[1992/oagheade.htm]

OAG 92-134

August 28, 1992

Wayne G. Lyster III

Chairman, Kentucky Racing Commission

Kentucky Horse Park

4063 Iron Works Pike

Lexington, Kentucky 40511

Dear Mr. Lyster:

Your agency has submitted four questions that arise out of the consolidation of the State Racing Commission and the Harness Racing Commission into the Kentucky Racing Commission. The facts as they have been presented to us are these:

Louisville Downs, Inc., held a license granted by the Harness Racing Commission to conduct harness racing and inter-track wagering. As of February 1, 1992, Eastern Kentucky Racing, Inc., had never held such a license and had no facility at which to conduct live racing. On February 1, 1992, the two corporations signed an agreement stating that in consideration of $250,000 “Louisville Downs hereby leases unto Eastern Racing its remaining status and rights to conduct live harness racing and/or intertrack parimutuel wagering.” The agreement purports to transfer status as a licensee, rather than the license itself. This aspect of the agreement may owe its existence to KRS 230.690(4), which states, “A license issued under this section is neither transferable nor assignable . . . .”

On February 14, 1992, the Harness Racing Commission granted a 1992 license to Eastern Kentucky Racing, Inc., even though that corporation will not conduct live racing in 1992. The Commission also granted Eastern Kentucky Racing the inter-track wagering dates that had been previously awarded to Louisville Downs. The Commission took this action despite the language in KRS 230.376 limiting simulcasting and inter-track wagering to tracks “duly licensed as of January 1, 1990, by the Kentucky State Racing Commission or the Kentucky Harness Racing Commission to conduct horse racing.”

On March 30, 1992, legislation became effective abolishing the Harness Racing Commission and the State Racing Commission, and placing authority over both harness and thoroughbred racing in the Kentucky Racing Commission. Section 1 of the legislation (House Bill 749) says, “All licenses approved by, and dates awarded by, the respective commissions shall remain in effect through December 31, 1992.” The new Kentucky Racing Commission has been confronted with questions from certain licensees challenging the validity of the license issued to Eastern Kentucky Racing.

Your letter to us raised these questions:

1. Before the provisions of HB 749 became law, could a previous Commission award a valid license as required by KRS 230.376(2) without any possibility of horse racing in the same year as that of the license?

2. In consideration of the current law (i.e. — the new provisions of HB 749: page 20, line 22; page 22, line 2; and page 50, line 9), should the current Commission consider any track or association for a license for a calendar year in which there is no reasonable presumption of horse racing?

3. Does the “grandfather” clause in HB 749 (page 3, lines 15-17) mandate that receipt of simulcasting by Eastern Kentucky Racing, Inc., be permitted in 1992?

On August 14, 1992, the executive director of the Kentucky Racing Commission submitted this additional question:

Specifically: can EKR, Inc. be considered to have Louisville Downs' license; and if they do not have Louisville Downs' license, are they eligible to receive ITW in light of the January 1, 1990 licensing requirement in KRS 230.376(2).

KRS 230.690 (repealed by HB 749) described the Harness Racing Commission's authority to grant licenses to engage in harness racing, simulcasting, and inter-track wagering. We will not quote at length from subsection 2 of the statute, but in summary the Commission was empowered to grant a license if the proposed conduct of racing would be in the best interest of the community and of the Commonwealth and would “nurture, promote, develop, or improve the standardbred, quarter horse, Appaloosa, and Arabian industry in the Commonwealth.” We find nothing in the statute that limited the grant of licenses to only those organizations that actually conducted racing during the year in which the license was granted. Therefore the answer to your first question is yes.

In response to your second question, the Kentucky Racing Commission must exercise its discretion in deciding whether to award a license to an organization that does not plan to conduct live racing during the year for which the license is sought. The standard to be used by the Commission, as set out in KRS 230.300(2), is essentially the same standard as the one described in the preceding paragraph. If the Commission does not believe that granting such a license would be in the best interests of the state, the community, and the industry, it should not grant the license.

Your remaining questions implicate the ability of the current commission to reconsider or overrule an action taken by a predecessor commission. There seems to be no question that the Harness Racing Commission did actually grant a license to Eastern Kentucky Racing; but there is perhaps some doubt about the legality of that action. The statutes clearly restrict inter-track wagering licensees to tracks that were licensed before 1990. That provision would appear to exclude Eastern Kentucky Racing, which received its first license in 1992. Eastern Kentucky Racing insists that while Louisville Downs could not transfer its license to Eastern Kentucky Racing, it could transfer its status as a track licensed before 1990, thereby rendering Eastern Kentucky Racing eligible to receive the license granted by the Harness Racing Commission in 1992. Apparently the Harness Racing Commission agreed with that proposition, for it issued an inter-track wagering license to Eastern Kentucky Racing fully aware that Eastern Kentucky Racing was not licensed before 1990.

This office cannot issue an opinion that attempts to declare the validity of Eastern Kentucky Racing's license. Such a declaration can come only from a court, which is authorized to make findings of fact and to hear arguments from both sides of a dispute. Our purpose in issuing opinions is to inform public officials of their duties under the law. We can provide our opinion on the duty of the Kentucky Racing Commission as it relates to the license of Eastern Kentucky Racing, and that duty is to accept the license as valid.

Section 1 of HB 749 (Acts 1992 c. 109) creates a new KRS section that describes the transition from the two predecessor commissions to the new Kentucky Racing Commission. Subsection 6 says, “All licenses approved by, and dates awarded by, the respective commissions shall remain in effect through December 31, 1992.” This provision appears to us intended to prevent the very sort of dispute among licensees that has provoked your questions to us. The General Assembly no doubt foresaw that the creation of a new commission with authority over all racing would tempt some parties to demand that the new commission review past licensing decisions made by the old commissions. Apparently that is exactly what happened in this instance. The minutes of the April 14, 1992, meeting of the Kentucky Racing Commission state, “Another lengthy discussion ensued in which Mr. Wilson [an attorney representing Churchill Downs] and Don Sturgill, counsel for the HBPA, questioned the type of license given to Eastern Kentucky Racing, Inc., since they did not have a track or conduct live racing in the current year.”

We believe that the General Assembly enacted the grandfather clause quoted in the preceding paragraph in order to allow the new commission to go about its work uninterrupted by complaints that a predecessor commission should or should not have issued a license to a particular track. As far as the Kentucky Racing Commission is concerned, it doesn't matter whether the Harness Racing Commission acted improvidently in awarding the license to Eastern Kentucky Racing; the simple fact is that they did issue it and consequently the license “shall remain in effect through December 31, 1992.” The statute does not say that a license may remain in effect if the new commission finds that it was validly issued; on the contrary the statute says that all licenses shall remain in effect throughout this calendar year. Of course, if Eastern Kentucky Racing's license is successfully challenged in court, then the Commission must abide by that ruling.

We emphasize that the Kentucky Racing Commission is not obligated by the statute to award a license to Eastern Kentucky Racing in future years. The license granted by the Harness Racing Commission remains in effect only through December 31 of this year.

Sincerely,

Chris Gorman

Attorney General

Ross T. Carter

Assistant Attorney General