Agencies & Organizations

The United States District Court of the Western District of Texas (Austin Division) recently held that Churchill Downs subsidiary website, Twinspires.com, is prohibited from accepting wagers from persons living in Texas.

Churchill Downs brought action against the Texas Racing Commission seeking a declaration that the Texas Racing Act’s in-person requirement, under which only a person inside the enclosure where a race meeting was authorized may wager on a race, violated the dormant Commerce Clause. The dormant Commerce Clause precludes states from enacting laws or regulations that excessively burden interstate commerce. 

The Texas Racing Commission is a state agency charged with enforcing the statutory and regulatory provisions of the Texas Racing Act. Churchill Downs moved for permanent injunction to prevent the Texas Racing Commission from enforcing the Act to prohibit Texans from placing wagers on Twinspires.com. The in-person requirement has been on the books in Texas since 1986.  Nevertheless, Twinspires.com continued to accept wagers from Texans through its website.

The court, Judge James R. Nowlin, presiding, found that the Act did not violate the dormant Commerce Clause and entered judgment for the Texas Racing Commission. With respect to the legitimate state interests furthered by the in-person requirement, Judge Nowlin remarked,

[E]very regulatory challenge that gambling has always posed to the state has been made that much more daunting by the advent of the internet. Gambling has always been addictive, but before the internet, at least the addicts had to go to the trouble of driving somewhere to place his bet. The internet allows the addict to get his fix 24/7/365, all without leaving the comfort of his own home . . . Along the same lines, underage patrons looking to get in on the action have always tried to evade detection with fake IDs and the like, but with the advent of the internet, all they need to place a bet is Dad’s credit card and date of birth . . . Finally, gambling—especially horse racing—has always attracted crooked individuals hoping to clean their money. With the advent of the internet, though, criminal elements are better able to hide behind the anonymity afforded by the computer screen.”

Churchill Downs has appealed this case to 5th Circuit Court of Appeals.

Case InformationChurchill Downs, Inc. v. Trout, No. 1:12-CV-00880-JRN, 2013 WL 5799694 (W.D. Texas Sept. 23, 2013).

On August 12, 2013, an evidentiary hearing was held on Plaintiffs’ request for attorneys’ fees and for injunctive relief that would require the AQHA to register clones and their offspring. 

Following the hearing, U.S. District Judge Mary Lou Robinson informed counsel that she would grant an injunction requiring the AQHA to register horses produced by cloning and their offspring.

On August 14, 2013, the court entered an order (which can be accessed here) setting forth specific changes and additions to AQHA rules and regulations, which, according to the order, the judge is considering for inclusion in the injunction. The order requires that any objections to the proposed rule changes be submitted by noon on August 19, 2013.

The court has not yet ruled on Plaintiffs’ request for nearly $900,000 in attorneys’ fees. The court ordered the Plaintiffs to furnish their billing statements to AQHA, and also ordered AQHA to file any objection to the request for attorney’s fees, by August 14, 2013. A copy of AQHA’s objection to Plaintiffs’ attorneys’ fees, filed yesterday, can be found here.  

AQHA’s primary objection to Plaintiffs’ fee request is the fact that the jury did not award any damages to Plaintiffs. Plaintiffs had sought $5.7 million in damages and sought to treble those damages under the antitrust laws for a total of $17.1 million. However, the jury awarded Plaintiffs zero damages.

At this point, the court has not yet entered final judgment in favor of Plaintiffs. According to this press release, AQHA will file a Motion for Judgment as a Matter of Law after entry of final judgment. In that motion, AQHA will request that the Court enter a take nothing judgment in favor of AQHA based on the fact that the jury’s verdict was not supported by the evidence. Should the court not grant AQHA’s motion, AQHA will file a notice of appeal thereby starting the appellate process.

