Sports Leagues Seek Supreme Court Intervention In $150M Battle With NJ Horsemen

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The six-year legal battle over sports betting between New Jersey and five major sports organizations wound up being decided by the U.S. Supreme Court.

On Friday, the leagues declared that they want the same court to decide on the “sequel” – the two-year-old effort by New Jersey’s thoroughbred horsemen to collect up to $150 million in damages due to a four-year delay in Monmouth Park’s ability to conduct such sports betting.

The leagues are appealing a 2-1 ruling by the U.S. Third Circuit Court of Appeals last fall that overturned a lower court’s finding that the horsemen are not even entitled to collect on a $3.4 million bond – much less extra damages long beyond that four-week set-aside for potential compensation.

All parties involved during oral argument last summer described the case as “highly unusual” – and for good reason. (Third Circuit Court Judge Theodore McKee even referenced the “Schrodinger’s Cat” paradox during oral argument last year.)

At issue is the fact that while U.S. District Court Judge Michael Shipp in 2014 had followed court precedent in denying the horsemen’s bid to offer sports betting, the Supreme Court in 2018 found that the entire law in question – the Professional and Amateur Sports Protection Act of 1992 – was unconstitutional.

So was Shipp wrong in his decision? That’s not the proper question, Third Circuit Judge Marjorie Rendell wrote in her decision.

The horsemen were right, judge notes

“The entire concept of ‘wrongfully enjoined’ envisions a look back from the ultimate conclusion of the case: Should the enjoined party have been permitted to do what it was prevented from doing? Thus, whether a party was wrongfully enjoined depends upon the final judgment on the merits.

“Did it turn out that [the horsemen]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.””

To the horsemen, that means not only that they should collect the $3.4 million bond – which was a temporary set-aside in case Shipp were to change his mind before issuing a permanent injunction a month later – but also for far more extensive damages from the end of 2014 until mid-2018. That is the period during which the horsemen could not take sports bets until the Supreme Court found PASPA unconstitutional.

The leagues, in their “petition for writ of certoriari,” dispute that “wrongfully enjoined” claim because Shipp was merely following precedent – which they assert is indeed the proper perspective. Their other question to the Supreme Court is whether Shipp has “full equitable discretion” to deny the $3.4 million bond to the horsemen even after the Supreme Court’s vacating of PASPA.

The Supreme Court appeal comes after months of negotiations between the horsemen and the leagues.  Whether the leagues can entice the Supreme Court to take the case could weigh heavily on those talks.

While the Supreme Court typically only takes about 1 in every 100 cases it receives, it took the New Jersey sports betting case after a pair of Third Circuit panels had ruled 2-1 against the state – the same sort of split decision that occurred in this sequel.

The core language of the appeal

Some key paragraphs from the writ:

“The Third Circuit viewed itself as having no choice, in light of this [Supreme] Court’s ultimate holding, but to conclude that ‘the horsemen were] wrongfully’ restrained. Never mind that the district court had no real alternative but to enter the [temporary restraining order], and never mind that full deliberations led the district court to confirm its TRO and enter a permanent injunction.

“The Third Circuit majority held that the ultimate result in Murphy ipso facto meant that [the horsemen were]wrongfully enjoined for four weeks nearly four years earlier. Adding insult to injury, the majority then concluded that the district court lacked discretion to determine that the intervening change in the law counseled against awarding [the horsemen]damages since petitioners were just exercising rights that Congress had given them. That decision is profoundly wrong and conflicts with decisions from other courts on multiple levels.

“A party with a clear legal entitlement to stop conduct causing it irreparable injury should not have to weigh the possibility that it might face millions of dollars in damages at the end of the litigation should the law that gives it that right be declared invalid.”

Also:

“There is no better illustration of the unfairness of the Third Circuit’s misguided approach than this case. [The horsemen have] a bond to seek recovery against only because it refused to hold off even a few weeks on beginning to offer sports gambling – even though (as every court agreed) the state law pursuant to which it planned to do so was a blatant violation of a federal statute that the Third Circuit had held constitutional a mere year earlier.

“In other words, the bond exists only because [the horsemen]insisted on breaking what was then the law, and because petitioners exercised the right Congress had given them to enforce what was then the law. The Third Circuit’s view that [court rule]not only permits, but compels recovery nonetheless, is a sure sign that something has gone awry.”

And:

“Under the Third Circuit’s logic, a district court could preliminarily enjoin a defendant who brazenly violates a statute that this Court has held constitutional for a century, yet if this Court were to take the extraordinary step of overruling that precedent years after the preliminary injunction issued, the district court would have no choice but to grant the party recovery for losses attributable to its own intransigence – and at the expense of the party that sought to enforce its then-clear legal rights, no less.”

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John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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