#1 Franklin Circuit Court 2010 Opinion Drafted By KEEP Member

After parts of the Franklin Circuit Court's 2010 Opinion and Order were found to be in error by Kentucky's Court of Appeals and Supreme Court, the case was remanded (returned) to the Franklin Circuit Court for the case to be reheard in accordance with the Supreme Court's instructions.

 

Following remand, the Franklin Circuit Court acknowledged that the 2010 Opinion and Order was drafted by the court’s law clerk... a law clerk who published articles concerning expanded gambling and who appears to have been a member of the Kentucky Equine Education Project, a leading advocate for expanded gambling in Kentucky (“KEEP”).

 

The president of Kentucky Downs, LLC, a party in the case, was Chairman of KEEP. Counsel for Kentucky Downs, LLC, in this case also appears to be counsel for KEEP. Kentucky Downs, LLC, was the first applicant for a license and the first track to install the historical horse racing gaming devices in 2011. KEEP presented on May 10, 2011, in support of the subject regulations at the Administrative Regulation Review Subcommittee of the Legislative Research Commission. The transcript of the December 14, 2010, hearing in the Franklin Circuit Court on the Appellees motion for summary judgment confirms the law clerk’s presence.

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#2 Sua Sponte Orders

During this case, the Franklin Circuit Court has issued a number of sua sponte Orders (of its own accord, without a motion or request from the parties).  

 

In 2010, the court determined sua sponte that a justiciable controversy existed without any adversarial party in the case prior to The Family Foundation’s intervention. An order that Kentucky's Court of Appeals and Supreme Court found to be in error. The Supreme Court declared that such a finding by the Franklin Circuit Court went against

"[g]enerations of common law and constitutional experience" and was "contrary to long-established and well-settled authorities".

 

Likewise, no party asked the Franklin Circuit Court to change the nature of the “agreed case”, where the Commission and Racetracks had to set forth the facts upon which their question depended. But the Franklin Circuit Court sua sponte converted it to a declaratory judgment action.  Such an action eight years into the case changed the very nature of the case. 

 

This sua sponte Order may have been in response to the Kentucky Supreme Court's observation that the "agreed case" process "may not be available to resolve in advance of prosecution the viability of a criminal action, such as the question of whether wagering on historical horse racing devices pursuant to the new regulations would violate the gambling prohibitions of Chapter 528 of the Kentucky Penal Code.” Thus, aiding the Commission and Racetracks avoid criminal liability for the operation of their "historical horse racing" slot gaming.

 

The issuance of sua sponte Orders may be necessary in some extreme circumstance, but in this case where they were used on such material issues makes them appear as executive branch proclamations.

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#3 Wrongly Deferred to Commission in Rewriting Defintion of Pari-Mutuel

The trial court deferred to the Appellees’ witness, Richard LaBrocca, who testified that the Regulatory Definition has whatever meaning the Commission chooses to give it:

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“The wagering that has been approved by the Commission defines what the wager is -- these are pari-mutuel because the definition of wager is fluid to the types of wagers the Commission can approve.”

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Although Mr. LaBrocca has a 2-year degree from the DeVry Institute and is not a lawyer, he provided legal opinions concerning the meaning of the Regulatory Definition. The trial court deferred to Mr. LaBrocca:

Pari-mutuel wagering does not require patrons to wager on the same horseraces, nor does it require reciprocity among patrons, or for a pool to remain open for a specified period of time. 

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This new definition of pari-mutuel wagering was then found to be satisfied because: 

[Richard] LaBrocca explained ‘[w]hen patrons are wagering amongst themselves into the same pool they are affecting the other wagers who come after them by either increasing the funding of the pool, as every wager is going to do, and at some cases when there is a win, decreasing the number . . . thereby affecting other future players.’

This was squarely contrary to the 2010 Kentucky Attorney General's Opinion examining "Instant Racing", the first generation of "historical horse racing" slot gaming:

 

"To the extent the success or failure of other bettors may influence the size of payouts of Instant Racing, it cannot occur in the same way in the context of traditional pari-mutuel betting.” 

 

Nonetheless, based on the Franklin Circuit Court’s new redefinition of pari-mutuel wagering, the Commission and Racetracks offered no proof that Exacta Gaming complied with the Regulatory Definition’s requirements that players be wagering among themselves on an uncertain event or that amounts wagered be placed in one or more designated wagering pools and that such resulting net pools be paid out to winning patrons.

 

Again, such an application of the Regulatory Definition is contrary to the meaning of the words used and the statutory conception of pari-mutuel wagering in KRS Chapter 230. The Franklin Circuit Court thus erroneously concluded as a matter of law that: “[T]he Exacta System was designed to align with the requirements of 810 KAR 1:001, Section 1(48).” Because Exacta Gaming did not meet the requirements to be pari-mutuel wagering, the Franklin Circuit Court changed the requirements and then adjudged the changed requirements met.
 

Interpreting and applying the words “patrons are wagering among themselves” to be satisfied by a fiction of where the operator deposits a singular, unique wager on a singular, unique event is creating an exception broader than the prohibition itself. Such an absurd interpretation and application of the words is not scrutiny.  It is deference.

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And as four U.S. Supreme Court justices recently stated in a concurring opinion:

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When we defer to an agency interpretation that differs from what we believe to be the best interpretation of the law, we compromise our judicial independence and deny the people who come before us the impartial judgment that the Constitution guarantees them. And we mislead those whom we serve by placing a judicial imprimatur on what is, in fact, no more than an exercise of raw political executive power.

Kisor v. Wilkie (2019) (Gorsuch, J. concurring, joined by Thomas, J., Alito, J., Kavanaugh, J.)

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