Case Information: Abraham & Veneklasen Joint Venture, et al v. American Quarter Horse Association; Cause No. 2:12-CV-00103-J in the U.S. District Court for the Northern District of Texas (Amarillo Division)

Related Posts:

Federal Jury Rules Against AQHA in Cloning Suit

Federal Lawsuit Alleges AQHA Cloned Horse Registration Policy Violates Antitrust Law

Today, a 10-person jury in the U.S. District Court for the Northern District of Texas, Amarillo Division ruled that AQHA Rule REG106.1, which prohibits the registration of cloned horses and their offspring in AQHA’s breed registry, violates federal and state anti-trust laws. The jury awarded no damages.

In a statement published today on AQHA’s website, AQHA Executive Vice President Don Treadway, Jr. said,

When individuals with shared interests, goals and values come together to form a voluntary association to serve a common purpose, the members have a right to determine the rules for their association. The wisdom of our membership –which is largely not in favor of the registration of clones and their offspring—has not been upheld by this verdict.

Whether nor not clones will be able to be registered with the AQHA in the foreseeable future is still up in the air. According to AQHA President Johne Dobbs,

We will meet with our legal counsel and executive committee regarding our appeal options in continuing to fight for our members’ rights and announce our decision in that regard in the near future.

The plainitffs in the case have requested injunctive relief, in which they have asked the court to order the AQHA to register their cloned horses.  They have also requested that the court order the AQHA to pay at least a portion of their legal fees.  A hearing on the injunctive relief and fees request has not yet been held.  The jury’s verdict has not been reduced to a final judgment, nor has the court issued an opinion in the case at this time.  

Case InformationAbraham & Veneklasen Joint Venture, et al v. American Quarter Horse Association; Cause No. 2:12-CV-00103-J in the U.S. District Court for the Northern District of Texas (Amarillo Division)

Related Post

Federal Lawsuit Alleges AQHA Cloned Horse Registration Policy Violates Antitrust Law

Audrey White of the Texas Tribune authored this news story concerning the federal lawsuit over the Texas Puppy Mill Bill. The article reports that the Humane Society of the United States and the Texas Humane Legislation Network filed an amicus brief in the suit supporting the Bill.

The story contains a quote from a representative of the Humane Society’s Texas Branch, as well as some quotes from two breeders who are not involved in the lawsuit. Neither of the breeders quoted in the article expressed the due process concerns raised by the plaintiffs in the suit.

With respect to the plaintiffs, the article states, “calls to plaintiffs in the case were not immediately returned.”

Jim Smith, a cat breeder and one of the plaintiffs in the case, posted this response in the comments section of the online article this morning. According to Smith,

I am one of the plaintiffs in the Puppy Mill and Kitten Mill case. I was called by Ms. White and asked for comments, but I told her that because there was legal actions pending, I needed to clear things with my attorney first. He told me that there was no reason why I couldn’t address the issues, so I called Ms White back (several times), got no answer, and she never returned my call. I called her back within an hour or two of her call.

Mr. Smith went on to explain his due process concerns, saying,

There are several reasons why this is bad law. First and foremost, even a meth dealer or porn publisher is afforded more rights under Texas Law than a Kitten or Puppy Breeder. The law is written in such a way that agents from the Texas Department of Licensing and Regulations can enter my property, with or without me being present, enter my private residence, confiscate my computer, files or other property, or my animals simply on their own recognizance. They do not need a warrant, and there is no oversight by any actual law enforcement agency or court. Once they seize my animals or property, there is no appeals process developed for me to protest their actions. The TLDC can also employ "Third Party Inspectors", such as members of Animal Rights organizations to do these functions for it.

Smith also hinted that legislation of this nature could eventually effect the equine and ranching industries, stating,

HB 1451 is part of a nationwide push by animal rights organizations to deny us the ability to keep pets, have horses and ranching, rodeos and many other traditional Texas activities because it offends their vegetarian and vegan beliefs. It’s their attempt to enforce their personal and religious beliefs on the rest of us.

Horse breeders, what do you think of the new Puppy Mill Bill? I welcome you to post your thoughts and insights in the comments section to this post.

