Monday, July 8, 2019

Does NYRA Owe Jerry Hollendorfer Due Process?

On June 22, soon after the fourth horse this year from Hall of Fame trainer Jerry Hollendorfer's barn was fatally injured at Santa Anita, the Stronach Group, owners of the Santa Anita track as well as Golden Gate Fields in Northern California, announced that Hollendorfer was being ejected and would be denied stalls and entries at all their tracks. On June 23, the New York Racing Association, where Hollendorfer had a few horses stabled at Belmont, said, in a statement from NYRA's communications director Pat McKenna, that his horses would be welcome at the upcoming Saratoga meet. But on June 29, NYRA, without any public or private hearing or any other element of due process. reversed position and told Hollendorfer that he could no longer enter horses at NYRA tracks. NYRA's McKenna and its Vice President for Racing Martin Panza, declined comment on the reversal.

In the event, the owners of Hollendorfer's New York-based horses, OXO Racing, promptly contracted with Hollendorfer's New York-based assistant, Don Chatlos, to train its horses; Chatlos was given stalls at Saratoga; and several OXO horses ran at Belmont on the closing weekend of that track's Spring-Summer meet.

The Hollendorfer issue poses an early challenge for new NYRA CEO Dave O'Rourke, who was confirmed in the top job only a few months ago, following the firing of former NYRA CEO Chris Kay for using NYRA personal for gardening and other chores at Kay's private residence.

O'Rourke, who came to NYRA a decade ago without any racing background, has been a quick and effective study in his decade at the track. He's been primarily responsible for overseeing the growth of NYRA's ADW betting arm, NYRABets, and for expanding the track's television presence, as well as for gaining control of its finances. Two areas that he hasn't ventured into, though, at least before his appointment as CEO, were legal affairs and racing operations. The Hollendorfer ban will require that he take charge in these arenas as well.

Hollendorfer's exclusion by the Stronach Group and by NYRA raises an important legal issue. Can a race track take away a trainer's livelihood without any sort of due process. Certainly, if a state agency were to suspend or revoke a trainer's license, it would have to provide some sort of due process. In fact, in New York, a trainer's appeal of a license suspension can drag on for years, muting the impact of the suspension; by the time a final appeal verdict is rendered, most people in racing will have forgotten what the original cause of the disciplinary action even was.

Did Hollendorfer use illegal drugs on his horses? Neither the Stronach Group nor NYRA made that accusation; they just said go away. But if one race track owner controls a significant share of a regional market, as Stronach does in California, Florida and Maryland, and as NYRA does in New York, isn't saying go away tantamount to depriving a trainer of his or her livelihood, and, if so, shouldn't the trainer have some sort of recourse?

In New York, the courts, both state and federal, have consistently held NYRA, in all its various pre- and post-bankruptcy permutations, to be so significantly entwined with the State of New York that NYRA's actions should be held to the same due-process standards as those that apply to state agencies.

As far back as 1973, New York's highest court held, in the case of trainer Buddy Jacobson, that NYRA was required to provide at least some justification before revoking or suspending the right of someone who held a New York State racing license to pursue their profession on the track. Similar decisions have required NYRA to provide due process in the case of veterinarians (Michael Galvin), jockeys (Larry Saumell) and other backstretch workers who hold state licenses. The cases distinguish NYRA, on the one hand, from small privately owned harness tracks, because NYRA has a near monopoly on thoroughbred racing in the state and because NYRA and its finances are so thoroughly intertwined with the state. In addition, NYRA has certain powers (such as appointing its own police force) that are typically held only by government entities, and ultimately any profit that NYRA is left with reverts to the state.

NYRA was reorganized once again in 2017, and no cases have decided whether the current incarnation should still be treated like a government agency for due-process purposes, but the earlier cases all dealt with versions of NYRA that were considerably less government-like than the current one. So is NYRA still a public agency? If the issue ever goes to court, I think the answer is inevitably, yes.

From the time "new NYRA" was established in 2011 until mid-2016, it conducted itself as if it were a governmental entity, acting in ways that were consistent with New York State's open meetings law and freedom of information law. As well it should have. "New NYRA" was a creation of legislation in 2011 that rescued old NYRA from bankruptcy, transferred the land under NYRA's race tracks to the State, and gave the state, and in particular, Governor Andrew Cuomo, effective control over appointments to the NYRA Board of Directors, and subjected NYRA to close oversight by the State Budget Department's Franchise Oversight Board. In the wake of the legislation,  "new NYRA" live-streamed its Board of Directors meetings and made them open, if somewhat inconvenient to the public, and posted its annual and quarterly financial reports on its website. In other words, it acted like a state entity.

New legislation in 2017 changed way NYRA Directors are appointed -- creating an essentially self-perpetuating Board instead of one appointed by Albany -- while at the same time giving the Franchise Oversight Board even greater powers. That legislation was signed by Cuomo as part of the State's 2017-18 budget, but did not go into effect until the fall of 2017, when "new" Directors -- who in fact were virtually the same as the previous Directors -- were appointed.

In 2017,  NYRA ceased posting the financial reports and stopped streaming Board of Directors meetings. It has not issued any sort of formal statement rejecting its status as a quasi-governmental entity, but it (or at least the people who decide how to treat Board meetings and financial reports) is certainly acting as if it believes itself to be a private corporation, not subject to the higher standards placed on government.

On balance, NYRA was right when it decided back in 2011 that it should act like a public entity. Nothing of legal significance has changed between then and now, except for the change in the way NYRA Directors are appointed. But Michael Del Giudice, a longtime Cuomo adviser, in both official and unofficial roles, remains chair of the NYRA Board. The current Board is a mix of people with multiple state jobs on their resumes (Del Giudice, Joe Spinelli and Vincent Tese), Jockey Club grandees (Stuart Janney, Ogden Phipps II and Earle Mack) and new members appointed by those same primarily government appointees who were on the old Board after 2011. Because of the self-perpetuating nature of the new NYRA Board, where the old, government-appointed Directors select their replacements and fill other vacancies, nothing much has changed. It's inconceivable that a Board nominee whom Andrew Cuomo opposed would be chosen.

I suspect that new CEO Dave O'Rourke did not play a major role in the Hollendorfer decision(s). And in practical terms, the one case probably doesn't matter a whole lot. OXO Racing's half-dozen or so horses based in New York won't be deprived of the opportunity to run. Don Chatlos, a veteran trainer, will get a turn in the spotlight, and the impact on Jerry Hollendorfer will be far less than the impact on him from the Stronach Group's ban in California. And Hollendorfer probably doesn't, at age 73, have the time or inclination to pursue a multi-year legal action in New York.

But if NYRA takes no further action, the denial of stalls and entries would set a very bad precedent and set up potentially embarrassing challenges in the future. NYRA has been recognized as a state actor for nearly half a century, and thus has been required to provide some minimal due process before depriving racing license holders of their livelihoods. Due process isn't so hard. A notice of charges, an opportunity for a meaningful hearing, and a right of appeal will do the job very nicely. As I suggested six(!) years ago at the Saratoga Racing and Gaming Law Symposium, it wouldn't be that difficult. And it would be a good model for other tracks around the country to follow.

I trust Dave O'Rourke will rapidly get a handle on the legal and racing decision-making at NYRA and that he will use the goodwill accompanying his rise to the top to make NYRA a model, not just for good racing but also for good citizenship, by enshrining due process for those who make the show possible.