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Bensalem Racing Association, Inc. and Keystone Turf Club, Inc. v. Pennsylvania State Harness Racing Commission

March 21, 2011

BENSALEM RACING ASSOCIATION, INC. AND KEYSTONE TURF CLUB, INC. (D/B/A PHILADELPHIA PARK RACETRACK), PETITIONERS
v.
PENNSYLVANIA STATE HARNESS RACING COMMISSION,
RESPONDENT :



The opinion of the court was delivered by: P. Kevin Brobson, Judge

Argued: February 9, 2011

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge HONORABLE DAN PELLEGRINI, Judge

HONORABLE RENEE COHN JUBELIRER, Judge HONORABLE MARY HANNAH LEAVITT, Judge HONORABLE P. KEVIN BROBSON, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE JOHNNY J. BUTLER, Judge

OPINION BY JUDGE BROBSON

These consolidated appeals arise out of a proceeding before Respondent Pennsylvania Harness Racing Commission (Harness Commission) on a petition of Intervenor Chester Downs and Marina, LLC d/b/a Harrah's Chester Casino & Racetrack (Harrah's Chester) for permission to conduct telephone account wagering pursuant to Section 218(b) of the Race Horse Industry Reform Act, Act of December 17, 1981, P.L. 435, as amended, 4 P.S. §§ 325.101-.402 (Reform Act). Petitioners Bensalem Racing Association, Inc. and Keystone Turf Club, Inc. jointly d/b/a Philadelphia Park Racetrack (Philadelphia Park) seek to appeal three (3) orders issued by the Harness Commission in that proceeding: (1) a May 27, 2010 Order, which the Harness Commission designated as a "Conditional Approval Order" (First Approval Order); (2) a May 27, 2010 Order denying Philadelphia Park's Petition to Intervene (Intervention Order); and (3) a September 30, 2010 Order, which the Harness Commission designated as the "Final Order" granting approval to Harrah's Chester (Second Approval Order). For the reasons that follow, we reverse as to the Harness Commission's Intervention Order. As a result, we must vacate the First Approval Order and the Second Approval Order and remand for further proceedings.*fn1

I. BACKGROUND

Since April 2003, Harrah's Chester has been duly licensed by the Harness Commission to conduct harness horse racing and pari-mutuel wagering at its facility pursuant to the Reform Act. On or about April 1, 2010, Harrah's Chester filed a verified petition with the Harness Commission, seeking permission to conduct telephone account wagering under Section 218(b) of the Reform Act, which provides, in pertinent part:

Each commission may upon request by any licensed corporation grant permission to the licensed corporation to conduct a telephone account wagering system; provided, however, that all telephone messages to place wagers must be to a place within the race track enclosure: And further provided, That all moneys used to place telephone wagers be on deposit in an amount sufficient to cover the wager at the race track where the account is opened. Each commission may promulgate rules or regulations to regulate telephone account wagering. . . . All telephone account wagering systems shall be solely operated by the licensed corporations.

4 P.S. § 325.218(b).*fn2 Harrah's Chester filed an amended petition on or about May 25, 2010. In both its original and amended petition, it proposed an account wagering system (AWS) that it contended complied in all respects with the Reform Act and the Harness Commission's regulations. Part of the proposed system included the use of a third-party contractor.

On April 23, 2010, Philadelphia Park filed its verified petition to intervene with the Harness Commission. The petition included nineteen (19) numbered paragraphs. Philadelphia Park also attached to its intervention petition a proposed "Motion to Dismiss and Answer in Opposition to Account Wagering Petition." On or about May 3, 2010, Harrah's Chester filed a response to the intervention petition. The response had two parts: (1) a preliminary statement in the nature of a general denial, and (2) a paragraph-by-paragraph response. In the paragraph-by-paragraph response, Harrah's Chester denied sixteen (16) of the nineteen (19) paragraphs in the intervention petition and denied as stated a seventeenth. In all, then, Harrah's Chester purported to admit only the allegations contained in two (2) paragraphs of the intervention petition. (Reproduced Record

(R.R.) 26a, 56a-57a.) We can discern, however, some additional, undisputed facts based on further scrutiny of the papers.