Yesterday, the Fort Worth Court of Appeals reversed and rendered in part and affirmed in part the judgment of the 236th District Court of Tarrant County, Texas in Whitmire v. NCHA. 

In the underlying suit, the jury returned a verdict for Lainie Whitmire for $70,000 in damages for breach of oral contract and $0 in damages on her false imprisonment claim. Lainie requested that the trial court enter judgment in accordance with the jury’s verdict and also requested attorneys’ fees for prevailing on her breach of contract claim.

On motion of the NCHA, the trial court entered a judgment notwitstanding the verdict (JNOV), holding that Lainie take nothing on her breach of oral agreement claim and awarding her no attorneys’ fees. The final judgment also ordered that the NCHA recover $302,000 in attorneys’ fees from Lainie and $45,000 in attorneys’ fees from her husband, Ray.

The Whitmires filed a timely notice of appeal.

A panel of the Fort Worth Court of Appeals, consisting of Dauphinot, Walker, and Gabriel, JJ., held on appeal that the trial court erred by disregarding the jury’s findings that the NCHA breached an oral agreement with Lainie and that Lainie sustained $70,000 in damages as a result. The court of appeals reversed that portion of the judgment and rendered judgment in favor of Lainie for $70,000. 

The court of appeals also sustained the Whitmires’ issue on the NCHA’s attorneys’ fees, and modified the trial court’s judgment to delete the NCHA’s recovery of attorneys’ fees of $302,000 from Lainie and $45,000 from Ray. The court of appeals affirmed the remainder of the judgment.

Case InformationWhitmire v. National Cutting Horse Ass’n, No. 02-11-00170-CV, 2012 WL 4815413 (Tex. App.—Fort Worth, Oct. 11, 2012, no pet. h.).

Related post

NCHA Litigation Update: NCHA Wins Again

The constitutionality of the hotly-contested “Puppy Mill Bill” passed in the 2011 Texas Legislature has been challenged in a federal suit filed in Austin on October 1, 2012.  A copy of the complaint can be downloaded here.

The new law, commonly referred to as the “Puppy Mill Bill”, was passed as HB 1451 and codified as Chapter 802 of the Texas Occupations Code . The title given to the codified act is “The Dog and Cat Breeders Act”. As part of the Act, the Texas legislature charged the Texas Department of Licensing and Regulation with the task of creating a regulatory and licensing scheme for dog and cat breeders in Texas. The rules related to the Act are set forth in Title 16, Texas Administrative Code, Chapter 91.

The plaintiffs in this week’s suit challenging the Act and related rules include Responsible Pet Owners’ Association Texas Outreach Inc.; Teresa Arnett, a Boston Terrier breeder in Rosansky; Sharleen Pelzl, a cat breeder in Dripping Springs; and James Smith, a cat breeder in Georgetown. The plaintiffs are represented by Steven Thornton of the firm of Westerburg & Thornton, P.C. in Dallas.

Could horse breeders be the next target of "Puppy Mill Bill" type legislation?

Included among the plaintiffs’ complaints about the “Puppy Mill Bill” and related rules are the following:

·       The Act allows inspectors to enter breeders’ facilities without a warrant. 

·       The Act allows inspectors to enter the private residence of a breeder without first obtaining a warrant.

·       The Act exempts dogs bred primarily to be used for purposes such as herding livestock, hunting, field trials, and other performance events. But the Act does not give a reason for a disparate treatment of breeders of different types of dogs, nor does it specify whether it is the intent of the breeder or the end purchaser that controls the analysis.

·       The Rules allow applications for breeders’ licenses to be denied with no possibility of appeal.

·       The Rules related to licensure of breeders require the successful completion of a “criminal background check.” However, the Rules do not specify what constitutes successful completion.

