Matter of Gill v New York State Racing & Wagering Bd. (2005 NY Slip Op 51317(U))

Matter of Gill v New York State Racing & Wagering Bd.

2005 NY Slip Op 51317(U)

Decided on June 27, 2005

Supreme Court, New York County

Zweibel, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Petitioners Michael Gill, a thoroughbred race horse owner, and Mark Shuman, a licensed trainer, bring this combined CPLR Article 78 and declaratory judgment action seeking a ruling (1) declaring 9NYCRR §4043.7 invalid and enjoining its implementation and enforcement, and (ii) annulling and setting aside the August 25, 2004 Findings and Order of respondent New York Racing and Wagering Board ("the Board"), disqualifying petitioners' horses and declaring their purses forfeited. Specifically, relief is sought, pursuant to sections 7803(3), 7806 and 3001 of the Civil Practice Law and Rules ("CPLR"), on the grounds that the Board's determination to promulgate section 4043.7 and, thereafter, to enforce that Rule against petitioners, was in violation of lawful procedure, affected by error of law, arbitrary and capricious and an abuse of discretion. The Board opposes the petition and cross-moves, pursuant to CPLR 3211 and 7804, to dismiss the Verified Petition on the grounds that petitioners failed to exhaust their administrative remedies, the petition is time-barred, and/or the petition is pre-mature because the August 25, 2004 decision purportedly was only a notification of post-race drug positives and, as such, was a "non-final" order. Petitioners oppose dismissal of the petition on procedural grounds, arguing that the Board's claims are meritless and is a ploy by the Board to avoid judicial scrutiny of its "legislative" initiatives.

The Court has reviewed all the affirmations/affidavits, exhibits and Memoranda of Law submitted by all the parties and the following is this Court's decision.

Respondent the New York State Racing and Wagering Board is the regulatory agency that has general jurisdiction over all pari-mutuel racetracks and betting activities, as well as the persons engaged in on-track racing throughout New York State (see NY Racing, Pari-Mutuel Wagering and Breeding Law ["Racing Law"] § 101). In order to maintain the necessary control over thoroughbred racing, the Board has the authority and responsibility to license all persons [*2]engaged in pari-mutuel thoroughbred horse racing in the State (see Racing Law § 213[1]). No person is permitted to participate as an owner, trainer or veterinarian at a thoroughbred race meet without being licensed by the Board (see Racing Law § 213[1]; see also 9NYCRR §4002.1[b]). Additionally, the Board promulgates and enforces rules designed to preserve the integrity of pari-mutuel horse racing and is granted the ability to act swiftly and appropriately to prevent abuses by licensees and the loss of public confidence (see Racing Law § 213[1]).

Punishment for a violation of a Board's rule may be imposed at the track level, or by disciplinary action initiated by the Board itself (see 9 NYCRR § 4022.23). Dispositions at track level are handled by three stewards, one of whom is appointed by the Board (the "State steward"), one by the Jockey Club and one by the owner or operator of the particular race track (see Racing Law § 212; 9NYCRR §§ 4022.1, 4022.16). Pursuant to 9NYCRR § 4022.12, however, the State steward has sole authority to impose punishment for rule infractions, which cannot exceed suspensions of 60 days per violation or a fine of $5,000 (see 9NYCRR § 4022.12). Before exercising this authority, the State steward is required to consult with the other two stewards (9NYCRR § 4022.12). All penalties imposed by the stewards are appealable or referable to the Board (9NYCRR §§ 4022.1, 4022.16).

Final determinations of the Board adverse to a licensee are reviewable in an Article 78 proceeding (see Racing Law § 213[3]). The Board's statutory powers include the power to promulgate rules and regulations in order to prevent "the administration of drugs or stimulants or other improper acts for the purpose of affecting the speed" of the horses that are about to participate in races (Racing Law §301[2][b]; see also L. 1940, ch. 254, s36 as amd., L. 1973, ch. 346, s3 [original and amended statutory authorizations to promulgate rules and regulations]). The rules and regulations promulgated by the Board are contained in Title 9, Subtitle T, Chapter B, Parts 4100, et seq. of the Official Compilation of the Codes, Rules and Regulations of the State of New York ("9NYCRR").

