Nat'l Horsemen's Benevolent & Protective Ass'n v. Black

107 F.4th 415

NATIONAL HORSEMEN'S BENEVOLENT AND PROTECTIVE ASSOCIATION;Arizona Horsemen's Benevolent and Protective Association;Arkansas Horsemen's Benevolent and Protective Association;Indiana Horsemen's Benevolent and Protective Association;Illinois Horsemen's Benevolent and Protective Association;Louisiana Horsemen's Benevolent and Protective Association;Mountaineer Park Horsemen's Benevolent and Protective Association;Nebraska Horsemen's Benevolent and Protective Association;Oklahoma Horsemen's Benevolent and Protective Association;Oregon Horsemen's Benevolent and Protective Association;Pennsylvania Horsemen's Benevolent and Protective Association;Washington Horsemen's Benevolent and Protective Association;Tampa Bay Horsemen's Benevolent and Protective Association;Gulf Coast Racing, L.L.C.; LRP Group, Limited;Valle De Los Tesoros, Limited; Global Gaming Lsp, L.L.C.;Texas Horsemen's Partnership, L.L.P., Plaintiffs—Appellants,State of Texas;Texas Racing Commission, Intervenor Plaintiffs—Appellants, v. Jerry BLACK; Katrina Adams; Leonard Coleman;MD Nancy Cox; Joseph Dunford; Frank Keating;Kenneth Schanzer; Horseracing Integrity and Safety Authority, Incorporated;Federal Trade Commission; Commissioner Noah Phillips;Commissioner Christine Wilson; Lisa Lazarus; Steve Beshear; Adolpho Birch;Ellen McClain; Charles Scheeler; Joseph DeFrancis;Susan Stover; Bill Thomason; Lina Khan, Chair; Rebecca Slaughter, Commissioner;Alvaro Bedoya, Commissioner; D. G. Van Clief, Defendants—Appellees.

No. 23-10520

United States Court of Appeals, Fifth Circuit

FILED July 5, 2024

Appeal from the United States District Court for the Northern District of Texas, USDC Nos. 5:21-CV-71, 5:23-CV-77, James Wesley Hendrix, U.S. District Judge

Daniel Robert Suhr, National Center for Justice & Liberty, Chicago, IL, Fernando Manuel Bustos, Bustos Law Firm, P.C., Lubbock, TX, for Plaintiffs-Appellants National Horsemen's Benevolent and Protective Association, Arizona Horsemen's Benevolent and Protective Association, Arkansas Horsemen's Benevolent and Protective Association, Indiana Horsemen's Benevolent and Protective Association, Illinois Horsemen's Benevolent and Protective Association, Louisiana Horsemen's Benevolent and Protective Association, Mountaineer Park Horsemen's Benevolent and Protective Association, Nebraska Horsemen's Benevolent and Protective Association, Oklahoma Horsemen's Benevolent and Protective Association, Oregon Horsemen's Benevolent and Protective Association, Pennsylvania Horsemen's Benevolent and Protective Association, Washington Horsemen's Benevolent and Protective Association, Tampa Bay Horsemen's Benevolent and Protective Association.

Stewart Reeves Jordan, Maynard Nexsen, P.C., Birmingham, AL, Gregory Philip Sapire, Maynard Nexsen, Austin, TX, Ilan Wurman, Arizona State University, Sandra Day O'Connor College of Law, Phoenix, AZ, for Plaintiffs-Appellants Gulf Coast Racing, L.L.C., LRP Group, Limited, Valle de Los Tesoros, Limited, Global Gaming LSP, L.L.C., Texas Horsemen's Partnership, L.L.P.

Lanora Christine Pettit, William Francis Cole, Esq., Office of the Texas Attorney General, Solicitor General Division, Austin, TX, Taylor K. Gifford, Maynard Nexsen, Austin, TX, Beth Ellen Klusmann, Esq., Office of the Texas Attorney General, Austin, TX, for Intervenor Plaintiffs-Appellants.

Pratik A. Shah, Lide E. Paterno, Akin Gump Strauss Hauer & Feld, L.L.P., Washington, DC, Brennan Holden Meier, Akin Gump Strauss Hauer & Feld, L.L.P., Dallas, TX, John Roach, Attorney, Ransdell Roach & Royse, P.L.L.C., Lexington, KY, for Defendants-Appellees Jerry Black, Katrina Adams, Leonard Coleman, MD Nancy Cox, Joseph Dunford, Frank Keating, Kenneth Schanzer, Horseracing Integrity and Safety Authority, Incorporated, Lisa Lazarus, Steve Beshear, Adolpho Birch, Ellen McClain, Charles Scheeler, Joseph DeFrancis, Susan Stover, Bill Thomason, D. G. Van Clief.

Joseph Forrest Busa, Courtney Dixon, U.S. Department of Justice, Civil Division, Appellate Section, Washington, DC, Stephen Ehrlich, U.S. Department of Justice, Commercial Litigation Branch, Washington, DC, for Defendants-Appellees Federal Trade Commission, Commissioner Noah Phillips, Commissioner Christine Wilson, Lina Khan, Rebecca Slaughter, Alvaro Bedoya.

Peter J. Sacopulos, Sacopulos Johnson & Sacopulos, Terre Haute, IN, for Amicus Curiae North American Association of Racetrack Veterinarians.