Animal cruelty and animal neglect have been illegal in the state of Texas for a long time. Some question why Act was even necessary, while others view the Act as nothing more than a vehicle to allow rescue groups (with the help of the authorities) to enter property of others and seize animals without a warrant. I believe that if such regulations are allowed to stand, it is only a matter of time before the animal welfare lobby will push for similar regulations applicable to horse breeders.

DVM News Magazine and others have expressed reservations about the “unintended consequences” of “puppy mill laws” passed in other states.  And just this morning, some pure bred dogs were abandoned in a rural area near Flower Mound around 1:00 AM. Some have suggested that the “Puppy Mill Bill” is to blame because these new laws are so draconian that no commercial breeder is able to comply with them.

Updates will be posted as this case progresses.

Did you know that horse slaughter for human consumption has technically been illegal in the State of Texas from 1949 to the present? The laws surrounding horse slaughter in the United States are complicated, and they vary from state to state. Below is an overview of the legal history of horse slaughter in Texas, from 1949 to present.

Photo:  Silhouette of a horse before a North Texas sunset

1949: 51st Texas Legislature passes a law that makes it a criminal offense for a person to 1) sell horsemeat as food for human consumption; 2) possess horsemeat intending to sell it as food for human consumption; and 3) transfer horsemeat to a person who intends to sell it as food for human consumption or who knows or reasonably should know that the person receiving the horsemeat intends to sell it as food for human consumption. See Article 719e of Vernon’s Texas Penal Code (now repealed). The 51st Legislature placed jurisdiction to investigate within the Board of Health’s powers as a matter related to the public health. However, Article 719e did not expressly authorize any particular entity to enforce the law.

1950: A news article quotes the “state health officer,” Dr. George W. Cox, as stating that the Department of Health was prosecuting “every violator we could find.” Health Officer Tells How to Stop Horse Meat Sales, Dallas Morning News, Mar. 17, 1950.

1952: Another news article quotes the same Dr. Cox, “state health officer”, as saying that sausage containing horsemeat “can’t be sold in Texas”. Neigh? Nay! Texans Can’t Horse Around with Sausage, Dallas Morning News, May 23, 1952.

1973The substance of Article 719e was transferred to Texas Revised Civil Statutes and again placed with statutes related to public health. It was not substantively changed.

Mid 1970’s: Horse slaughter companies Beltex (Fort Worth, Texas) and Dallas Crown (Kaufman, Texas) began marketing and processing horse-meat intended for human consumption in foreign countries. 

1991The statute prohibiting horse slaughter was codified as Chapter 149 of the Texas Agriculture Code (where it resides today). It was not substantively changed. Nothing in the current statute expressly authorizes any entity or agency to enforce the law.

2002: Texas State Representative Tony Goolsby requested that the Texas Attorney General clarify the enforceability of Chapter 149, which on its face prohibits the processing, sale or transfer of horsemeat for human consumption. AG John Cornyn issued this opinion, stating that Chapter 149 is applicable to the slaughterhouses in Texas and was not preempted by federal law. According to the opinion, Texas Department of Agriculture has no authority to investigate or assist in prosecuting violations of Chapter 149, but local prosecutors may investigate and prosecute alleged violations of Chapter 149.

2007: When the slaughterhouses learned of the 2002 AG opinion, and that Beltex and Dallas Crown were facing imminent prosecution, they brought a case in the United States District Court for the Northern District of Texas, seeking a declaration of legal rights and responsibilities and to enjoin any potential prosecution of them under Chapter 149. The slaughterhouses generally asserted that Chapter 149 had been implicitly repealed and/or it was preempted by federal law. The trial court permanently enjoined the state from prosecuting the slaughterhouses under Chapter 149. On appeal, the 5th Circuit Court of Appeals vacated the trial court’s judgment and injunction in favor of the slaughterhouses, finding that Chapter 149 had not been repealed, was not preempted by federal law, and that it did apply to the slaughterhouses. See Empacadora de Carnes de Fresnillo, S.A. de C.V. v. Curry, 476 F.3d 326 (5th Cir. 2007). As a result of this decision, Beltex and Dallas Crown shut down their operations in Texas.

