Federal Judge Tosses Suit Over Derby Seat Licenses

Churchill Downs Inc. registered a legal victory Nov. 30 when a U.S. District Court judge tossed a lawsuit brought by a casino company that alleged breach of contract by Churchill Downs racetrack over terms in a personal seat license for eight seats on Millionaires Row for Kentucky Derby Weekend.

Judge David Hale, U.S. District Court Judge for the Western District of Kentucky Louisville Division, granted CDI's motion to dismiss the case Monday when he found no standing for Gulfside Casino Partnership's assertions of breach of contract, breach of implied duty of good faith and fair dealing, violation of the Kentucky Consumer Protection Act, or unjust enrichment.

The judge denied the Gulfport, Miss.-based casino company's request to hear oral arguments on CDI's request to dismiss and tossed the case Monday. Gulfside Casino Partnership had filed the lawsuit Jan. 15.

Gulfside had argued that CDI had breached the contract it had as a personal seat license holder when Churchill Downs eliminated Gulfside's Millionaires Row seats as part of a renovation and offered to effectively move the seat license for its eight seats to a renovated sixth-floor area. The pricing for these new seats would be $10,000 a seat, which Gulfside said was significantly more than the $1,968 a seat for its 2018 seats.

In 2012 Gulfside purchased the already activated 30-year seat license for the eight seats for $300,000 from Sonia Cain. It is valid through the 2034 Kentucky Derby (G1), a race currently sponsored by Woodford Reserve. The license allows the holder to purchase tickets for Kentucky Oaks and Derby Days, as well as any Breeders' Cup conducted at Churchill Downs.

Judge Hale found no breach of contract as he noted the track's personal seat license agreement included provisions for renovations that render seats unusable. The judge noted that "construction plans clearly show that Table B04 (Gulfside's former table) will not exist post-renovation." He said Gulfside's arguments that CDI could have offered comparable seating have no legal standing because CDI had the option to either "relocate Gulfside's seats to a comparable location or terminate the agreement and refund Gulfside a prorated portion of the license fee." 

The judge determined that Churchill fulfilled the latter half of that standard as the track offered to terminate the agreement and buy out the remaining seat license years. Even Gulfside's filing noted that CDI offered to terminate the Gulfside seat license agreement and pay the pro-rata seat refund for the seats covered by the seat license.

The judge saw no facts that suggested CDI violated its implied duty of good faith and fair dealing or the Kentucky Consumer Protection Act. As for the latter, the judge noted that "Gulfside has not alleged how CDI's assertions that the seats were unavailable and that there were no comparable seats were unfair, false, misleading, or deceptive."