San Luis Rey Racing, Inc. v. Cal. Horse Racing Bd.

222 Cal. Rptr. 3d 453, 15 Cal. App. 5th 67, 2017 Cal. App. LEXIS 772
CourtCalifornia Court of Appeal, 5th District
DecidedAugust 14, 2017
DocketD069680
StatusPublished
Cited by33 cases

This text of 222 Cal. Rptr. 3d 453 (San Luis Rey Racing, Inc. v. Cal. Horse Racing Bd.) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
San Luis Rey Racing, Inc. v. Cal. Horse Racing Bd., 222 Cal. Rptr. 3d 453, 15 Cal. App. 5th 67, 2017 Cal. App. LEXIS 772 (Cal. Ct. App. 2017).

Opinion

HUFFMAN, J.

*69San Luis Rey Racing, Inc. (SLRR) appeals from a judgment denying its petition for a writ of mandate asking the superior court to overturn certain orders of the California Horse Racing Board (CHRB) regarding the management of a fund established and governed by Business and Professions Code 1 sections 19607 and 19607.1. The superior court determined SLRR did not have standing because it did not have a direct interest in the disbursement of the fund and denied SLRR's petition. We agree SLRR does not have standing and affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1990, the California legislature enacted legislation to address the increased costs associated with the need to provide off-site stabling for horses during race meetings due to rising horse populations exceeding the number of stalls available at a single race location. Section 19607 required satellite wagering facilities to redirect a small portion of the funds they would otherwise allocate for commissions, purses and owners' premiums into a fund (the fund), and created an organization comprised of race associations, fairs conducting racing, and the organization representing horsemen and horsewomen (collectively, the fund management organization2 ) to manage the fund. (Former § 19607, added by Stats. 1990, ch. 131, § 15, eff. June 11, 1990, p. 33370, amended by Stats. 1998, ch. 516, § 1, p. 3635.) Section 19607.1 *70directed the fund management organization to use the funds, in part, to reimburse race associations for the incremental increase in operating expenses associated with providing off-site stabling at board approved auxiliary training facilities during race meetings. (Former § 19607.1, added by Stats. 1990, ch. 131, § 15, eff. June 11, 1990, p. 33370.)

At that time, SLRR operated an auxiliary facility and provided additional stabling *455for racehorses during race meetings but did not, itself, put on races, and thus was not a race association and did not contribute to the fund. Prior to 2009, the fund management organization provided reimbursements from the fund for the use of auxiliary stalls at SLRR's facility, along with a number of other facilities. By December 2009, though, horse racing revenues had decreased and the fund was operating at a deficit. The fund management organization agreed to stop providing reimbursement for off-site stabling at SLRR and another auxiliary facility, while continuing to provide reimbursements for off-site stabling at just two facilities, Santa Anita and Hollywood Park, both of which conducted their own race meetings and provided off-site stabling for other venues during their off seasons. SLRR disputed the CHRB's decision to do so and filed a grievance with the CHRB.

Unable to reach a resolution with the fund management organization or the CHRB, SLRR filed a complaint and petition for writ of mandamus with the superior court in early 2012. In the complaint, SLRR asserted claims for unfair competition, interference with contracts, and interference with prospective economic advantage, among others, based on allegations the fund management organization provided illegal subsidies to certain race associations, making it impossible for SLRR to compete for horse stalling business. SLRR also requested a writ directing the CHRB to exercise its jurisdiction to compel the fund management organization (referred to in the complaint as SCOTWINC) to comply with the statutory provisions governing the fund and to prohibit certain distributions from the fund.

The CHRB, along with other named defendants, filed various demurrers in response to SLRR's writ petition. The superior court granted the demurrers with respect to all claims asserted against the CHRB except for the writ petition. The court noted that certain racing associations had requested an audit of the fund, thereby invoking the board's primary jurisdiction to investigate and adjudicate the issue of whether the fund management organization had properly disbursed the funds in accordance with the law, and therefore stayed the remainder of the action in the interest of judicial efficiency. In making its ruling, the superior court noted SLRR had conceded it did not have standing to seek reimbursement from the fund, but that SLRR was not precluded from asserting other claims for damages, restitution or injunctive relief.

*71Upon completion of the audit, the CHRB appointed an independent referee, C. Scott Chaney, to make a determination as to two specific issues: " '(1) Whether the Stabling and Vanning Funds, distributed pursuant to Business and Professions Code section 19607 et seq., [had] been properly allocated and (2) [w]hether the Audit Report, dated November 6, 2012, performed by the Audit Unit of the California Horse Racing Board, [was] in accordance with Business and Professions Code section 19433.' " Even though it was not a racing association with an interest in the audit, the CHRB permitted SLRR to participate in the meetings given SLRR's complaint in the superior court. After receiving briefing and materials from the parties and taking oral testimony from various witnesses, Referee Chaney issued a proposed decision to the CHRB on July 5, 2013.

Of relevance here, in the proposed decision Referee Chaney found the CHRB audit was conducted in accordance with the law, the statute required the fund management organization to reimburse the race associations for payments made to off-site facilities but the fund management organization *456had been directly reimbursing the facilities providing the off-site stabling instead, and the fund had been used for purposes other than stabling and vanning. With respect to the later finding, the proposed decision explained the fund management organization disbursed $600,000 from the fund in 2008 to pay for capital improvements at an auxiliary stabling facility and had also provided additional funds for medical services related to horse training. However, the decision noted the two improper disbursements were discovered in the audit and the CHRB had subsequently required the race associations to return the money to the fund.

Referee Chaney also determined the fund management organization did not use the funds in the most efficient manner, in part due to the circumvention of negotiations between individual race associations and stabling facilities that resulted from the direct reimbursement of off-site stabling facilities, and thus recommended additional oversight by the CHRB. In particular, Referee Chaney noted there was a general acceptance of overpaying for off-site stabling because race associations that acted as auxiliary facilities were generally willing to overpay to be overpaid in return. As a result, auxiliary facilities like SLRR that did not also act as a race association did not receive reimbursements. However, Referee Chaney acknowledged decisions for reimbursement could not be driven purely by economics and nothing in the law precluded the fund management organization from considering additional factors such as goodwill, service to the industry and minimizing disruptions in stabling.

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Cite This Page — Counsel Stack

Bluebook (online)
222 Cal. Rptr. 3d 453, 15 Cal. App. 5th 67, 2017 Cal. App. LEXIS 772, Counsel Stack Legal Research, https://law.counselstack.com/opinion/san-luis-rey-racing-inc-v-cal-horse-racing-bd-calctapp5d-2017.