1. Exclusions/Ejectment: Becoming More Prevalent in Racing? Legal Strategies to Respond Douglas L. McSwain, General Counsel, National HBPA July 2, 2009

2. OVERVIEW  Exclusion or ejection can be devastating to licensees  Arbitrarily imposed by racetracks with no ability to challenge or reverse based on:  Intimidation  Favoritism  Irrational fears  Legal basis of the “common law right of exclusion”  Legal strategies to deal with unfair exclusions/ejection  “Due process” review or appeal

3. EXCLUSIONS – THE IMPACT CAN BE DEVASTATING  Loss of Occupation, Means of Earning a Living  Reputation injury  Re-licensing disclosure  Loss of Stalls  Loss of Owner Confidence

4. REASONS FOR RACETRACK EXCLUSION  Racing Associations are required by law in many States to eject or exclude a licensee if: (1) a statutory reason for a steward to exclude exists, or (2) racing officials have already ruled a licensee off the racetrack grounds  For the first reason: ejection/exclusion may involve factual disagreements such that, in fairness, there should be legal redress  For the second reason: ejection/exclusion is based on a reviewable decision of racing officials

5. REASONS FOR RACETRACK EXCLUSION  Ejection/exclusion for other reasons or “no reason” raises the specter of exclusion for:  Arbitrary reasons based on incorrect facts  Improper reasons based on favoritism, discrimination or manipulation May be cloaked with subjective reasons such as “reputation” or “moral character” of the excluded licensee –Similar to stall allocation discrimination and/or favoritism  Oppressive reasons based on retaliation or intimidation

6. ORIGIN OF COMMON LAW EJECTION/EXCLUSION  Summary: Common law right of ejection or exclusion originally applied to patrons, and only later was extended to licensees (i.e., horsemen, jockeys, etc.)  The common law right of ejection/exclusion originated from public attractions or events held on private property - Wood v. Ledbetter,.153 Eng.Rep. 351, Ex. 1845 (Wood was a patron [not licensee]; dispute treated as private property issue)  As a private property issue, racetrack has the right to decide who can enter track premises

7. ORIGIN OF COMMON LAW EJECTION/EXCLUSION  Wood decision later reversed by another English court, but already adopted as U.S. “common law” - Marrone v. Washington Jockey Club, 227 U.S. 633 (1913)  Eventually extended beyond patrons to licensees, including horsemen and jockeys - Martin v. Monmouth Park Jockey Club, 145 F.Supp. 439 (D.N.J. 1956), aff’d, 242 F.2d 344 (3rd. Cir. 1957) (Jockey excluded for betting on horse even though license reinstated)

8. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES  Summary: Common law of ejection/exclusion allows racing associations in various racing jurisdictions to eject/exclude horsemen, jockeys, and patrons from the racetrack.  Whether a racing association can exclude a licensed horseman or jockey for arbitrary reasons and with little or no recourse depends on state law and there is not uniformity among the state statutes and racing rules.

9. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES Examples of state-to-state variances:  Explicit right of appeal exists  MA, MN, NE, LA, PA, & IL (non-exhaustive list here)  Implicit right of review exists  AR, Ontario, KY, & MD  Other states—is the right of exclusion reviewable or appealable or is it absolute (i.e., unchallengeable)?

10. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES Examples of state-to-state variances, con’t:  MA, MN, NE, LA, PA & IL – Explicit right of appeal  Statutes or rules of racing grant explicit appeal right to racing commission - 128A Mass. General Laws, § 10A; 2008 Minn.Stat.Ann. § 240.27, subd. 5; La. Rev. Stat. § 4:191 &.192; 58 Pa. Code § 165.231; 230 Ill. Comp. Stat. 5/9(e), Ill. Admin. Code, Title 11 § 204.90  Statute grants explicit appeal right to stewards (from which commission appeal may later be taken) – Neb. Rev. Stat. § 2-1245

11. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES Examples of state-to-state variances, con’t:  AR, Ontario, KY, & MD – Implicit right of review  Plenary authority of racing commission over all issues of racing gives racing commission authority to review racetrack exclusions of licensed horsemen or jockeys by appeal to racing stewards &/or direct review by commission – See, e.g., Evans v. Ark. Racing Comm’n, 606 S.W.2d 578 (Ark. 1980); Ontario Harness Horse Assn. v. Ontario Racing Comm’n, et al., 2002 Can.L.II 41981 (Ontario, CA 2002); In re Billy Phelps (Ky. Rac. Comm. case, 1991); 81 Md. Op. Att’y Gen’l 169 (1996) (racetrack exclusions likely subject to review by commission)  Implicit states like Ky. may even have regulations that affirm the existence of the right of racetracks to exclude

12. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES Examples of state-to-state variances, con’t:  Other states – Is the right of exclusion subject to review or appeal or is it absolute (i.e., unchallengeable)?  Unless tested (before stewards/racing commission, Attorney General, or court of law) it cannot be known whether reviewability/appealability exists  Exception: there always exists a right of review/appeal for exclusions based on race, color, creed, sex, national origin, or ancestry

