Lucinda Finley Q&A on the Fifth Circuit Bombshell

On Friday, the United States Court of Appeals for the Fifth Circuit issued a decision finding that while “nearly all” legally contested aspects of the Horseracing Integrity and Safety Act (HISA) were constitutional, they determined the HISA Authority's broad enforcement powers unconstitutional.

In the process, the Fifth Circuit split with the Sixth Court Circuit's Court of Appeals which recently had found the Congressionally amended version of HISA constitutional. The Supreme Court subsequently declined to hear a challenge to that decision filed by Oklahoma, Louisiana and West Virginia.

“HISA's enforcement provisions violate the private nondelegation doctrine. The statute empowers the Authority to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions-all without the FTC's say-so. That is forbidden by the Constitution. We therefore DECLARE that HISA's enforcement provisions are facially unconstitutional on that ground. In doing so, we part ways with our esteemed colleagues on the Sixth Circuit,” the Fifth Circuit judges wrote in their decision.

To discuss the various implications from the Fifth Circuit's decision, the TDN spoke once more with constitutional law expert, Lucinda Finley. She is the Frank Raichle Professor of Trial and Appellate Advocacy, and director of Appellate Advocacy at the University of Buffalo Law School.

In short, Finley said the Fifth Circuit's ruling sets up a conundrum for those states that operate Thoroughbred horseracing under the Fifth Circuit's jurisdiction: That HISA's rules are now federally binding and supersede state horse racing laws. These states must now decide how to enforce them, she said.

“I would assume that the state racing commissions in Louisiana and Texas will realize that somebody has to enforce the rules of racing and their rules are superseded by the federal rules now. So, the only rules of racing in those states are the HISA rules and somebody has to enforce them,” said Finley.

The following has been lightly edited for brevity.

TDN: What are your main takeaways from the Fifth Circuit's reasoning over HISA's enforcement powers being unconstitutional?

LF: Well, my main takeaway is sort of bewilderment about the practical impact of this decision and the huge–I guess you might say loophole–it might practically lead to. By that, I mean the Fifth Circuit agreed with the Sixth Circuit and upheld as constitutional the rulemaking process in the HISA act.

This means that now in the Fifth Circuit states–Texas and Louisiana being the ones with racing–that the HISA rules that the [Federal Trade Commission] FTC has approved are the law. The statute itself says that when the HISA and FTC rules are officially promulgated, they become binding federal law and they supersede any state rules about racing medication and safety.

Under the Fifth Circuit decision, we now have the situation where the HISA rules are the binding rules of racing in Texas and Louisiana. But the Fifth Circuit says that the enforcement of those rules by HISA is unconstitutional.

That leads to a rather challenging practical situation where you have rules that can't be enforced. What does that mean for racing and horse and human welfare in those states? If HISA cannot enforce its valid constitutional rules, who is supposed to enforce them?

I suppose the state racing commissions are now either going to have to enforce the HISA rules or contract with HIWU, the entity that enforces the rules every place else. Or they're going to have to say, 'it's the Wild West in Texas and Louisiana now nobody can enforce the rules, so go dope your horses to your heart's content.' That would be tragic if that's what happens. And untenable.

For their reasoning on the enforcement powers, they directly disagreed with the Sixth Circuit and didn't think that the structure of enforcement powers was very similar to that between the Securities and Exchange Commission [SEC] and the private body known as [the Financial Industry Regulatory Authority] FINRA, which primarily enforces the SEC's insider trading regulations–those that have often been upheld as constitutional.

I thought their reasoning was a bit light on case citation. That's about all I could say.

TDN: Given what you've just laid out, what does HISA do here? Could they, for example, say to the Fifth Circuit states that unless they enforce these federally binding rules of racing, they'll take an approach like they did in Louisiana (where they threatened to put horses coming out of those states on the vet's list for a period of time)?

LF: Absolutely they could do that. As a practical matter, that's probably what they should do. I suspect that if HISA were to do that, there would be actual enforcement of the HISA rules in those states. That road would be exactly what the group's challenging HISA didn't want in the first place, which was federal rules being enforced.

As a legal matter of the options available to the HISA and the FTC, they either first ask the entire group of judges on the Fifth Circuit to rehear just the enforcement issue through what's known as en banc, where the entire court hears the case instead of just three appellate judges.

But I don't think that move will bear fruit because the majority of the Fifth Circuit judges are very, very conservative and very hostile to federal regulation. It's also very rare for the federal appeals courts to take the case en banc when there is no dissent on the panel of three.

The other legal option for HISA and the FTC is to now petition the U.S. Supreme Court for a writ of certiorari to review the Fifth Circuit decision.

If I were them, I would limit the petition to only the issue they lost on–namely the constitutionality of the enforcement mechanism. That would make it incumbent on the national HBPA and the other plaintiffs to cross petition and ask the Supreme Court to review the constitutionality of the rulemaking authority and the other issues they raised that the Sixth Circuit said we're not good constitutional challenges.

TDN: Even this right-leaning Supreme Court has been critical of some of the Fifth Circuit's recent rulings. How do you think this Supreme Court will view this particular ruling?

LF: First, I think it's highly likely that with a direct conflict now between two federal circuit courts about the constitutionality of part of a federal statute governing a national industry–leaving this bizarre gap in enforcement of valid federal rules within just a few states–that the Supreme Court would now be highly likely to take the appeal from the Fifth Circuit.

Second part of your question, 'how do I think the Supreme Court would view the challenge?' Again, one can never predict. But on the private non-delegation doctrine thus far in various footnotes or dissents from denial of certiorari, only three justices on the court, the most conservative ones–Justices Thomas, Alito and Gorsuch–have expressed any questions about the need to reexamine the private non-delegation doctrine.

