Federal Judge To Review NJ Horsemen’s $150M Lawsuit Vs. Sports Leagues

NJ Horsemen Lawsuit
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In the real world, the American sports landscape marches on unscathed, 2 1/2 years after a U.S. Supreme Court ruling that opened the door for any state to offer Las Vegas-style sports betting.
But in the long-running sequel to that six-year saga won by New Jersey state officials, the state’s thoroughbred horsemen remain locked in a legal battle with five major sports organizations that has yet to even result in a determination about a $3.4 million bond posted by the leagues way back in 2014.
The question of whether the horsemen can seek far more extensive damages for the period from 2014-18 — when a federal judge prohibited sports betting at the horsemen’s Monmouth Park racetrack based on the ultimately invalidated Professional and Amateur Sports Protection Act of 1992, or PASPA — has now been pushed back until after a Jan. 13 hearing on the original bond.
The ruling by U.S. Magistrate Judge Freda L. Wolfson earlier this month, reached without oral argument on the issue, fulfills a directive of the Third Circuit Court of Appeals in September 2019 that invalidated a prior lower-court ruling. The three-judge panel found that the horsemen had been “wrongfully enjoined” from offering sports betting and therefore were entitled to seek compensation.
The first focus, however, will be on the $3.4 million bond posted by the NCAA, NFL, and three other sports leagues for a four-week period in late 2014. That was the time between U.S. District Court Judge Michael A. Shipp’s issuance of a temporary restraining order barring Monmouth Park from opening sports betting windows and his ultimate permanent ban on the gambling.
Shipp had agreed with the leagues’ claims that even having a single central Jersey racetrack offer Las Vegas-style sports betting for a period of what would have been a mere four weeks prior to his ruling would constitute “irreparable harm” to the reputation of the leagues.

Harm? What harm is that again?

In retrospect, it seems a bizarre ruling, given that a majority of U.S. states now have legalized sports betting and that “harm,” if any, appears to be minimal at most. Instead, the leagues have thrived in a world where sports betting no longer is solely (outside of Nevada) the province of bookmakers in the backrooms of local taverns and offshore sportsbooks on the internet.
But Wolfson will review the circumstances of 2014, seeking to determine what portion of the $3.4 million bond should be released to the horsemen.
A key element to that ruling likely will be a report by sports betting economics expert Chris Grove.

Wolfson, in the 14-page opinion that led to next month’s hearing, wrote: “I am not satisfied that, based on this written record, [the New Jersey Thoroughbred Horsemen’s Association] has carried its burden of proving its damages are up to the bond amount, particularly since [the leagues]  have not had an opportunity to challenge NJTHA’s experts.”

Wolfson denied the horsemen’s request to recoup attorneys’ fees from 2014, while granting the leagues “limited discovery” to challenge Grove’s calculations — in part by deposing Grove.

Projections vs. reality

The leagues say that the horsemen want to rely on testimony from Grove and Monmouth Park operator Dennis Drazin “speculating on the hypothetical revenue and profits they contend NJTHA would have earned during its first four weeks of sports betting in October/November 2014 if not for the TRO.
“Of course, the Court need not engage in such pure speculation. Once NJTHA opened a sportsbook in 2018, it had an actual balance sheet for its first four weeks of operations, just as it did for the four weeks in October/November 2018 that coincide with the TRO period.
“NJTHA’s actual revenues, costs, and profits for these two 28-day periods — which show profits dramatically lower than the amounts hypothesized by Messrs. Drazin and Grove — are highly probative of NJTHA’s purported lost profits during the TRO period.”
The horsemen have countered that argument by pointing out how different a 2014 monopoly by Monmouth Park would have been compared to four years later.
By late 2018, the Meadowlands Racetrack and several Atlantic City casinos had opened their own rival sportsbooks, and a number of mobile phone sportsbooks — which soon began to claim nearly 90% of total dollars wagered — had opened for business. Also, the invalidated state law under which Monmouth Park’s sportsbook would have operated would have allowed the racetrack to operate outside of public regulatory oversight and without a requirement of paying taxes.
The leagues claim, however, that a wider scope of bets available to the public in 2018, as well as British bookmaker William Hill’s management of sports betting operations, mean that Monmouth Park’s 2014 revenues would have been relatively tiny in comparison.
An expert witness of their own, league attorneys say, also should be permitted to weigh in on how much revenue the horsemen would have achieved in those four weeks of 2014. But the horsemen describe such a request as “untimely” at this late stage of the game.

The heart of the matter

The bond dispute, of course, is merely the appetizer to the more than $140 million in damages the horsemen seek in the period 2014-18. Third Circuit Judge Marjorie Rendell in her ruling last year wrote:

“Whether a party is wrongfully enjoined depends upon whether it turns out that that party had a right all along to conduct the activity it was enjoined from doing. Did it turn out that NJTHA had the right all along to do what they were enjoined from doing? There is no way that the answer to that question could be ‘no.’”

The horsemen repeatedly have claimed “bad faith” on the part of the leagues, given that during the six years they battled New Jersey, the NHL established a new franchise in Las Vegas; the NFL allowed the Oakland Raiders to move its team there; and all of the professional sports leagues established partnerships with daily fantasy sports operators as well as casinos and other gambling businesses.

But Wolfson ruled that in this “sequel,” such a claim must be denied because “I find that NJTHA has not properly pleaded any legally cognizable claim or counterclaim for ‘bad faith’ damages sustained during the period after the expiration of the TRO.”

Wolfson, who replaced Shipp on the case six months ago, also said she would “reserve judgment” on the larger issue until after she dispensed with the bond damages portion of the dispute, thereby denying the leagues’ bid to have a claim for 2014-18 damages be dismissed.

But Wolfson’s Opinion also addressed “the absence of any case law to support NJTHA’s request for substantial damages during the post-TRO period which would eclipse the original bond amount.”

“If, after the evidentiary hearing, NJTHA has established provable damages in excess of the $3.4 million bond amount, I will decide whether its novel claim for ‘bad faith’ damages can be legally sustained.”

So while she expressed a willingness to review a new claim by the horsemen for more than $140 million in damages, the horsemen appear to face an uphill climb.

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