Autum Flores, Underwood Law Firm, P.C., Amarillo, TX, for Amicus Curiae American Quarter Horse Association.

Raffi Melkonian, Wright, Close & Barger, L.L.P., Houston, TX, for Amici Curiae Reason Foundation, Cato Institute, Competitive Enterprise Institute, Goldwater Institute, Manhattan Institute for Policy Research, Niskanen Center.

Eric Grant, Hicks Thomas, L.L.P., Sacramento, CA, Paul Emmanuel Salamanca, Lexington, KY, for Amici Curiae Senator Mitch McConnell, Representative Paul Tonko, Representative Andy Barr.

Gregory George Garre, Blake E. Stafford, Latham & Watkins, L.L.P., Washington, DC, for Amicus Curiae Thoroughbred Industry Participants.

Aaron Michael Streett, Elisabeth Catherine Butler, Baker Botts, L.L.P., Houston, TX, for Amicus Curiae Financial Industry Regulatory Authority, Incorporated.

Before King, Duncan, and Engelhardt, Circuit Judges.

Stuart Kyle Duncan, Circuit Judge:

We again consider constitutional challenges to the Horseracing Integrity and Safety Act of 2020 ("HISA"). In HISA, Congress empowered a private corporation—the Horseracing Integrity and Safety Authority ("Authority")—to create and enforce nationwide rules for thoroughbred horseracing. Last time, we held HISA facially unconstitutional under the private nondelegation doctrine because the Authority's rulemaking was not subordinate to the Federal Trade Commission ("FTC"). See Nat'l Horsemen's Benevolent & Protective Ass'n v. Black (Horsemen's I), 53 F.4th 869 (5th Cir. 2022). At the time, we did not consider a separate nondelegation challenge to the Authority's enforcement power. Congress responded to our decision by amending HISA, giving the FTC power to abrogate, add to, or modify the Authority's rules.

On remand, the district court held the amendment cured HISA's constitutional deficiencies because the FTC now has general rulemaking power over the Authority's activities. It also rejected claims raised by a new plaintiff, Gulf Coast Racing LLC ("Gulf Coast"), that HISA violates the Constitution's Appointments Clause because the Authority wields significant governmental authority. The plaintiffs all appealed, arguing HISA is still constitutionally deficient under the private nondelegation doctrine, the Due Process Clause, the Appointments Clause, and the Tenth Amendment.

We agree with nearly all of the district court's well-crafted opinion. Specifically, we agree that the FTC's new rulemaking oversight means the agency is no longer bound by the Authority's policy choices. In other words, the amendment solved the nondelegation problem with the Authority's rulemaking power. We also agree that HISA does not violate the Due Process Clause by putting financially interested private individuals in charge of competitors. Further, we agree that, under current Supreme Court precedent, see Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 115 S.Ct. 961, 130 L.Ed.2d 902 (1995), the Authority does not qualify as a government entity subject to the Appointments Clause. Finally, we agree that plaintiff Gulf Coast lacks standing to bring its Tenth Amendment challenge.

We disagree with the district court in one important respect, however: HISA's enforcement provisions violate the private nondelegation doctrine. The statute empowers the Authority to investigate, issue subpoenas, conduct searches, levy fines, and seek injunctions—all without the FTC's say-so. That is forbidden by the Constitution. We therefore DECLARE that HISA's enforcement provisions are facially unconstitutional on that ground. In doing so, we part ways with our esteemed colleagues on the Sixth Circuit. See Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023) (rejecting nondelegation challenge to HISA's enforcement provisions).

Accordingly, the district court's judgment is AFFIRMED in part and REVERSED in part.

I. BACKGROUND

A. HISA Framework

In 2020, HISA created a framework for enacting and enforcing nationwide rules governing doping, medication control, and racetrack safety in the thoroughbred horseracing industry. See 15 U.S.C. § 3054(a). See generally Horsemen's I, 53 F.4th at 873-75. To "develop[ ] and implement[ ]" these rules, HISA empowers a "private, independent, self-regulatory, nonprofit corporation, to be known as the 'Horseracing Integrity and Safety Authority,' " subject to the "oversight" of the FTC. §§ 3052(a), 3053.

Under HISA, the Authority writes all the rules—that is, rules fleshing out the substantive areas covered by HISA, as well as rules governing investigation, adjudication, and sanctions.¹ The Authority submits proposed rules to the FTC, which publishes them for public comment. § 3053(b)(1), (c)(1). Rules take effect only after FTC approval, which must occur within 60 days of publication. The FTC "shall approve" a proposed rule if it finds the rule "consistent" with the Act and with "applicable rules approved by the [FTC]." § 3053(c)(2). Originally, this "consistency review" did not allow the FTC to reject a proposed rule based on its disagreement with the Authority's policy choices. Horsemen's I, 53 F.4th at 884-87. In Horsemen's I, we held that this arrangement violated the private nondelegation doctrine by making a private entity superior to a government agency. Ibid. In response, Congress amended HISA to give the FTC power to "abrogate, add to, and modify" the Authority's rules. § 3053(e).

The Authority also has the power to enforce HISA. It does so by (1) exercising "subpoena and investigatory authority," § 3054(h); (2) imposing civil sanctions, §§ 3054(i), 3057; and (3) filing civil actions seeking injunctions or enforcement...