So, I think that the central issue before the Supreme Court would be: Is the enforcement structure similar enough to the enforcement structure between the Securities and Exchange Commission and FINRA to make HISA constitutional? And does the fact that the FTC has plenary appellate review–we call it de novo–to review and substitute its own judgment for any HISA enforcement ruling, does that give the FTC sufficient authority?

TDN: How quickly could that happen?

LF: I think the earliest that they would announce whether they would take the appeal from the Fifth Circuit would be sometime in October. Then, there would be a few months for submitting the briefs. And then there would be oral argument, probably not until late winter or early spring. And then maybe a decision not until next May or June. So, we're talking minimum a year for the whole process to play out, if they take the case.

TDN: In the meantime, could these issues be readily fixed with another Congressional amendment to the law?

LF: They could do that. If they want to do that, they'd better act quickly because [Senate Republican leader] Mitch McConnell will not be in his leadership role starting next January, and he has been the major champion in the Senate of pushing through any necessary changes to salvage uniform rules and national oversight for racing.

Congress is in its summer recess. Everybody's going to be consumed with campaigning in the fall. Just practical political-timing wise, I don't think things look very strong in Congress unless between early November and the end of December, McConnell wanted to try to push something through like he's done before–attach it to essential budget laws.

But the way the Fifth Circuit reasoned, it wouldn't be a simple little tweak. The Fifth Circuit reasoning is essentially that the FTC has to be the one that approves subpoenas and approves investigations, and only the FTC should be the one to be able to bring lawsuits to enforce the law.

One possible minor revamping suggested by the Fifth Circuit is to give the FTC some of its own powers to subpoena, to investigate or to bring civil lawsuits. Because the Fifth Circuit said in contrasting the HISA enforcement structure to that of the SEC versus its private group FINRA, the Fifth Circuit said, 'well, in addition to all the things FINRA can do, the SEC can do some of those things too.'

I suppose the simplest tweak would be to just give the FTC some of the same powers as HISA and say, 'okay, HISA or the FTC could initiate investigations.' But that probably wouldn't satisfy the Fifth Circuit. They didn't seem to like the idea that the private Authority had any law enforcement powers.

TDN: In the meantime, what does the Fifth Circuit's decision mean to HISA's deployment nationwide?

LF: Nothing outside of Texas and Louisiana.

TDN: But given how the Fifth Circuit has found HISA's enforcement powers unconstitutional, doesn't this potentially put into question cases currently being adjudicated?

LF: It could potentially. Any lawyer representing someone wanting to challenge a HISA enforcement action now has a federal Circuit Court opinion saying it's not constitutional for them to enforce the law.

But that argument isn't going to work in any state that's within the Sixth Circuit because the Sixth Circuit has already rejected that. We'll see what the Eighth Circuit says. It's not likely to fly in the Ninth Circuit where California is. It's not likely to fly in the Second Circuit where the New York tracks are. It's not likely to fly in the Third circuit where the Pennsylvania tracks are.

TDN: What does the Fifth Circuit's decision mean to cases that have already been resolved? Does it put any of them into doubt?

LF: Probably not in states outside the Fifth Circuit. And of course, there were no HISA actions in states in the Fifth Circuit.

There's a strong principle of finality in the law that once a case is resolved and all the steps you have, even if the law later changes, you can't go back and reopen it.

TDN: The Eighth Circuit still must issue its ruling on HISA's constitutionality. Does this Fifth Circuit decision have any bearing on the way that court will go?

LF:  It gives the Eighth Circuit now two diametrically opposite views of part of HISA. But it gives the Eighth Circuit unanimous views about the other parts of HISA. So, it probably bolsters the likelihood that the Eighth Circuit will find the rulemaking provisions constitutional. On the enforcement, it's still an open question.

Everybody's going nuts over the Fifth Circuit finding part of it unconstitutional. But it's hugely significant that the Fifth Circuit of all courts found the rulemaking powers–the ability to set national uniform rules for racing–to be constitutional. That is a huge development and pretty much I think cements the HISA Act and the HISA Authority as the future of regulation of horse racing in the U.S.

TDN: But the Fifth Circuit has raised the question of who enforces them and how.

LF: That question right now exists only in the Fifth Circuit. As I said before, nothing in the Fifth Circuit would prohibit any state racing commission from either deciding that they're going to enforce the HISA rules or that they're going to contract with HIWU to enforce the HISA rules. That would be an independent decision by a state racing commission.

I would assume that the state racing commissions in Louisiana and Texas will realize that somebody has to enforce the rules of racing and their rules are superseded by the federal rules now. So, the only rules of racing in those states are the HISA rules and somebody has to enforce them.

TDN: Finally, are there any other aspects to this that I haven't raised that you think are really important to note?

LF: It's not really a legal point. It's sort of a practical point. The Fifth Circuit agrees that Congress has made HISA's rulemaking power constitutional. Given that, and given the knowledge that those rules have to be enforced by someone as a practical matter, I wonder when the horsemen of the nation who are members of this national HBPA that brought this Fifth Circuit case, are going to say to their organization, 'what are you doing to us pursuing this fight?'

More and more horsemen have accepted HISA's rules, are learning that they can work with them, that they're seeing HISA be responsive to their concerns. They are seeing the safety benefits of uniform rules. They're seeing the practical benefits of uniform rules. At some point, I would think the majority of Thoroughbred horsemen in the U.S. who supposedly are members of this national HBPA, they need to take control of their organization and say, 'the HISA rules are here to stay. They need to be enforced. Let it happen.'