672 F.Supp.3d 220
N.D. Tex.2023Background
- Congress enacted the Horseracing Integrity and Safety Act (HISA) to create a nationwide anti-doping/track-safety regime and recognized a private nonprofit, the Horseracing Integrity and Safety Authority, to draft rules subject to FTC oversight.
- Under the original HISA the Authority drafted rules and the FTC could only review proposed rules for consistency and recommend changes; the Authority retained effective control.
- The Fifth Circuit held that arrangement unconstitutional under the private-nondelegation doctrine because the FTC lacked power to abrogate, add to, or modify Authority rules and thus the Authority did not function subordinately.
- Congress quickly amended HISA to give the FTC explicit authority to “abrogate, add to, and modify” the Authority’s rules; the case was remanded to the district court.
- Plaintiffs (horsemen, Gulf Coast Racing, and Texas/intervenors) renewed challenges: private-nondelegation and Due Process (self-dealing); Gulf Coast also pressed Appointments/Removal (Article II) and a Tenth Amendment anti-commandeering claim.
- After trial the district court found (1) Authority is a private entity (law of the case and precedent), (2) the 3053(e) amendment cured the Fifth Circuit’s nondelegation defects, (3) Due Process and Article II claims fail, and (4) private plaintiffs lack standing for the Tenth Amendment claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Private nondelegation / delegation to a private entity | HISA unlawfully vests legislative/executive power in a private Authority because the FTC could not require changes pre-amendment; even post-amendment plaintiffs say statutory fixes insufficient. | Congress amended §3053(e) so the FTC may abrogate, add to, and modify Authority rules and thus retains meaningful oversight and policy control. | The amendment cures the defect: FTC can initiate and change rules; HISA as amended survives facial nondelegation challenge. |
| Due Process (self-dealing by industry participants) | Authority officials are industry-affiliated and may regulate competitors, violating Fifth Amendment due process. | HISA contains conflict-of-interest and independence safeguards; FTC oversight and amendment reduce any risk; no evidence of actual self-dealing harming plaintiffs. | Facial and as-applied due-process claims fail: statutory safeguards + lack of concrete self-dealing evidence. |
| Article II (Appointments Clause / removal) | Authority directors are federal officers (Lucia) and must be appointed/ removable under Article II. | Authority is private (not created or controlled by government); Lebron and related precedent govern; if private, Appointments Clause inapplicable. | Authority is a private entity (Fifth Circuit law of the case and independent analysis); Article II claims dismissed. |
| Tenth Amendment anti-commandeering | HISA conditions effectively force states to implement federal program; private plaintiffs prefer state regulation and are harmed. | HISA uses an elect-or-authority funding/assessment mechanism; if a state does not elect, the Authority will collect assessments, so private plaintiffs will remain regulated; private plaintiffs lack traceable, redressable injury. | Private plaintiffs lack Article III standing for anti-commandeering claim; claim dismissed. |
Key Cases Cited
- Nat’l Horsemen’s Benevolent & Protective Ass’n v. Black, 53 F.4th 869 (5th Cir. 2022) (Fifth Circuit held original HISA unconstitutional under private-nondelegation doctrine)
- Oklahoma v. United States, 62 F.4th 221 (6th Cir. 2023) (upheld amended HISA; interpreted §3053(e) to allow FTC to create and modify rules)
- Lebron v. Nat’l R.R. Passenger Corp., 513 U.S. 374 (1995) (test for when a corporation is a government entity for constitutional purposes)
- Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940) (private entities may act in aid of agencies if they function subordinately under agency surveillance)
- Carter v. Carter Coal Co., 298 U.S. 238 (1936) (early statement of private-nondelegation concerns)
- Ass’n of Am. R.Rs. v. Dep’t of Transp., 721 F.3d 666 (D.C. Cir. 2013) (Amtrak I: private-nondelegation analysis that framed the approve/disapprove/modify test)
- Amtrak III, Nat’l R.R. Passenger Corp. v. Boston & Maine Corp., 821 F.3d 19 (D.C. Cir. 2016) (Due Process concerns where a self-interested private entity regulated competitors)
- A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935) (historical extreme nondelegation example; discussed but distinguished)
- Free Enter. Fund v. Pub. Co. Accounting Bd., 561 U.S. 477 (2010) (used Lebron principles in government/private entity analysis)
- Lucia v. SEC, 138 S. Ct. 2044 (2018) (addressed Appointments Clause for ALJs; noted but distinguished as involving clear federal officers)