Eighth Circuit Court of Appeals Hears HISA Challenge

While two major legal actions seeking invalidation of the Horseracing Integrity and Safety Act are in hiatus pending further rulings, a lesser-known proceeding was argued in court this week.

A lawsuit filed in an Arkansas federal district court in April 2023 sought a preliminary injunction against the private corporation authority created by HISA. When the injunction was denied, an appeal led to a hearing June 12 in the Eighth Circuit Court of Appeals based in St. Louis.

During 39 minutes of oral arguments, the most prominent issue became whether the Federal Trade Commission lacks independent rule-making power and is thus subservient to the authority.

The answer, both sides agreed, partly lies in language contained in an amendment to HISA enacted after it was declared unconstitutional by the Fifth Circuit Court of Appeals. Responding to concerns voiced by the court, Congress gave the FTC has power to "abrogate, add to, and modify the rules of the Authority promulgated in accordance with this Act."

Attorney Frank D. Garrison IV argued on behalf of the Iowa Horsemen's Benevolent and Protective Association and others the legislation only gives the FTC authority to act after a rule is passed, not during the rule-making process. In the meantime, he argued, rules enacted without FTC input are put into effect.

"Here under HISA (the FTC) doesn't review the policy choices. They just check the boxes... The authority is still allowed to fill in the details...and the FTC has no power to second-guess that," Garrison said. "So for example, the statute allows the authority to draw a list of drugs that'll be banned. As long as they bring a list to the FTC, that's it, that's consistent (with the statute). But what drugs are banned or how much of the drugs are banned, the FTC has no control over that."

FTC attorney Courtney Dixon said the statute gives rule-making power to the FTC.

"When the authority proposes a rule, it submits it to the commission. There is no time period...after which the FTC is in receipt of a proposed rule from the authority by which the FTC has to put that out in the federal register for public notice and comment," she said. "It could take the authority's proposal, look at it, consider it, say we have some questions, draft its own proposal, put them both out for public notice and comment at the same time.

"The statute creates a clear hierarchy and gives the FTC the chance at every step to ensure the statute is being carried out as the FTC sees fit," Dixon said.

Pratik Shah, appearing for HISA, said the statute is constitutional whether or not the FTC has the power to initiate rules, based on a large body of judicial precedent. However, Shah said, the congressional amendment gives the FTC that power by allowing it to "add to" rules.

"As long as there is a plausible reading of the statute to make it constitutional the doctrine of constitutional avoidance means the court cannot impose a narrow reading of the statute that would invalidate the statute," Shah argued.

Previously the State of Oklahoma and others initiated a challenge to HISA in a Kentucky federal district court which declared the statute constitutional before it was amended. The Sixth Circuit Court of Appeals, after taking the amendment into consideration, affirmed. That case has been briefed to the United States Supreme Court and is awaiting a decision.

A HISA challenge filed in a Texas federal district court by the National HBPA and state affiliates was also denied, but the Fifth Circuit Court of Appeals reversed, holding the FTC was subservient to the authority. That decision led to the congressional amendment giving the FTC more power. The Texas district court again found in favor of HISA, and the case was again appealed to the Fifth Circuit where oral arguments were heard Oct. 4. A decision is pending.

Judges Steven M. Colloton, Michael J. Melloy, and Raymond W. Gruender heard this week's the oral arguments. A question was raised, in so many words, whether the plaintiffs were forum shopping.

"You (HISA opponents) brought a challenge in the Sixth Circuit and they rejected it. Fifth Circuit has the same case under submission," the judge said. "Let's assume they also reject the challenge. What is the...policy that governs going from one circuit to the next circuit to the next circuit until you find one that agrees with you and then grants a nationwide injunction. Is there anything from a legal or policy standpoint we should be concerned with? Why should we look at that?"

The case now stands under submission and will be decided "in due course" the panel said.