2008: Attorney General Greg Abbott issued this opinion, stating that it is illegal under Chapter 149 for a foreign corporation to transport horsemeat for human consumption in-bond through Texas for immediate export to foreign destinations. Abbott made clear that neither federal law nor the U.S. Constitution invalidated this application of Chapter 149.

July 2012:  As discussed in this prior post, the Texas Senate Committee on Agricultural and Rural Affairs met to hear testimony on the economic impact of the closure of Texas’s slaughterhouses.  According to this news story, some believe that a repeal of Chapter 149 could be on the table next legislative session.

Unless Chapter 149 is repealed or revised, horse slaughter remains illegal in Texas—though it can ostensibly be carried out in other U.S. jurisdictions barring the passage of any federal law that directly or indirectly prohibits it. Whether U.S. horse slaughter, in my opinion, remains a viable option from a legal prospective will be the topic of an upcoming post.

On April 23, 2012, AQHA member Jason Abraham and two related business entities sued the American Quarter Horse Association (AQHA) in the U.S. District Court for the Northern District of Texas, Amarillo Division.

The complaint asks the court to order the AQHA to revoke AQHA Rule 227(a), on the basis that an outright restriction on the registration of cloned horses and their offspring allegedly violates federal antitrust laws.

Rule 227(a) was approved in 2004 by the AQHA board of directors, which prohibits all cloned horses and their offspring from being included in the AQHA’s breed registry. 

Other breed registries, such as the Jockey Club and the Paso Fino Horse Association, have also ruled that cloned horses and their offspring are not eligible for registration.

As discussed in this prior post, Texas law (which may or may not be deemed applicable in this case) favors a policy of judicial non-intervention with respect to the internal affairs of voluntary associations, such as the AQHA. An exception to Texas’s policy of judicial non-intervention can apply in cases where a valuable right or property interest is at stake in a lawsuit, and cases where a voluntary association’s rules violate the law.

For more information, see the following articles:

Lawsuit Challenges AQHA Cloned Horse Registration Policy

Suit Filed: Claims AQHA Ban on Cloned Horses Violates Antitrust Law

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On March 30, 2012, the Supreme Court of Texas denied review of Paula Gaughan’s lawsuit against the National Cutting Horse Association (“NCHA”). 

We first covered the Gaughan case in a post back in August of 2011, shortly after the Fort Worth Court of Appeals affirmed the trial court’s judgment in favor of the NCHA. The trial court’s now completely final judgment awards the NCHA $75,000 in attorneys’ fees and denies Gaughan’s request that certain NCHA financial records be judicially declared available for inspection by all NCHA members. For more information, see this article.

The Justices of the Supreme Court of Texas

The NCHA is a Texas nonprofit corporation. The Gaughan case dealt primarily with a company’s duties under the Texas Non-Profit Corporation Act to maintain and, in some cases, allow members to inspect the nonprofit’s books and records. The trial and appellate courts held that the NCHA complied with the portions of the Act that were at issue in the lawsuit.

While we’re on the topic of a member’s suit against a horse association, it is a convenient time to point out that the NCHA would likely be deemed a “voluntary association” under Texas law. Here are some “fun facts” about voluntary associations:

  • It is the right of a voluntary association to manage, within legal limits, its own affairs without interference from the courts. This is what they call the “policy of judicial nonintervention.”
  • Review of a voluntary association’s actions is severely limited under Texas law. Courts will not interfere with the internal management of a voluntary association so long as the governing bodies of such association do not act totally unreasonably, contravene public policy, break the law, or violate the association’s own rules and procedures.
  • An individual, by becoming a member of a voluntary association, subjects himself or herself, within legal limits, to the association’s power to administer its rules as well as its power to make its rules.
  • An exception to the policy of judicial nonintervention can be made where a valuable right or property interest is at stake in a lawsuit.

Although the policy of judicial nonintervention did not directly come up in the Gaughan case, these issues often preclude or limit the ability of a court to interfere in disputes between members and horse industry associations. 

