The Nebraska Supreme Court has reversed a Lincoln judge's ruling that the state's Racing Commission exceeded its authority in 2018 by ordering tracks in Lincoln and Omaha to turn over funds they collect to the Nebraska Thoroughbred Breeders Association.
Friday's decision was a reprieve to tracks in Grand Island and Columbus, which have shared in the pooled funds for nearly two decades, as more of the funds came from wagering on simulcasts rather than live racing in the state.
But it didn't exactly solve the issue.
And one of the justices said the outcome could provide the Legislature reason to consider a change that would have allowed the court to take up the matter.
First, writing for the court, Justice Jeffrey Funke said the district court lacked jurisdiction to hear the case because Omaha Exposition and Racing Inc. didn't give notice to the breeders association within 30 days of filing the lawsuit.
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As a result, Lancaster County District Judge Susan Strong's order reversing and vacating the Commission’s order was void and the appeal must be dismissed, the justice said.
"In vacating the order of the district court, we make no determination as to the merits of the Commission’s order, whether the Commission had authority to consider NTBA’s request, whether the Commission had authority to appoint a custodian, or the extent of the Commission’s authority to approve a bookkeeper," Funke wrote.
It's all about a state statute, which requires licensed horse tracks to deduct a certain amount from wagers to promote horse breeding in Nebraska and be distributed as breeder and stallion awards for live races.
But, unlike other states, Nebraska's law doesn't spell out who should be the custodian of the funds.
For 19 years, the State Racing Commission followed and approved an agreement between the Horsemen's Benevolent and Protective Association and the Nebraska Thoroughbred Breeders Association to disburse breeder funds to Fonner Park in Grand Island, State Fair Park in Lincoln and Agricultural Park in Columbus.
But a dispute arose in 2017, when the HBPA advised the breeders association it was suspending the distribution of funds because Fonner Park had failed to contribute its share.
Fonner Park, which for years has staged the vast majority of the state's live races, contended it could be covered by simulcast wagers at other Nebraska tracks. But the HBPA said that went against state statute, which required contributions to come from the individual track.Â
In its vote, the Racing Commission concluded that the breeders association was the proper entity to hold the funds because "its purposes squarely align" with the goal of collecting the breeder funds.
But in a decision Dec. 13, 2018, Strong reversed it, saying there was no authority requiring some other entity to be the custodian of the funds, "and certainly no authority that another entity may distribute payments of such funds to any Nebraska racetrack at its discretion."
She said the past practice of "subsidizing other racetracks" by allowing the breeders association to allocate a portion of the funds to the various tracks by deciding amounts of breeder purses was "contrary to the statutes and cannot be sanctioned by this court."
In Friday's reversal of Strong's order, Justice Jonathan Papik offered a concurring opinion that the court lacked jurisdiction to hear the case based on lack of notice and prior case law.
He said he wrote separately to observe that the court's interpretation of the Administrative Procedure Act resulted in a rule that is "legally anomalous and, in my view, can lead to peculiar results."
While the Nebraska Thoroughbred Breeders Association and the Racing Commission hadn't been formally served, they were aware of the lawsuit and filed answers within 30 days, so there was no need to worry whether they received adequate notice.
"Given the important role of judicial review of administrative agency actions, this strikes me as a particularly unfortunate area for counterintuitive rules or jurisdictional traps," Papik said.
The outcome in the case may provide reason for the Legislature to reconsider whether the Administrative Procedure Act should be amended to allow courts to exercise jurisdiction when parties aren't served "but nonetheless make a timely general appearance in a judicial review proceeding."