Saying their costs have gotten out of hand illegally and
there has been the threat of a shutdown, Churchill Downs Inc. and the
New York Racing Association 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.

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 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.”

Because CDI refused to make a nearly $2 million payment based
on the 50-50 purse-and-starts fees, the lawsuit said, 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 horse races,” 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 twenty 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.”

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.”

The 18 defendants include HISA and its administrative parent
the Federal Trade Commission and U.S. government. Individual defendants include
officers of HISA, including CEO Lisa Lazarus, and the FTC, including
chairperson Lina Khan.

A spokesperson for HISA did not respond to a request
Thursday morning for comment about the lawsuit.

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 August three years after a failed
drug test led to the disqualification of his first-place finisher Medina Spirit
in the 2021 Derby.