Philadelphia Park (i.e., its constituent owners) is licensed by the Harness Commission to conduct harness racing and pari-mutuel waging. It is also approved to conduct telephone account wagering under Section 218(b) of the Reform Act. Philadelphia Park has engaged in each of these licensed and authorized activities at its facility in southeastern Pennsylvania. Harrah's Chester's facility is located within a 35-mile radius of the Philadelphia Park facility. (Id. 25a-26a, 56a.) Indeed, Harrah's Chester's primary market area (PMA)*fn3 and Philadelphia Park's PMA partially overlap. (Id. 27a, 59a.) Based on these undisputed facts, neither the parties nor the Harness Commission dispute that Philadelphia Park and Harrah's Chester are competitors in harness racing and pari-mutuel gaming and, if the Harness Commission's approval orders stand, will be (or even currently are) competitors in telephone account wagering.

In support of intervention, Philadelphia Park relied on its status as a current competitor of Harrah's Chester and a prospective competitor of Harrah's Chester in the area of telephone account wagering. Philadelphia Park's intervention papers express concern over the impact that a new entrant into the telephone account wagering market would have on the existing market--"the grant of Harrah's Chester's application will only serve to cannibalize the existing market." (Id. at 27a.) Harrah's Chester denied this assertion. (Id. at 58a-59a.)

Philadelphia Park also, however, conceded in its intervention papers that it does not have an exclusive right to conduct telephone account wagering in its PMA. It nonetheless articulated the following concern:

While Harrah's Chester may have equal rights to conduct account wagering within the shared portions of the [PMA], [Philadelphia Park] has a direct, substantial and immediate interest in ensuring that such account wagering is conducted in conformance with the requirements and protections, specifically designed for [Philadelphia Park's] benefit, in the Reform Act and Horse and Harness Racing Commission Regulations.

(Id. 27a-28a.)*fn4

The alleged legal deficiencies in Harrah's Chester's petition for approval of its AWS are more specifically set forth in Philadelphia Park's proposed answer and motion to dismiss the petition for approval (attached as an exhibit to Philadelphia Park's intervention petition):

Overall, [Philadelphia Park] opposes the relief requested because the account wagering system proposed by Harrah's Chester is violative of numerous requirements of Section 218(b) of the Reform Act . . . . Summarily, in violation of these laws, Harrah's Chester's account wagering business is to be operated almost entirely by an out-of-state account wagering company which would routinely accept account wagers originating in Pennsylvania, is not solely operated by a licensed corporation, and is not operated exclusively by Harrah's Chester's licensed employees.

(Id. at 33a-34a (footnotes omitted).) Philadelphia Park also avers the following:

It is fully admitted that the operation of an account wagering system can be an important tool for a licensed corporation. However, like other business activities, account wagering systems must be conducted in compliance with all applicable laws. Otherwise, illegal account wagering systems will be provided a competitive advantage over an account wagering system, like that operated by [Philadelphia Park], which bears the burden and expense of full legal compliance while Harrah's

[Chester] and its contractor cannibalize [Philadelphia

Park's] existing business. [Philadelphia Park] in adhering to Pennsylvania law with respect to account wagering currently employs ten people at its racetrack for the account wagering operation. Permitting this Petition will cause an unfair competitive advantage to Harrah's Chester and will cause the loss of jobs at Philadelphia Park.

(Id. at 41a-42a.) It further claims:

It is admitted that account wagering systems provide increased exposure to the races wagered on by account wagering patrons. However, this does not excuse the conduct of a system that is not in compliance with applicable laws. As is evident from the petition and its passing-the-buck to a third party contractor, Harrah's Chester intends to reap the benefits of account wagering without making the investment in its facility that is required under the Reform Act and the Commission's regulations and that [Philadelphia Park] and other existing licensed corporations have already made. Such a result is wholly inequitable and plainly inconsistent with the best interests of racing.

(Id. at 42a.)

As noted above, the Harness Commission did not conduct any hearing on Philadelphia Park's intervention petition.*fn5 The Intervention Order provides:

AND NOW, this 27th of May, 2010, upon consideration of the Petition to Intervene and Request for Hearing, by Bensalem Racing Association, Inc. and Keystone Club, Inc. (d/b/a Philadelphia Park) and their Motion to Dismiss and Answer to the above Petition for Permission to Conduct an Account Wagering System; and upon consideration of Harrah's Chester's Answer in Opposition to Philadelphia Park's Petition, the Commission, in its discretion, finds that Philadelphia Park's Petition has failed to demonstrate to the Commission that it has a right to Intervene or an interest of such nature that intervention is necessary or appropriate to the administration of the account wagering provisions of the Race Horse Industry Reform Act.

In accordance with 1 Pa. Code §35.28(a)(1-3),

Philadelphia Park's Petition to Intervene and accompanying ...


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