Supreme Court Agrees to Review HISA; Other Steps Remain

With a sweeping set of orders June 30, the United States Supreme Court took a major step toward moving forward the years-long dispute over the legality of the Horseracing Integrity and Safety Authority's powers.

Those orders affect three HISA cases decided in the U. S. Court of Appeals for the Fifth, Sixth, and Eighth Circuits. All three courts found HISA's rule-making authority valid, but the Fifth Circuit departed from the other two appellate courts in finding HISA's enforcement powers unlawful.

In today's orders, the high court set aside the judgments of all three appellate courts and ordered them to give HISA's constitutionality "further consideration" in light of its own ruling in Federal Communications Commission v. Consumers’ Research, which was rendered just three days earlier in a 6-3 decision. In so doing, the Supreme Court agreed to grant requests for certiorari, enabling it to review all three cases, but not before the lower appellate courts take another look.

Last Friday's ruling hinges on the legality of a legislative scheme that could be viewed as similar to HISA. The FCC was authorized to collect fees from telecommunications carriers to accomplish a goal of the Communications Act of 1934: to make available to all the people of the United States reliable communications services at reasonable charges. That goal was enhanced by a 1996 law requiring every carrier providing interstate telecommunications services to contribute to a bank of money known as the Universal Service Fund. The legislation includes principles directing that all consumers, including low-income consumers and those in rural areas, should have access to quality services at affordable prices. 

The syllabus of the Supreme Court ruling in the FCC case explains that a formula was established to collect fees from carriers for the fund; and that the FCC appointed the Universal Service Administrative Company, a private, not-for-profit corporation, as the fund’s “permanent administrator" that manages the fund’s day-to-day operations and helps the financial projections that determine the contribution factors. 

Under federal legislation HISA, a private corporation operating under the umbrella of the Federal Trade Commission, was delegated to collect fees, establish rules, and enforce them in the horse racing industry. Among the legal challenges to HISA is an argument that its power violates the nondelegation doctrine prohibiting government power being turned over to private persons or entities. The holding in the FCC case is, quoting the Supreme Court, "The universal-service contribution scheme does not violate the nondelegation doctrine."

Exactly how the circuit courts of appeal will come down on these issues after revisiting them remains to be seen, but it appears if HISA withstands other forms of legal scrutiny, its authority to collect fees to run the program is on solid constitutional ground.

A HISA spokesperson told BloodHorse via email that the Authority is encouraged by today's Supreme Court orders and said that all orders invalidating HISA are now off the books.

“In today’s orders, the Supreme Court vacated the judgments of the appellate courts and returned the cases to those courts for further consideration. As a result, the sole adverse decision from the Fifth Circuit (which the Supreme Court had previously paused) is now off the books, and the opinions of the federal district courts–all of which upheld the Act’s constitutionality in full–remain valid and operative.

"The Supreme Court’s ruling in FCC v. Consumers’ Research rejected a constitutional challenge under the private nondelegation doctrine. That ruling aligns with what every district court has already said in the HISA cases: The private nondelegation doctrine challenges against the Act have no merit."

Litigants in opposition to HISA include the National Horsemen's Benevolent and Protective Association and state affiliates in the Fifth Circuit; the states of Oklahoma, West Virginia, and Louisiana in the Sixth Circuit; and president of the Arkansas HBPA president Bill Walmsley and executive director of the Iowa HBPA Jon Moss in the Eighth Circuit. The HBPA said it expects the Fifth Circuit to rule against HISA.

“We are confident that the Fifth Circuit, once again, will declare HISA to be unconstitutional.” said Eric Hamelback, CEO of the National HBPA, referencing its finding that HISA's enforcement powers unlawful. “Our well-founded arguments regarding HISA remain unchanged—it is a deeply flawed, unconstitutionally delegates governmental authority to a private corporation, and places unfair burdens on horsemen.”

According to Peter Ecabert, general counsel of the National HBPA, the Supreme Court’s action should not change the prior opinion of the Fifth Circuit holding HISA's enforcement powers unconstitutional. 

“HISA is fundamentally different from and more flawed than the statute in the Consumers Research case," he said in a release. "Under HISA, the FTC cannot appoint or remove authority board members; plus the authority was unlawfully granted sweeping enforcement powers that were not at issue in Consumers Research."

With the previous appellate court findings set aside, a question arising in the wake of today's developments is whether Louisiana and West Virginia will continue to operate outside HISA while the cases progress. Texas also operates outside of HISA by not sending out its racing signals to other states—the stick used in the legislation to bring jurisdictions under HISA.