Related Post:  NCHA Litigation Update:  NCHA Wins Again

The Fort Worth Court of Appeals has affirmed the 348th District Court of Tarrant County’s dismissal of horse trainer Rebecca “Becky” George’s lawsuit against Adam Deardorff and Lana Wirsig, holding that the trial court lacked personal jurisdiction over Wirsig and Deardorff.

Becky George of Tomball, Texas alleged that statements by Deardorff and Wirsig were submitted to the American Paint Horse Association (APHA), which caused the APHA to revoke George’s status as an official APHA judge and suspend her from APHA competitions for six months. George alleged that the suspension caused her to lose more than half of her clients.

All parties agreed that Deardorff was a resident of Pennsylvania, and Wirsig was a resident of Missouri. The trial court dismissed George’s claims against Deardorff and Wirsig on jurisdictional grounds. According to the Court of Appeals, George did not meet her burden to allege facts sufficient to give the trial court personal jurisdiction over Deardorff and Wirsig, because:

1) George asserted in her pleadings that another defendant named Harlan Hall (and not Deardorff or Wirsig) submitted Deardorff and Wirsig’s statement to the APHA (which is based in Fort Worth). 

2) George alleged that Deardorff had engaged in negotiations with Hall regarding the possibility of Hall hiring Deardorff to become the Hall family’s horse trainer in Texas. But George did not allege where these negotiations occurred or allege any other facts about these negotiations.

3) Even if Deardorff and/or Wirsig had submitted their statements to the APHA, this allegation is not sufficient to establish personal jurisdiction because it “was too is too random or isolated to constitute purposeful availment and does not show that Deardorff or Wirsig sought some benefit, advantage, or profit by availing themselves of Texas.”

 4) George’s claim asserting a civil conspiracy among Deardorff, Wirsig, and Hall (a Texas resident) did not impute Hall’s acts to Deardorff and Wirsig. The court held that George had to establish jurisdiction over Deardorff and Wirsig individually and not based on the acts of another person as part of a conspiracy.

5) George argued that Deardorff and Wirsig attended APHA events and that Wirsig competed in APHA-sponsored events, and because the APHA is headquartered in Texas, these acts constitute doing business in Texas. The Court of Appeals overruled this argument because George did not allege that Deardorff and Wirsig attended any of these events in Texas, much less that their contacts with Texas in connection with these events constituted purposeful availment of the laws of Texas.

6) George claimed that Wirsig was a customer of George, and George’s business is located in Texas. But George never alleged that Wirsig ever did business with George in Texas or other facts showing that Wirsig purposefully invoked the benefits of Texas laws by using George’s services.

As you can see, a defendant’s isolated or indirect contacts with Texas do not always give rise to jurisdition in Texas.  The defendant must usually be shown to have committed a tort in Texas, to have done busniess in Texas, or to have otherwise purposefully availed himself of the protections of Texas law to in order to submit to the jurisdiction of Texas courts.  Plaintiffs should always plead jurisdictional facts against out-of-state defendants in a detailed manner to demonstrate the defendant’s specific acts undertaken in Texas.

Plaintiffs to litigation against defendants who reside in other states should carefully consider jurisdictional factors before deciding where to bring suit. Filing suit in the correct forum to begin with can expedite the litigation process and save attorneys’ fees and court costs. Typically, jurisdiction is proper in the state and county were the defendant resides. If a defendant has a possible “quick way out” of a lawsuit by challenging personal jurisdiction, a defendant will usually take advantage of this.  If a defendant’s suit is dismissed on jurisdictional grounds, the plaintiff must then sue them again in a proper forum.  But the plaintiff must act expediently in doing so to ensure that the statute of limitations does not expire before the new suit is filed.

Case informationGeorge v. Deardorff, No. 02-11-00173-CV, 2012 WL 335854, (Tex. App.—Fort Worth, Feb. 2, 2012).