13. COMMON LAW IS NOT UNIFORMLY APPLIED AMONG THE STATES Examples of state-to-state variances, con’t:  West Virginia – Enforcement occurs through stewards and appeal of exclusion to commission  Stewards and racetrack have power to exclude persons acting improperly. The stewards shall enforce the suspension or exclusion. Rule 10.19  “Any person ejected by the stewards or the association from the grounds of an association shall be denied admission to the grounds until permission for his or her reentry has been obtained from the association and the Racing Commission. However, all occupational permit holders who are ejected have the right of appeal to the Racing Commission.” Rule 4.7

14.  When ejected:  Most states provide some form of post-ejection “due process” review  A few allow for a limited pre-ejection review  Whether a jurisdiction provides explicit review, implicit review, or the right of review has yet to be established, most racing commissions and state courts confronted with the issue disfavor racetracks having an absolute, unreviewable right to exclude licensees  Given the devastating impact on excluded licensees, granting “due process” review or appeal only makes common sense MOST JURISDICTIONS DISFAVOR UNREVIEWABLE EXCLUSIONS

15.  State law generally governs whether a horseman has a legal right to “due process” review (explicit or implicit)  But, Federal law “due process” standards come into play in two ways:  Barry v. Barchi, 443 U.S. 55 (1979) (horsemen’s license is a “property right” that cannot be taken away by state officials without pre-deprivation review, i.e., “due process”)  Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982) (state- created procedures can amount to a “property” interest that cannot be taken away without due process) Explicit right of review states have created procedures that entitle horsemen to a meaningful review as a matter of Federal Constitutional “due process” WHEN SHOULD A HORSEMAN HAVE THE RIGHT TO DUE PROCESS REVIEW...

16. STRATEGIES FOR ENSURING “DUE PROCESS” REVIEW OF EJECTIONS/EXCLUSIONS  In explicit review states: Appeal to commission or stewards (whichever has been given jurisdiction to review the exclusion)  § 1983 of federal law provides a check to ensure a meaningful hearing and review occurs  In implicit review states: Appeal to stewards (even if they look at you strangely) unless the implicit review right resides in the commission  In states where reviewability is not established: Appeal to stewards and when you lose (because you asked them to do something strange), appeal to the commission to establish reviewability

17. STRATEGIES FOR ENSURING “DUE PROCESS” REVIEW OF EJECTIONS/EXCLUSIONS  Negotiate with racetracks for “due process” review rights regarding exclusions  Many HBPA’s already include provisions concerning horsemen’s ability to challenge unfair stall allocations  Consider contract provisions providing for review of exclusions through private arbitration  Be sure to negotiate costs of arbitration in a manner that does not impose undue burdens on the excluded licensee

18. EJECTION/EXCLUSION BY RACING ASSOCIATIONS  Enforcement of Racetrack “House Rules”  NTRA Certification of Racetracks “House rules” adopted in lieu of a racing commission’s non- adoption of certain minimally expected rules for racing Ejection/exclusion for violation of “house rules”  National HBPA’s pledge when joining the NTRA Alliance  Expressly stipulated that enforcement of “house rules” must be subject to horsemen’s right of “due process” This “due process” could be review before a racing commission or steward or private arbitration

19.  The Model Rules provide racing associations discretion to eject/exclude licensees for “any lawful reason,” but, the association must report the exclusion or ejection to the racing commission immediately.  Some courts construe this type of provision to mean the commission has jurisdiction to review the ejection/ exclusion of licensees and the excluded licensee has the right to “due process” review  The Model Rules do not define “lawful reason” ARCI MODEL RULES

20.  The Model Rules provide extensive due process procedures but do not specifically apply them to ejection/exclusion of licensees.  But, the Model Rules allow licensees to file “complaints” with the stewards, and for appeals from rulings of the stewards  Implicitly the right of review of a racetrack’s exclusion may be argued to exist in this “complaint” process (with subsequent appeal right)  The “due process” right of a licensee for reviewability or appealability of a racetrack’s ejection/exclusion should be expressed in the Model Rules ARCI MODEL RULES

21. ADDITIONAL QUESTIONS TO CONSIDER  What standard of review governs an appeal or review of a racetrack’s ejection/exclusion decision?  Who bears the burden of sustaining the ejection/exclusion?  If an ejection/exclusion is sustained by a racing commission today, is the continuation of that exclusion indefinitely subject to later re-review (i.e., reconsideration) by the commision?  Same issues here: what standard applies and who bears the burden of sustaining the continued exclusion?

22. CONCLUSION  Ejections and exclusions are real and devastating  But, legal strategies to cope with, curb and/or check abusive racetrack exclusions exist:  Appeals before racing officials  Appeals and/or lawsuits in courts of law  Contractual negotiations for agreed upon remedies before racing officials and/or for private arbitration  Amending ARCI Model Rules to express a licensee’s right of review of racetrack ejections/exclusions