Road Racing Take … 3?

Because I always try to note the horse-related human races on the calendar, tomorrow is the Southern Lights Stroll 5k at the Kentucky Horse Park.

The race benefits the Kentucky Horse Park and is held on the night that the Horse Park’s Southern Lights display is opened to the public. This will be my fourth year in a row running this race. My first year, by the grace of God, I suppose, I somehow won the 20-29 year old women age group, but have finished off the board the last two years. I’m hoping for a decent finish this year.

Regardless of how I do, it’s a pretty lovely way to start the holiday season. Last year, it even snowed. Perhaps November 19 seems early to start the holidays, but when I was in law school, it provided a nice little taste of hope and joy.

If you aren’t inspired by the thought of holiday lights, they also have a great light display of horses breaking from the gate at Keeneland, and I swear there’s a Star Wars light display in there, too.

It’s a fun race, though. It’s at the horse park, and it’s followed by cider and cookies and all kinds of fun stuff. If you are in the Lexington area and are a runner, I strongly encourage you to participate.

Ownership and Control

The Court of Appeals of Kentucky recently handed down its opinion in Ramsey v. Lambert, 2009 W.L. 2408413 (Ky. Ct. App. 2009),  a breach of contract action that touches upon the unauthorized practice of veterinary medicine. The basic facts are as follows:

Kenneth Ramsey hired David Lambert to help him evaluate Thoroughbreds at auctions in Kentucky and Florida. Among other methods, Lambert used an ultrasound to conduct heart scans on potential horses – he would then compare the size and shape of the horse’s heart to previous race winners. This is not an uncommon practice.

The Ramsey-Lambert agreement was based on a letter, which set forth Lambert’s conditions, including:

1. A prearranged fee to cover heart scans and all physical exams
2. 2.5% of purchase price
3. A bonus in the event a purchase wins races as follows:

• A Grade I race: $50,000
• A race of $1m or more: $50,000
• For any stallion that goes to stud: 2 breeding rights

Ramsey testified that he only agreed to the first two points. Thus, when one of the horses Lambert ID’d, Roses in May, won the Grade I Whitney Handicap in August of 2004, and Lambert sent Ramsey an invoice for $50,000, Ramsey did not pay. [Ramsey did pay Lambert $50k after Roses in May won the Dubai World Cup, but he alleged that he paid all employees that amount after the win]. After Ramsey sold Roses in May to Japanese interests for $8m, Lambert claimed he was owed 2 breeding rights under the contract, which he valued at $100,000 each. Thus, the total amount Lambert claimed under the contract was $250,000.

When Lambert sued Ramsey in Fayette Circuit Court for breach of contract, Ramsey counterclaimed that the heart scanning conducted by Lambert constituted the practice of veterinary medicine. Because Lambert was not licensed as a vet in Kentucky or Florida, Ramsey concluded that Lambert was engaging in the unauthorized practice of veterinary medicine.

The trial court found that heart scanning constituted the practice of veterinary medicine and awarded Ramsey $17,966 in damages for the heart scans performed in Kentucky (although the court noted that Ramsey still hired non-vets to perform such scans). The trial court found for Lambert on the breach of contract claim. Both parties appealed.

The Court of Appeals reversed the trial court’s finding that the heart scans constituted the practice of veterinary medicine. It noted that KRS 321.181(5)(a) defines the practice of veterinary medicine as follows:

to diagnose, treat, correct, change, relieve, or prevent animal disease, deformity, defect, injury, or other physical or mental conditions, including the prescription or administration of any drug, medicine, biologic, apparatus, application, anesthetic, or other therapeutic or diagnostic substance or technique, and the use of any manual or mechanical procedure for testing for pregnancy, or for correcting sterility or infertility, or to render advice or recommendation with regard to any of the above.

The court agreed with Lambert that he did not do any of the above, but rather provided opinions regarding the identification and procurement of Thoroughbreds that he believed possessed the potential to race successfully. The court found similarly under the Florida statute. The Court of Appeals affirmed the verdict in favor of Lambert on the contract claim.

This case is interesting not because of the contract claim – those are commonplace in the horse industry – and not just because the court addressed the unauthorized practice of veterinary medicine, which has received a lot of attention lately with respect to practitioners of equine dentistry or chiropractics. I also found it interesting because it leads to an examination of the structure of the vet-client-patient relationship.

