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Euster v. Eagle Downs Racing Association

decided: May 17, 1982.

EUSTER, EUGENE H.; FIERAMOSCA, SAMUEL; LOPEZ, DANIEL; HASBANY, DAVID; AND FALLON, MARTIN J. JR. APPELLANTS
v.
EAGLE DOWNS RACING ASSOCIATION, A PENNSYLVANIA CORPORATION; PENNSYLVANIA HORSE RACING COMMISSION; JOHNSON, ANDREW R., CHAIRMAN OF PENNSYLVANIA HORSE RACING COMMISSION; AND A MARLYN MOYER AND WILLIAM D. GROSS, COMMISSIONERS OF THE PENNSYLVANIA HORSE RACING COMMISSION APPELLEES



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Before Hunter, Weis and Higginbotham, Circuit Judges.

Author: Hunter

Opinion OF THE COURT

1. This is an appeal from an order of the United States District Court for the Eastern District of Pennsylvania granting defendants' motion for summary judgment. Plaintiffs-Appellants are owners and trainers of thoroughbred race horses in Pennsylvania. They brought this antitrust action against the Pennsylvania Horse Racing Commission (the "Commission") and its members challenging the Commission's rule which sets the fees to be paid to jockeys who ride at racetracks in the Commonwealth. Specifically, plaintiffs allege that the rule violates Section 1 of the Sherman Act, 15 U.S.C. § 1.*fn1 Defendants moved for summary judgment in the district court, pursuant to Fed.R.Civ.P. 56, on the ground that the "state action" exception to the antitrust laws enunciated in Parker v. Brown, 317 U.S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943) precludes Commission liability.*fn2 The district court entered an order and judgment, supported by a memorandum opinion, granting the motion for summary judgment. We will affirm.

FACTS AND PROCEDURAL HISTORY

2. The Pennsylvania legislature enacted the Pennsylvania Horse Racing Act in 1967. 15 P.S. §§ 2651-2675 (1980). The Pennsylvania Horse Racing Commission was established pursuant to this Act and was given broad authority over horse racing and betting:

Pursuant to the provisions of this act, the State Horse Racing Commission shall have power to supervise generally all thoroughbred horse race meetings in this State at which pari-mutuel betting is conducted. The commission may adopt rules and regulations not inconsistent with this act to carry into effect its purposes and provisions and to prevent circumvention or evasion thereof.

15 P.S. § 2652(a) (1980). The present appeal focuses on one such rule, Rule of Racing 9.15 ("Rule 9.15"). Rule 9.15 contains a jockey fee scale which was initially promulgated by the Commission in 1968 and was amended in 1978 to increase the schedule of fee payments. Appendix at A-22.

3. Shortly before this action was filed in the district court, the Pennsylvania Division of the Horseman's Benevolent and Protective Association, which represents owners-trainers of racing horses at various tracks in Pennsylvania, and three other individuals filed a lawsuit in the Commonwealth Court of Pennsylvania challenging the authority of the Commission to promulgate a rule setting the fees to be paid to jockeys. The Commonwealth Court held that the Commission exceeded its legislative authority and could not regulate the amount of compensation paid to jockeys. Gilligan v. Pennsylvania Horse Racing Commission, 46 Pa.Commw.Ct. 595, 407 A.2d 466 (1979). After the Commonwealth Court's decision, the district court rejected the defendants' argument that the state action exemption of Parker applied, relying on the decision of the Commonwealth Court in the Gilligan case.

4. The Commission then appealed the Commonwealth Court's decision to the Supreme Court of Pennsylvania. In September 1980, the Supreme Court reversed the Commonwealth Court, holding that the Commission was authorized by the legislature to promulgate a jockey fee schedule. Gilligan v. Pennsylvania Horse Racing Comm'n, 492 Pa. 90, 422 A.2d 487 (1980). In light of the decision of the Pennsylvania Supreme Court, holding unambiguously that the Commission had authority to set jockey's fees, the district court held that the defendants were immune from antitrust liability under the Parker doctrine.

Discussion

5. In Parker, the United States Supreme Court held that the Sherman Act was inapplicable to certain state action.*fn3 A raisin packer sued the California State Agricultural Commission to enjoin enforcement of the State's Agricultural Prorate Act. That Act authorized the State Director of Agriculture and the Agriculture Commission to adopt marketing programs regulating the sale of certain produce. The plaintiff attacked the program as violative of the Sherman Act. The Supreme Court held that state regulatory programs were immune from the proscriptions of the Sherman Act. The Court found no language or legislative history of the Sherman Act indicating congressional intent to proscribe the behavior of a sovereign state. The Court held that state regulatory programs could not violate the Sherman Act because the Act is directed against "individual and not state action." Id. 317 U.S. at 352, 63 S. Ct. at 314.

6. The Parker doctrine was recently discussed and reaffirmed in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S. Ct. 937, 63 L. Ed. 2d 233 (1980). In Midcal, the Supreme Court set forth the appropriate standards for the state action exception as follows:

First, the challenged restraint must be "one clearly articulated and affirmatively expressed as state policy"; second, the policy must be ...


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