In 1982, the Board adopted a series of rules - codified at 9 NYCRR Part 4043 - to regulate the administration of drugs to Thoroughbred racehorses prior to their participation in pari-mutuel races. Certain provisions in the Board's Rules restrict the administration of drugs to a racehorse prior to the start of a program containing a race in which the horse is to compete. Those sections establish a schedule which provides that certain drugs may be used at any time up to race time (9NYCRR § 4043.2[a]); that certain drugs may be administered by injection until 24 hours before the start of a racing program (9NYCRR § 4043.2[b]); that certain drugs may be administered by any means until 48 hours before the start of a racing program (9NYCRR § 4043.2[c]); that certain drugs may be administered by any means until 72 hours before the start of a racing program (9NYCRR § 4043.2[d]); and that no other drugs may be administered by any means within one week of the start of a racing program (9NYCRR § 4043.2[e]). The purpose of the Board's Rules was to provide a "flexible set of standards for trainers and veterinarians in administering drugs to a racehorse before the horse runs in a race. To that end, they establish a schedule which informs the horse's trainer how long before race time a particular drug may be given to a competing horse" (Equine Practitioners Association, Inc. v. New York State Racing and Wagering Board, 105 AD2d 215, 217 [1st Dept. 1984], affd. and modified 66 NY2d 786 [1985]).

On October 30, 2003, the Board filed a notice of emergency adoption (the "Notice"), [*3]adding §4043.7 (the "Emergency Rule"), to Part 4043 of the Board's Rules. The Board's Notice contains, inter alia, the following statements:

* * *

Alternate Approaches: There are no other significant alternatives to this rule, which was drafted to [*4]

By operation of State Administrative Procedure Act ("SAPA") §202(6), the Board's "Emergency Rule" automatically would expire after 90 days. Within the original 90-day period, however, the Board-pursuant to § 202(6)(b)- re-adopted the Rule-again, on an emergency basis. The Board thereafter continued to re-adopt the "Emergency Rule" - all on an "emergency" basis - a total of 5 times: on January 30, April 30, August 2 and November 1, 2004.

On August 8, 2004 Clay's Rocket competed in the second race at Saratoga Race Course and finished first in the race. Following the race, the Board's test barn supervisor, and Board inspector, together with a Board veterinarian, assisted in collecting post-race samples of blood from Clay's Rocket, which were shipped to the Board's Equine Drug Testing Lab at Cornell University. The post-race samples of blood taken from Clay's Rocket tested positive for the drug fluphenazine.

On August 9, 2004, Kalookan Lady competed in the fifth race at Saratoga Race Course and finished fourth in the race. Following the race, the Board's test barn supervisor, and the Board inspector, together with a Board veterinarian, assisted in collecting post-race samples of blood from Kalookan Lady, which were shipped to the Board's Equine Drug Testing Lab at Cornell University. The post-race samples of blood taken from Kalookan Lady tested positive for the drug fluphenazine.

By notice date dated August 25, 2004 and received by Shuman on August 26, 2004, New York State Investigator Louis Gonzalez informed trainer Mark Shuman of the post race positive blood tests for Clay's Rocket and Kalookan Lady after their respective races. Pursuant to 9 NYCRR § 4043.7, the notification further directed Shuman to call Investigator Gonzalez to set up an interview and provide the veterinary records of treatment for the horses for the past 90 days. Shuman was directed to return purse monies to the New York Racing Association ("NYRA"). Finally, the horses were to be retested for drug clearance before they could start again. Specifically, the Board Investigator Louis Gonzalez notification stated:

In compliance with the above directive, (but while expressly reserving their rights to challenge the Board's ruling), the purse monies were returned to the New York Racing Association ("NYRA") and KALOOKAN LADY was returned to petitioners.

On September 18, 2004, Board Investigator Gonzalez issued a second "notification" concerning the Board's application of § 4043.7 to petitioners:

obtained.

The sample from Clay's Rocket was not re-tested. Investigator Gonzalez reminded petitioners' counsel that as of September 18, 2004, Shuman had not participated in the Board's investigation of the post race positive for both horses in that neither Shuman nor a member of his staff had been interviewed by the Board and the Board had not received the veterinary records of treatment for either horse. The investigator also stated that the Board had not received a request from Shuman to conduct an independent blood test of the blood samples taken from the horses after their respective races.

Section 4043.7, by its terms, does not permit imposition of penalty upon the trainer, personally, "based solely upon the finding by the laboratory that the drug reserpine or the drug fluphenazine was present" in a sample. Section 4043.4 ("Trainer's responsibility"), however, does provide that

As of the date of the Petition, the Board is continuing its investigation of the fluphenazine drug "positives" from the August 8 and 9, 2004 races - including propounding interrogatories to, and demanding production of veterinarian records from, petitioners-thus raising the possibility that the Board will seek further sanction against petitioners, personally, for violating the board's "Emergency Rule."

Petitioners brought the instant combined CPLR Article 78 and Declaratory Judgment action seeking, inter alia, a finding and determination that a certain "emergency rule" (9 NYCRR § 4043.7) was promulgated by the Board in violation of the New York State Constitution and the SAPA. Specifically, petitioners argue that the Board's "Emergency Rule" relating to the medication fluphenazine should be annulled, its implementation or enforcement enjoined, and the Board's August 25, 2004 ruling vacated, because the Board violated or otherwise failed to comply with the emergency rule provisions of the SAPA § 202 by impermissibly re-adopting the rule a total of five times- all on a supposedly "emergency" basis. According to petitioners, the support for each re-adoption was based on "provably false representations regarding the supposed necessity for "emergency" enactment and the Board promulgated the rule without publishing or disseminating the rule in a manner likely to provide notice to those directly affected by it. Petitioner Gill also challenges the Board's August 25, 2004 decision to invoke the "emergency rule" as a violation of his Due Process rights to notice and hearing, and as an unconstitutional regulatory "taking."

The Board cross-moves to dismiss the Verified Petition on the ground that the Verified Petition must be dismissed for failure to exhaust administrative remedies, or as time-barred or as premature because the August 25, 2004 decision purportedly was only a notification of post-race drug positives and, as such, was a "non-final" order.

The Board's cross-motion to dismiss is denied. The Board argues that the petition must be dismissed in its entirety because petitioners allegedly failed to exhaust their administrative remedies by failing to seek a declaratory ruling from the Board on the validity of Rule 4043.7 pursuant to SAPA §§ 204 and/or 205. On February 3, 2005, by separate notices, the State steward, acting pursuant to 9NYCRR §§ 4043.5 and 4043.7, disqualified Clay's Rocket and Kalookan Lady respectively and unplaced the horse in the order of finish for their respective August 8, 2004 race and the August 9, 2004 race at Saratoga Race Course for the drug fluphenazine. However, by letter dated February 7, 2005, petitioners apparently did formally request that the Board rule on the validity and applicability of its "emergency rule. By letter dated March 2, 2005, the Board expressly "decline[d] to make any ruling(s) in response" to petitioners' request. Thus, petitioners pursued administrative remedies under SAPA §§ 204 and 205, but were rebuffed by the Board. Their attempt to exhaust their administrative remedies was frustrated by the Board.

Additionally, because the Board never promulgated a regulation providing for declaratory judgments on the validity of its rules, the requirement of petitioning the Board pursuant to SAPA is obviated. Thus, SAPA § 205 is no bar to the instant proceeding as the Board has not provided for declaratory rulings pursuant to section 204 of the SAPA (see Building Contractors Association, Inc. v. Tully, 65 A.D. 199, 202 [3rd 1978]; New York State Builders Assoc. v. State [*8]of New York, 98 Misc 2d 1045, 1048 [Sup. Ct. Albany Co. 1979]).

Moreover, petitioners' claims are exempt from any exhaustion requirement because they challenge the Board's "emergency rule" as unconstitutional and beyond the Board's power to promulgate (see Watergate II Apartments v. Buffalo Sewer Authority, 46 NY2d 52 [1978]; see also Sievers v. City of New York Dept. of Bldgs., 146 AD2d 473 [1st Dept. 1989]). Petitioner claims that the Board violated New York Constitution, Article 1V, § 8 and SAPA § 202 by impermissibly re-adopting its rule a total of 5 times-all on a supposed "emergency" basis; supporting each re-adoption by false and unsubstantiated claims regarding the supposed necessity for "emergency" enactment; and promulgating the rule without publishing or disseminating the rule in a manner likely to provide notice to those directly affected by it.

Additionally, the doctrine of "futility " also exempts petitioners' claims from any exhaustion requirement (see Watergate II Apartments v. Buffalo Sewer Authority, 46 NY2d, at 57). The Board has already "declined" to rule upon whether its "emergency rule" was validly enacted. Moreover, it is questionable whether the Board is even empowered to decide the constitutional questions raised by petitioner (see e.g. Dozier v. New York City, 130 AD2d 128, 136 [2d Dept. 1987]; Chapel, Inc. v. Van Den Hende, 32 AD2d 565 [2d Dept. 1969]). Interestingly, In the Matter of the Disqualification of Doctrinaire (Aqueduct Race Track First Race of March 15, 1994, the Board previously disclaimed authority to rule upon the constitutionality of its own regulations in its Findings of Facts and Order of the New York State Racing and Wagering Board, Division of Thoroughbred Racing, dated July 29, 1994 (annexed as Exhibit A to Petitioner' Memorandum of Law in Opposition to Respondent's Motion to Dismiss).

Similarly meritless is the Board's argument that this proceeding must be dismissed as "premature" because "the August 25, 2004 post race positive test is not a final determination subject to review by an Article 78 proceeding." According to the Board, petitioners failed and refused to participate in a post-August 25, 2004 "investigation" and no administrative appeal has ever been file by petitioners. The Court notes, that contrary to the Board's claim, petitioners' Third Cause of Action is not a challenge to a "post race positive drug test or notice thereof, but rather challenges as unconstitutional the August 25, 2004 disqualification of his horses, the forfeiture of their purses and the banishment of those horses from future races. In any event, an administrative ruling is deemed "final: for Article 78 purposes when they "impose an obligation, deny a right or fix some legal relationship as a consummation of the administrative process" and because determination of whether the agency action is "final" requires that "a pragmatic evaluation [be made] of whether the 'decisionmaker has arrived at a definitive position on the issue that inflicts an actual, concrete injury" (Essex County v. Zagata, 91 NY2d 447, 453 [1998][citations omitted]; see e.g. Stop-The-Barge v. Cahill, 1 NY3d 218 [2003]; Demers v. N.Y.State Dept. of Environmental Conservation, 3 AD3d 744, 746 [3rd Dept. 2004]). Petitioner Gill specifically alleges that those acts were unconstitutional in that he was at no time afforded a post-forfeiture hearing, and that the Board's banishment Order denied petitioner Gill the economically viable use of his horses and failed to advance any legitimate State interest. Therefore, using a "pragmatic evaluation," as petitioner suggests, it is clear that the Board did not simply fail to notify petitioners that trace amounts of "fluphenazine" had been found in their horses, and that this violated an "emergence rule," but also declared petitioners' horses disqualified, their purses forfeited, required that one of the horses be "reclaimed," and banned [*9]both horses from future races. This is not a tentative, preliminary or "interlocutory" Order.

Furthermore, after a seven month investigation which followed the August 25, 2004 ruling, on February 3, 2005, the Stewards first announced that (i) no action would be taken against petitioner Shuman under the separate, "trainer responsibility" rule, and (ii) that they had no discretion in regards to the "emergency rule," for which liability was "mandatory." Since that determination was rendered prior to issue being joined in this proceeding, it is clear that there is a final Order for this Court to review. As the Appellate Division, Second Department, has observed, "the ripeness doctrine is not so inflexible as to require us to ignore the fact that final determinations were rendered prior to issue being joined and are part of the record before us" (see Dozier v. New York City, 130 AD2d, at 134).

The Court notes, that contrary to the Board's claim that petitioners failed or otherwise "decided not to participate in" the Board's post-August "investigation," petitioners seem to have attempted to participate from the start. Also, the record seems to contradict the Board's claim that no administrative appeal was ever "filed" or otherwise sought by petitioners. On August 27, 2004, within 24 hours of receiving notice of the Board's disqualification, forfeiture and banishment Order, Counsel for petitioners appears to have filed a notice of appearance with the Board. On February 3, 2005, petitioners apparently attempted to raise their constitutional and statutory objections with the Racing Stewards and were told the Stewards lacked discretion to consider them. By letter dated, February 4, 2005, petitioners filed their objection and appeal of the Steward's February 3 "ruling". By letter dated February 7, 2005, petitioners formally asked that the Board rule upon the validity and applicability of its "Emergency Rule." By letter dated March 2, 2005, the Board declined to do so. The Emergency Rule appears to have been promulgated in secret. "[w]hen an administrative body itself creates ambiguity and uncertainty... affected employees and their counsel should not have to risk dismissal for prematurity or untimeliness by necessarily guessing when a final and binding determination has or has not been made. Under these circumstances, 'the courts should resolve any ambiguity created by the public body against it in order to reach a determination on the merits and not deny a party his day in court'" (Mundy v. Nassau County Civil Service Commission, 44 NY 352 [1978][quoting Matter of Castaways Motel v. Schuyler, 24 NY2d 120 [1969] and citing City of New York v. State of New York, 40 NY2d 659 [1969]).

Finally, the Court rejects the Board's argument that the proceeding must be dismissed as time-barred because CPLR § 217(1) requires that a proceeding against a body or officer be commenced within four months after the determination to be reviewed and the challenged determination was issued on August 25, 2004 but the instant proceeding was not commenced until December 27, 2004, more than four calendar months after the August 25, 2004 Order. First, the four month Statute of Limitations applicable to an Article 78 proceeding did not begin to run until August 26, 2004 when petitioners received notice of the August 25, 2004 ruling (see Biondo v. New York State Board of Parole, 60 NY2d 832 [1983]). The last day to commence this proceeding was either December 25, 2004 (by the Board's calculation) or December 26, 2004 (as petitioner's maintain. However, December 25th was both a Saturday and a national holiday (Christmas), while December 26th was a Sunday. Under Section 25-a of the General Construction Law, petitioners' time to commence this proceeding was extended to the next business day, December 27, 2004, on which date the instant proceeding was, in fact, timely [*10]commenced (see General Construction Law § 25-a; Scuderi v. Board of Education, 49 AD2d 942 [2d Dept. 1975]). Furthermore, to the extent that petitioners' challenge to the Board's emergency Rule is considered an action for declaratory relief, the applicable limitations period is six years (see CPLR § 213; Maher v. New York State Div. of Hous. and Community Renewal, N.Y.L.J. p.24, col.5 [Sup. Ct. Westchester Co. Sept. 8, 1993]). Hence, the Board's Statute of Limitations argument fails.

Additionally, the Board opposes petitioners' request for leave to conduct discovery pursuant to CPLR 408 and SAPA § 202-A. Courts have "broad discretion in granting or denying disclosure," and are called upon to "balance the needs of the party seeking discovery against such opposing interests as expedition and confidentiality" (Zulu v. Egan, 1 AD3d 649 [3rd Dept. 2003] [citations omitted]; Niagara Mohawk Power Corp. V. City of Saratoga Springs Assessor, et al., 2 AD3d 953 [3rd Dept. 2003]). Given that the Board's own emergency rule-making notices proclaim that the requested material is available and may be obtained from the Board's counsel as well as the Board's failure to articulate any interest that might warrant denying the few documentary items that petitioners seek leave to obtain through discovery, the request for discovery of the four items sought by petitioners is granted to the extent that the requested material is to be provided to petitioners or to the Court with respondents Verified Answer for an in camera review of the material to determine whether it is relevant to the issues in this case.

Accordingly, it is Ordered that the cross-motion to dismiss the petition is denied in its entirety and that respondent has twenty (20) days from receipt of this decision to submit a verified answer to the petition; and it further

Ordered that the portion of the petition seeking discovery is granted petitioners to the extent that the requested material is to be provided to petitioners or to the Court with respondent's Verified Answer for an in camera review of the material to determine whether it is relevant to the issues in this case within 20 days of receipt of this Decision and Order unless respondents believe the items non-discoverable based on opposing interests such as confidentiality in which case the items are to be produced in Court for an in camera review within 20 days of receipt of this Decision and Order.