Churchill, NYRA sue HISA over fee dispute, shutdown threat

Saying their costs have gotten out of hand illegally and that they have been threatened with a shutdown, Churchill Downs Inc. and the New York Racing Association have combined legal forces to sue the Horseracing Integrity and Safety Authority.

The 51-page case was filed Wednesday night in Western Kentucky federal court and assigned to judge Rebecca Grady Jennings.

“The Horseracing Integrity and Safety Authority will aggressively defend itself against (the suit) filed in the companies’ attempt to avoid paying their fair share of HISA’s fees,” the federal authority said in a news release Thursday.

CDI and NYRA believe HISA broke its own rule that says racetracks and their operators would be charged a fee based on the number of starts they host in a given year. The lawsuit said fees actually are based 50% on purses and 50% on starts. Big purses then at Churchill and New York tracks then have raised fees illegally, according to the plaintiffs.

“The Horseracing Integrity and Safety Act requires the authority to determine each state’s proportionate share of the annual fees necessary to fund its operations on the authority’s budget for the following year and ‘the projected amount of covered racing starts for the year in each state,’ ” the lawsuit said. “Yet the authority unlawfully adopted and the Federal Trade Commission unlawfully approved an assessment methodology that imposes fees based largely on the size of a racetrack’s purses, ... the total prize money paid to race winners, rather than a state’s share of racing starts.”

Since CDI refused to make a nearly $2 million payment based on the 50-50 purse-and-starts fees, the lawsuit said that HISA threatened to shut down Churchill Downs and Ellis Park in 2025.

“Because CDI declined to remit the millions of dollars in fees unlawfully demanded by the authority, on Nov. 13, the authority sent CDI a notice that it was charging CDI with a violation. ... The notice states that the alleged violation ‘is subject to the sanctions’ ... which include (the power to) ‘prohibit a racetrack from conducting any covered horse race’ or even ‘a lifetime ban’ from conducting covered horseraces,” the suit said. “The authority has made clear that it is seeking such extreme coercive relief in this action, stating that it is seeking an order ‘directing CDI to pay $1,905,142 to the authority within 20 days of the order of the board panel, and if payment in full is not received by the authority by the date prescribed in the order, that for each day the payment is late, Churchill Downs and Ellis Park be prohibited from conducting any covered horse race to be applied immediately on the next scheduled race days at Churchill Downs and Ellis Park.”

CDI and NYRA have asked the federal court to “enjoin defendants from taking any actions to enforce it against CDI and NYRA.”

In its media response Thursday, HISA said the fee structure properly was “approved by the Federal Trade Commission. The rule was created to properly and equitably allocate the costs of HISA’s operations to state racing commissions and-or (owners, trainers and jockeys) involved with covered horse races. CDI and NYRA are the only two organizations subject to this rule that have refused to remit their share of fees.”

The complaint called out the very disciplinary process that it said HISA has employed against the racetrack operators.

“Worse, the authority is illegally conducting its enforcement action through an internal disciplinary process before its board of directors,” the complaint said. “The act does not empower the private authority to adjudicate fee-collection disputes in-house but rather envisions that the authority would exercise its statutory power to bring a civil action in federal court to compel payment of any legitimate fee assessments.

“Interpreting the act to permit the authority to determine for itself whether CDI and NYRA owe it millions of dollars and impose sanctions based on its own findings would violate the act and Article III of the Constitution, which require that such disputes between private entities be adjudicated in federal courts, not within administrative agencies and certainly not within private, unaccountable corporations. And it would also violate the fundamental due-process principle that no person may serve as a judge in his own case.”

In so many words, HISA CEO Liza Lazarus said Churchill and NYRA are biting the regulatory hand that has fed much-needed reform in the sport.

“CDI and NYRA have both benefited greatly from HISA’s uniform safety rules, expertise and oversight, particularly over the past two years,” Lazarus wrote. “That uniformity must extend to cost assessments as well. To do otherwise would be unfair to other tracks and industry participants who are paying their fair share.”

Lazarus concluded her statement by saying, “We will not allow any parties to pick and choose which rules they follow. Every racetrack, including CDI and NYRA, must operate under the same paradigm. No one is exempt.”

The 18 defendants include HISA, the FTC as its administrative parent and U.S. government. Individual defendants include board members and officers of HISA, including Lazarus, and the FTC, including chairperson Lina Khan.

The case was filed by attorneys Tom Dupree, Lochlan Shelfer and Matthew McGill. Dupree, who is based in Washington, led the CDI legal team that convinced Grady Jennings to turn down trainer Bob Baffert’s call to be made eligible for this year’s Kentucky Derby. Baffert eventually dropped the legal challenges to his suspension, which was lifted in July. That was more than three years after a failed drug test led to the disqualification of Baffert’s first-place finisher Medina Spirit in the 2021 Derby.

“This lawsuit narrowly targets the unlawful, excessive and disproportionate financial assessments that HISA’s authority is attempting to impose on NYRA,” a spokesperson for the racing company said Thursday. “Since 2022, NYRA has disputed HISA’s methodology for calculating fees. ... NYRA joined in this action as a last resort only when threatened with illegal HISA enforcement actions.”

Attorneys for both sides have been given 90 days to report back to Grady Jennings on how the expect to move forward with the case.

This is the complaint filed in federal court: