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Suffolk Regional Off-Track Betting Corp. v. New York State Racing and Wagering Board

December 17, 2008

IN THE MATTER OF SUFFOLK REGIONAL OFF-TRACK BETTING CORPORATION, PETITIONER-CROSS APPELLANT,
v.
NEW YORK STATE RACING AND WAGERING BOARD, ET AL., APPELLANTS-RESPONDENTS. (AND FOUR OTHER RELATED PROCEEDINGS.)



The opinion of the court was delivered by: Kaye, Chief Judge

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

This opinion is uncorrected and subject to revision before publication in the Official Reports.

At the core of this litigation with the Off-Track Betting Corporations (OTBs) on one side, and the State Racing and Wagering Board and state harness racing tracks on the other side are questions of statutory interpretation. We begin with a brief history of the relevant sections of the Racing, Pari-Mutuel Wagering and Breeding Law (the Racing Law), and the present controversy.

Prior to 1970, New York permitted wagering on horse racing only at its thoroughbred and harness tracks, leaving (as Supreme Court observed) "a lucrative and illegal niche for local bookies, who took bets from those individuals who wished to gamble on horse racing but who were unable or unwilling to travel to the race track to place their wagers." When off-track betting was thereafter authorized, its popularity depleted attendance at the tracks and threatened their viability. To redress the situation, the Legislature in 1973 created seven regional OTBs*fn1 to administer off-track wagering and required them to pay a "state tax," a portion of which went to the regional harness tracks and nonprofit racing associations (L 1973, ch 346, as amd). The intention of the Legislature was:

"to derive from such betting . . . a reasonable revenue for the support of government, and to prevent and curb unlawful bookmaking and illegal wagering on horse races. It is also the intention of this article to ensure that off-track betting is conducted in a manner compatible with the well-being of the horse racing and breeding industries in this state, which industries are and should continue to be major sources of revenue to state and local government and sources of employment for thousands of state residents." (Racing Law § 518).

In 1984, the Legislature authorized the simulcasting, or telecasting, of horse races conducted in the State for the purposes of pari-mutuel wagering (Racing Law § 1001 [a]). That again was a perceived threat to the financial stability of the regional harness tracks, leading to new legislation requiring OTBs to pay them commissions on the simulcast wagers placed at OTB facilities.

Between 1984 and 2003, simulcasting of thoroughbred races was prohibited between 7:30 p.m. and midnight evenings were traditionally reserved for harness racing. In 2003, however, the Legislature allowed simulcast licensees to broadcast, and accept bets on, thoroughbred races conducted after 7:30 p.m. from anywhere in the world. Again perceiving an adverse impact on nighttime harness racing, the Legislature provided for "maintenance of effort" payments, requiring OTBs that simulcast nighttime thoroughbred racing, every year after 2002, to guarantee to their regional harness tracks minimum payments based upon the commissions those tracks received before the nighttime thoroughbred simulcasts were permitted.

That requirement engendered two of the statutory questions now before us: first, can the OTBs credit commissions derived from daytime harness racing against the maintenance of effort payments and second, are those payments to be made on a regional, or track-by-track, basis.

The third statutory issue before us involves so-called "dark day" payments. "Dark days" occur when the State Racing Association is not conducting a thoroughbred race meeting, and no licensed harness track is accepting wagers on or displaying the signal of any thoroughbred track. On dark days, simulcast licensees can broadcast out-of-state thoroughbred races, but they must make payments to the harness tracks (which are not open for business that day) in accordance with a statutory formula (Racing Law § 1017)*fn2. From 1997 through 2003, all OTBs made dark day payments to their respective regional harness tracks, but in 2004 New York City OTB (NYC OTB) stopped payment on the ground that the statute required the tracks, not OTBs, to make such payments to one another.

Seeking clarification on maintenance of effort and dark day payments, the OTBs brought their claims to the State Racing and Wagering Board, which in February 2005 rejected their arguments. The Board concluded that OTBs cannot credit commissions derived from daytime harness racing against the maintenance of effort payment; that Racing Law § 1017-a required calculation of the maintenance of effort payment on a track-by-track (not regional) basis; and that Racing Law § 1017 required OTBs to make dark day payments to their respective regional harness tracks. Five of the State's six regional OTBs (Western did not join) brought article 78 proceedings challenging the Board's determinations. After consolidating the proceedings, Supreme Court dismissed the petitions, including a new claim that the Board's determinations were rules not properly promulgated under the State Administrative Procedure Act. On appeal, the Appellate Division modified Supreme Court's dismissal: while affirming the separate payment distribution and SAPA determinations, the court reversed on the maintenance of effort and dark day payments issues. The Board and the harness tracks moved for leave to appeal, the OTBs cross-moved, and we granted leave to appeal to all parties. We now conclude that the Board and harness tracks, not the OTBs, were correct in their reading of the relevant statutory sections.

Analysis

Given the growth in codification of the law over recent decades, the principles governing the Court's statutory review have by now been extensively articulated. First and foremost, it is our role to implement the intent of the Legislature (Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006]). Deference to administrative agencies charged with enforcing a statute is not required when an issue is one of pure statutory analysis (Matter of Astoria Gas Turbine Power, LLC v Tax Commn. of City of N.Y., 7 NY3d 451, 455 [2006]). Even if no deference is owed to an agency's reading of a statute, a court can nevertheless defer to an agency's definition of a term of art contained within a statute (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 57 NY2d 588, 595 [1982]). Against this backdrop, we turn to the specific issues in controversy.

Maintenance of Effort Payments. Starting May 2003, when OTBs were permitted to accept wagers on simulcast nighttime out-of-state thoroughbred races, Racing Law ยง 1017-a (2) (a) required them to make maintenance of effort payments to their regional ...


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