KRS 321.190 prohibits the practice of medicine without a valid veterinary license. There are several exceptions, including owners, owner’s employees, and trainers, provided there is a “vet-client-patient relationship.”

KRS 321.185 sets forth the requirements for a vet-client-patient relationship:

The vet has assumed responsibility for making judgments regarding the health of the animal and the need for veterinary treatment, and the client, whether the owner or other caretaker, has agreed to follow the instructions of the veterinarian. (emphasis added)

“Client” is not defined further in Chapter 321.

If you’ve been following racing news, that highlighted section might remind you of Joe Drape’s recent New York Times article, “Lawsuit Sheds Light on Use of Legal Medications in Horses.” More specifically, it might remind you of Dr. Foster Northrop’s testimony, as recounted by Drape, in the IEAH lawsuit against David Lanzman over the purchase of I Want Revenge. When Andre Regard, counsel for IEAH, asked him who he believed was his client – the owner or the trainer – he replied:

“The trainer …. The trainer is the agent of the owners is my understanding of it, but with that said, I welcome all owners to communicate directly with me.”

It may take the sting out of Drape’s use of Northrop’s testimony, but Kentucky statutes (and agency law) support the vet’s reasoning. Moreover, although owners who watch over their stables are certainly laudable, the structure of this relationship is essential to Thoroughbred ownership, and especially essential in encouraging new ownership.

Almost 80 years ago, Adolf Berle detailed the separation of ownership and management in The Modern Corporation and Private Property. In it, he wrote:

Under the corporate system, the second function, that of having power over an enterprise, has become separated from the first. The position of the owner has been reduced to that of having a set of legal and factual interests in the enterprise while the group which we have called control, are in the position of having legal and factual powers over it. (emphasis added)

Just like executives can run amok in corporations, the separation of ownership and control of Thoroughbreds can leave the door open to over-medication or other worrisome behavior. This explains Dr. Northrop’s statement, as related by Drape, that he supports transparency and disclosure of treatments to the owners. Think of it as an anti-fraud provision in corporate law. While I understand Drape’s motives, I think it was unfair of him to juxtapose this comment with the statement that Northrop’s interest in transparency doesn’t surround disclosure to bettors, because that’s not really Northrop’s concern – he’s a vet, not a steward or a racing commissioner. He’s interested in reining in misbehavior by creating an informed owner – bridging the gap between ownership and control.

I’m not saying I have the answers; as usual, I’m just making observations.

Human Racing

For racing fans who are also runners:

There are two Thoroughbred-related foot races coming up that you might be interested in if you live in the Bluegrass area, or if you will be in Lexington for the Keeneland meet.

This Saturday, September 26, is the Big Red Run/Walk 5K, a/k/a the Secretariat 5k. It’s part of the second annual Secretariat Festival in Bourbon County, and this is the first year the race has been held. According to the race info, the course “will begin and end at the Bourbon County Fairgrounds,” and “will travel along Main Street through scenic downtown Paris and pass by some of the loveliest historic homes and pastoral settings in the heart of horse country.”

The festival itself features a Secretariat look-alike contest, tours of Claiborne Farm, and other fun stuff. As an added bonus, rumor has it that Ms. Chennery will be in attendance, along with several of the stars from the Secretariat movie that just started filming around here.

Coming up on October 10 (during the Keeneland meet) is the seventh annual Race for Education 5k/10k. This is by far one of my favorite races. It starts in charming downtown Midway (a locomotive starts the race with a whistle) and runs out past horse farms and back again. The race is followed up with live bluegrass and the awesomest breakfast burritos ever. As you probably know, Race for Education provides scholarships and educational support to children of horse farm workers, as well as students interested in pursuing equine-related degrees. It’s a terrific organization, and the race is always first class.

Happy running!

Regulation Re-Hash

While I was tacking up my horse today, I had a conversation with a vet who keeps her horse at the same barn. I mentioned that Rick Dutrow’s appeal is coming through the court at which I clerk, and explained that it was an appeal of KHRC’s suspension of Dutrow based on a Clenbuterol overage.

“I think it’s so odd that that stuff is even regulated by the government,” she said. She, as a participant in the sport horse world as both a vet and a competitor, is well-familiar with the United States Equestrian Federation, which regulates “that stuff” at horse shows across the country. And USEF regulates it quite effectively. It has a zero tolerance policy, its penalties are quick and emotionless, and all suspensions are published monthly for all the world to see (yes, even little Susie’s name gets published if her pony tests positive for reserpine, regardless of whether she even knew about it).

“Gambling,” I replied. “Because gambling on the races is legalized, the states have a right to regulate pretty much all aspects of racing.”

The sports page of the Wall Street Journal publishes the “odds” for various college and professional sports games, but the states don’t regulate those sports because gambling isn’t legal. Right.

Everyone bemoans the regulation situation. It’s sort of tres chic right now to launch diatribes at the racing commissions, the Jockey Club, the NTRA. I’m going to clear things up, though.

1. The industry will never, voluntarily, completely “fix” itself. Moreover, it does not want to.

2. The only entity that can organize the states is the federal government, which can step in using the power that stems from the commerce clause and the supremacy clause.

3. The feds need to create a federally-chartered corporation that will operate basically like USEF. Look at Britain.

4. Regulation of wagering should be left to one branch of the federally-chartered corporation. The states should have a piece of what is wagered on their races, of course, but they should not have the right to regulate the mechanisms of wagering. The police power argument holds no sway with me. Federal supremacy trumps disingenuous interests in “public morals” arising from gambling.

All other methods will simply patch-up holes and create a veneer of cooperation and efficacy.

Will the above-detailed plan happen? Don’t bet on it.

Meanwhile, I’ll be watching the International Hunter Derby Finals at the Kentucky Horse Park this weekend. Todd’s brother Peter Pletcher has quite a few horses, and if I’m lucky I might even spot the Boss – his daughter Jessica’s competing.

If you want in on my books, holla.

Fresh Air

The Thoroughbred Bloggers Alliance has a new website, which makes it easy to follow 123 people on Twitter, 132 blogs, and 38 horse racing news feeds. The site also features video, a free past performances search, and, as always, a way to give back to the industry, and the horses we love, through various charities. So what are you waiting for, check it out – there’s clearly nothing to see here!

The Thoroughbred Brief will remain on hiatus until after the bar exam.

New Blog: Gaming Law Update

Since the Thoroughbred Brief continues its extended hiatus due to the fact that I’m finishing my third and final year of law school, I’m happy to be able to direct attention to a new blog that also hits on legal aspects of racing.

Gaming Law Update, written by gaming attorney (and Thoroughbred Brief guest blogger) John Lockwood, is a parimutuel and gaming law blog that covers various issues in the parimutuel and gaming industry. These issues are crucial to determining the future of the racing industry, and Lockwood has the experience and first-hand knowledge to present them clearly and compellingly. Additionally, the Gaming Law Update provides links to all gaming and parimutuel commissions and industry associations, making it a much needed central hub when trying to access information by jurisdiction. In other words, check it out.

Hopefully I will be able to return to updating soon. In the meantime, I have officially declared the week after I finish exams to be “Arlo Week,” so if you’re really, really, incredibly bored, feel free to check out a website entirely centered around my goofy horse. There are even Derby picks, although they need to be updated, since Quality Road is out.

Also, you can now follow the Thoroughbred Brief on Twitter. Which is not to say that I have anything interesting to say, but there you have it.

Guest Editorial – The Prospect of Instant Racing Machines in Kentucky

John M. Lockwood, Esq. is an attorney affiliated with Rutledge, Ecenia, & Purnell, P.A. in Tallahassee, Florida. He concentrates his practice primarily on advising clients on laws and regulations affecting the pari-mutuel, cardroom, and slot machine wagering industry. He can be reached at jlockwood@reuphlaw.com.

On April 16, 2009, Kentucky State Senator Damon Thayer requested the opinion of Kentucky Attorney General Jack Conway concerning the legality of operating Instant Racing machines in Kentucky to assist the horse industry.

Instant Racing machines utilize recorded pari-mutuel events, currently greyhound and thoroughbred races, upon which patrons place wagers through a terminal that is virtually identical to a self-service wagering terminal. The machine uses a random number generator to select races from a grouping of stored pari-mutuel races located in a main server. The patron inserts money and makes a selection of potential finishers, just like making a bet on a live race, based upon certain handicapping data that is provided via performance charts. The patron is not provided information concerning the race venue, date of race, name of horse or dog, or the jockey or trainer if applicable. Once the patron submits the wager via the terminal, the race is shown and the result is displayed. Payouts are determined by the wagers contributed to the pari-mutuel wagering pools.

Instant Racing machines have been successful at Oaklawn Park in Hot Springs, Arkansas where such machines have helped boost purses and attract larger fields. Unfortunately, Instant Racing machines have not garnered a significant following outside of the state. In 2006, the Wyoming Supreme Court declared that Instant Racing machines were illegal slot machines that “attempted” to mimic traditional pari-mutuel wagering. In Oregon, an administrative law judge ruled that Instant Racing machines were pari-mutuel devices and could be installed at Portland Meadows. This decision was subsequently overturned by the Oregon Racing Commission and is currently being reviewed by the Oregon Court of Appeals. In addition, the Maryland Attorney General issued an opinion stating that Instant Racing machines were not permitted in Maryland because they did not constitute pari-mutuel wagering devices. However, the Alabama Attorney General has twice opined that Instant Racing machines were pari-mutuel devices that could lawfully be operated at state greyhound tracks.

So what does this mean for Kentucky and its horse racing industry? The Kentucky Attorney General will likely be faced with a delicate legal analysis focusing upon a comparison of traditional pari-mutuel wagering and slot machine devices. Based upon the Alabama opinions, there is precedent to conclude that such devices are, in fact, pari-mutuel wagering devices that may be operated just like self-service totalisator terminals. Of course, the state legislature could always allow the Kentucky Horse Racing Commission to authorize and regulate Instant Racing machines if the Attorney General concludes that such devices are not presently authorized pursuant to existing pari-mutuel wagering laws.

Wyoming Supreme Court opinion

Maryland AG Opinion

First Alabama Opinion

Second Alabama Opinion

The final order of the Oregon Racing Commission is on file with the author and the Thoroughbred Brief.

Redux

Joe Drape reports that the New York Racing and Wagering Board is investigating Ernie Paragallo, who is licensed by the Board as an authorized agent, for his alleged mistreatment of the horses at his Center Brook Farm.

If the Racing and Wagering Board wants an example of a state racing commission exercising its jurisdiction over licensees to issue sanctions for animal cruelty on a private farm, the KHRC addressed a similar case last year. The KHRC ended up suspending Joseph Crescini’s license for 2 years, but the case is currently being appealed.

For a thorough discussion of the Crescini case, I direct you to one of my previous entries: Regulators (handy with the steel).

Hiatus

The Thoroughbred Brief is on hiatus due to my law school workload.

Beyond the Press Release: Comments on Churchill’s Sweeping Safety Measures

Based on historical records, we believe there has only been one catastrophic injury among the 1,710 horses that have competed during the 134 runnings of the Kentucky Derby, but even one is too many. -  Bob Evans, president and chief executive officer of Churchill Downs Incorporated.

For those who have followed this site to any extent, it should be clear that I have a particular interest in racetrack “house rules,” a supplementary form of regulation implemented by private racetracks.

So when I received Churchill’s press release this morning detailing the new safety measures to be implemented at all CDI tracks by 2001 and at Churchill itself by the first Saturday in May, I was pretty interested (and also admittedly thrilled at receiving a press release from Churchill, regardless of why I might have received it).

These new safety measures, known as “Safety from Start to Finish,” are described in the release as including “unprecedented standardized
third-party testing of track surfaces and comprehensive testing of all winning horses for more than 100 prohibited drugs.”

Here’s Churchill’s list of these sweeping safety measures, which will be in place at Churchill Downs by Derby day (the reason I listed some of them in bold is explained below):

• Independent, standardized third-party testing and monitoring of track surfaces;
• “Supertesting” of all winning horses for more than 100 performance-enhancing drugs;
• Age restrictions requiring Thoroughbreds to be at least 24 calendar months of age before becoming eligible to race;
• The freezing and storage of equine blood and urine samples to allow for retrospective testing;
• The banning of steroids;
• Limits on the number of horses allowed to compete in certain races;
• The prohibition of “milkshaking”, which results in excessive levels of total carbon dioxide in Thoroughbred racehorses;
• Prohibiting the transport of horses from CDI facilities for slaughter;
• The banning of unsafe horseshoes, including front shoe toe grabs longer than two millimeters;
• The use of low-impact riding whips with limited usage rules;
• The presence of on-site medical personnel, equipment, and state-of-the-art equine ambulances;
• Immediate online access to jockey medical histories for emergency medical personnel;
• $1 million in catastrophic injury insurance coverage for jockeys;
• Mandatory and uniform reporting of equine injuries to the Equine Injury Database System, thereby assisting in the compilation of statistics and trends to improve safety conditions around the country;
• A professionally designed and installed safety rail on the inside of the dirt course;
• Mandatory usage by all jockeys, exercise riders and other on-track personnel of safety vests and safety helmets that meet internationally acknowledged quality standards;
• 3/8-inch foam padding on all parts of the starting gates;
• Significant financial support for equine retirement programs;
• Inspection of all horses by regulatory veterinarians prior to and following all races;
• Review of security procedures around barns and other racetrack backstretch areas;
• Continued maintenance of protocols for the treatment of horses that have been injured during racing or training, to ensure the most humane treatment possible; and
• Mandatory, independent, and complete necropsies of any horse that dies as a result of an injury sustained while racing or training at Churchill Downs.

