach is broad,” and HISA creates a truly nationwide, comprehensive regulatory scheme for racetrack safety and ADMC. Nat'l Horsemen's, 53 F.4th at 873.

B. A private entity, the Authority, is incorporated in aid of HISA.

The Authority was incorporated as a nonprofit on September 8 2020. GPX 6 at 1; No. 5:23-CV-077, Dkt. No. 47 at 5. HISA “recognize[d] the Authority, a “private, independent, self-regulatory, nonprofit corporation . . . for purposes of developing and implementing a horseracing anti-doping and medication control program and a racetrack safety program for covered horses, covered persons, and covered...

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