WHY KEEP THE COURT IN THE DARK?
On July 20, 2010, the Commission had passed regulations which it claimed made the machines legal, despite no change of law in Kentucky's General Assembly.
The Commission, charged with ensuring the integrity of horse racing and protecting the public, and the Racetracks were well aware that no other state had ever found "historical horse racing" slot gaming to be lawful absent a change of law.
Given their shaky legal ground, Kentucky’s Commission and Racetracks sought the court's determination of whether licensing and operating the machines was legal. On the same day the regulations were passed, an "agreed case" was filed.
However, irregularities in the process raise the question:
"Why keep the court in the dark?"
#1 Failing to Name an Opponent
The constitutionality of the declaratory judgment process, especially actions brought under KRS 418.020 as an agreed case, hinges upon the existence of a “real” controversy. That means there must be antagonistic parties to present both side of a controversy.
As the Kentucky Supreme Court noted when this case first reached it in 2014, “By any definition, a controversy is a disagreement and a disagreement requires parties that disagree.”
Regardless, the Commission and Racetracks failed to name any adversary. Then the Franklin Circuit Court wrongfully issued a sua sponte order (an action taken by a judge without the prompting or request of either party) claiming it still had authority to hear the case.
Intervening in the case, The Family Foundation objected to the only parties in the case being advocates for the new slot gaming, no evidence being presented to the court, and the judge’s sua sponte order.
On appeal, Kentucky’s Court of Appeals expressed grave concern “about the wisdom of a process that provides for judicial approval of a matter based solely upon statements of parties having no adverse interests at stake.
Kentucky’s Supreme Court unanimously echoed those concerns, making clear that:
Generations of common law and constitutional experience have taught us that the tension between the adversaries brings forth the most cogent grounds upon which matters of significant public importance should be decided. The adversarial system promotes sound judicial reasoning by assuring that the courts are fully and fairly informed... the heightened immediacy and public importance of an issue are all the more reason to require true adversarial participation.
As a result, the Court declared that the Franklin Circuit Court's sua sponte order was in error and overturned an older Court of Appeals decision which had raised some doubts about the legal doctrine.
#2 Failing to Provide Required Facts
Despite KRS 418.020’s requirement that such an “agreed case” present the facts upon which their questions depend, Kentucky’s regulatory body and Racetracks asked the court to declare the slot gaming machines legal without any evidence or facts as to how the machines actually worked.
#3 Opposing All Discovery of Evidence
Once The Family Foundation intervened in the case, Kentucky's Horse Racing Commission and Racetracks worked hard to ensure that the court never saw any facts or evidence about how the machines worked.
Before a single question was even asked, the Racetracks and the regulatory body charged with ensuring integrity sought to block The Family Foundation from discovering any evidence or asking any questions.
Kentucky’s Court of Appeals and Supreme Court both declared the Franklin Circuit Court’s decision to bar all discovery to be in error, reversing it.
In its June 15, 2012 decision, Kentucky's Court of Appeals emphasized:
The role of discovery in the litigation process can be hardly overstated. Discovery is the process whereby parties learn the strengths and weaknesses of their cases, formulate issues and learn the facts. As lawyers and judges are well aware, most cases are decided on the facts discovered and admitted in evidence.
...We conclude that the request for discovery by Family Foundation was relevant and necessary to the court’s determination and that the court’s denial of discovery constituted an abuse of discretion.
By virtue of the absence of any discovery, the record before us is without a meaningful evidentiary basis to support the judgment of the trial court...
The Kentucky Supreme Court affirmed in its February 20, 2014 decision:
...To answer the question posed by [the Commission and Racetracks]... one must examine the methodology of wagering they would undertake to determine if it is actually pari-mutuel in form.
We agree with the Court of Appeals that the Foundation... had the right to develop the evidence required to determine if the operation of historical horserace wagering... conforms to the requirements of... pari-mutuel wagering...
#4 Concealing Commission Member's Belief It Was A Sham
In 2013, when this case was before the Kentucky Supreme Court the first time, the Commission and Racetracks concealed the fact that a Commission member believed the Instant Racing historical horse racing to be a sham.
On April 9, 2013, Commission Chairman Robert Beck described the reliance on so-called “experts”: “So I think we have to rely heavily upon the expert to tell us if these games – and somebody, you know.”
Commissioner Edward Bonnie observed: “We are paying our expert to tell us and he knows what we want him to say. And he has said it. And the opposition says he is dead wrong. And I just want us to be careful because we are the ones that are going to approve or not approve. And it makes me very nervous. This was stretching the interpretation of the statutes to start with. And this is further down that road moving away from historic races as far as I can see. There is not a reference to a historic race in Pigs in Mud and Bayou Bash. So I want to register my discomfort with expansion at this time. And, 2, whether or not it is consistent with statute. And I have not recently read our expert’s view with respect to it. But I wanted to register it on the record.”
#5 Letting the Court Misunderstand the Nature of the Gaming
When the Kentucky Supreme Court first heard this case in 2013, the Horse Racing Commission and Racetracks failed to correct its misunderstanding of the slot gaming at issue.
The Court understood the gaming to be a harmless bet on a video of a horse race. However, slot gaming has never operated how it was described by the Court.
Under the impression that it was analogous to watching a rerun of a basketball game, the Court's February 20, 2014 opinion said that “We can not say, conceptually, watching a video-taped (or digitally-recorded) image of a horse race makes the event any less of a horse race....”
Even though the machines had been in operation for some two years before and at the time the Court heard oral arguments in 2013, the Racetracks and the regulatory body charged with ensuring integrity failed to clarify how the games work.
As a result, the Court was unaware that associated with such videos were slot gaming type random multipliers, random wild symbols, and random bonus rounds to determine prizes.
Those realities led Wyoming’s Attorney General to declare, in September 2015, that “Instant Racing”, the first version of historical horse racing, was not pari-mutuel wagering on horse racing.
This convenient omission of information, which the Commission and Racetracks were legally required to provide, meant the Court was unaware of the injection of material elements of chance into the gaming which would invalidate it under Kentucky law.
#6 Opposing Any Demonstration of the Games
The Supreme Court's unanimous February 20, 2014 decision noted that "one must examine the methodology of wagering they would undertake to determine if it is actually pari-mutuel in form."
Kentucky's Court of Appeals (2012) and Supreme Court (2014) wouldn't stand for The Family Foundation being denied the right to discover "the evidence required to determine if the operation of historical horserace wagering... conforms to the requirements of... pari-mutuel wagering...", sending the case back to the Franklin Circuit Court to correct its "abuse of discretion."
Seeking the evidence the Court of Appeals and Supreme Court declared a right to, The Family Foundation requested a demonstration of the machines before the Franklin Circuit Court. But the Commission and Racetracks again objected to the court having that information.
The Franklin Circuit Court blocked the demonstration, making discovery of the necessary facts much more difficult and expensive. But The Family Foundation pressed on.
#7 Dumping Documents on the Last Day of Discovery
Forced by the Kentucky Supreme Court to finally provide the facts they were required by law to provide when they first brought their case in 2010, Kentucky's Horse Racing Commission and Racetracks resorted to tactics that made it extremely difficult to piece together the necessary information.
One such example was dumping tens of thousands of pages of paper on The Family Foundation's attorney, Stan Cave, during the last day of discovery.
In order to find the information he needed, Cave had to sort through every individual page and piece together the various documents as he came across their pieces.