If many of these regulations sound familiar, then you’ve either read my most recent post, or, like me, have printed out your own copy of the NTRA’s Safety and Integrity Alliance pledge and its initiatives (although that might just be me). By my glancing review, most of the Safety from Start to Finish initiatives comport with the Alliance initiatives. It looks like, as Alex Waldrop mentioned to my equine law class, Churchill will certainly be qualified for the accreditation program this year.

Also by my glancing review (if you see a mistake, feel free to tell me), those rules in bold are areas where Churchill has gone above and beyond the NTRA mandates. My comments are as follows:

First, CDI is joining Suffolk Downs, the Magna tracks, and others in banning the transfer of horses from CDI tracks for slaughter. It will be interesting to see whether this applies to direct or indirect participation in the slaughter chain, and what sanctions CDI intends to apply.

Second, while the number of horses in races will be limited, this rule does not apply to the Kentucky Derby field, which will remain at 20 horses.

Third, the “supertesting program” and the freezing and storage of samples are huge steps in bringing drug testing into the 21st century. One thought I have is that, while I’m glad that all winners will be subject to the supertesting program, I think random testing would further supplement this goal – if the results were reported.

Fourth, the age-limit rule, requiring that horses actually be 2 years old to race, rather than just “Thoroughbred” 2 years old. I’m not sure exactly how many Thoroughbreds this will affect – most are born so early in the year that they will be 24 months of age before they start (although they will probably be in training before that). But I’m not sure that anyone could argue that keeping a horse from subjecting its growing bones to the pounding rigors of a race at least until they’re 2 is a bad plan.

Lastly, the initiative that interests me the most – “Independent, standardized third-party testing and monitoring of track surfaces.” The press release expands on this:

CDI is expanding its existing testing of track surfaces to implement regular, standardized, third-party testing of its racetracks, including a battery of laboratory tests of track surfaces and ground-penetrating radar to ensure track consistency and integrity. CDI has secured the services of the world’s top track surface researcher, Dr. Mick Peterson, a University of Maine professor of mechanical engineering who has developed an innovative robotic hoof device that duplicates the force and speed of a horse as it runs on a racetrack. Data generated by these and other tests will help to ensure that CDI tracks maintain safe and consistent track surfaces for both horses and jockeys. The Company is also a founding member of and financial contributor to the new Racing Surfaces Testing Laboratory, which is identifying safe practices for the future by facilitating and advocating measurements of track safety effectiveness.

This plan, perhaps above all else, is what Churchill Downs can point to on Derby day when the public asks, “What about Eight Belles?” And it’s a heck of a lot to point to – ground-penetrating radar? Check. An innovative robotic hoof device that mimics the hoof of a running horse? Check. A new testing lab for racing surfaces? Check.

Additionally, according to Jim Gates, general manager of Churchill Downs and the leader of Safety from Start to Finish, “[w]e also have recognized that we need to do a better job of communicating to our fans and the general public what our industry has done and is doing to maximize safety. To that end, we have created an interactive, educational ‘Safety Center’ that is currently on display at Churchill Downs’ Gate 17. The Center utilizes audio, video and actual material and equipment samples to educate racetrack guests about the numerous policies and procedures in place to ensure the safety, security and well-being of horses, riders, and on-track personnel.

All of the initiatives listed above are laudable.

But in a time when bolstering the public image of racing is perhaps more vital than ever, the surface safety initiative and the interactive “Safety Center,” focused as they are on that “one catastrophic injury among the 1,700 horses that have competed during the 134 runnings of the Kentucky Derby,” – focused on Eight Belles -  might just be the most important to the sport.

More information about the Safety from Start to Finish program can be found here.