ALJDEC decisions subject to certification as final

22F-002-GAM · Department of Gaming · 2021-10-07

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of

TP Racing, LLLP, PCA EW275

No. 22F-002-GAM

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: September 29, 2021

APPEARANCES: TP Racing, LLLP (“Appellant”) was represented by Craig L. Keller, Esq. and Conly L. Shulte, Esq.; the Arizona Department of Gaming (“Department”) was represented by Lena Kalkbrenner, Esq., Assistant Attorney General, and Patrick Irvine, Esq.

ADMINISTRATIVE LAW JUDGE: Adam D. Stone

_____________________________________________________________________

FINDINGS OF FACT

Background and Procedure

On August 6, 2021, Appellant submitted an application for an Event Wagering Operator License to the Department.

On August 10, 2021, the Department sent an email to Appellant containing additional requests for information related to Appellant’s Event Wagering Operator License Application.

On August 11, 2021, Appellant submitted responses to the Department's August 10, 2021 additional requests for information.

On August 17, 2021, the Department notified Appellant the it had denied Appellant’s application for an Event Wagering Operator license, as the application failed to demonstrate that it met the requirements in A.A.C. R19-4-106(C)(1); that it failed to demonstrate that Appellant met the definition of “Professional Sport”; that it failed to meet the requirement of a “Sports Facility”; and that it failed to meet the threshold requirement pursuant to A.R.S. § 5-1304(A)(1).

Pursuant to A.R.S. § 41-1092.01, the Department referred the appeal to the Office of Administrative Hearings, an independent state agency, for an evidentiary hearing.

By agreement of the parties, an accelerated hearing was held on September 29, 2021. Prior to the hearing, the parties stipulated to the admission of four exhibits as well as the following facts:

Appellant has owned and operated the Turf Paradise Race course since 2000, and has continuously held a Commercial Racing Permit to Conduct a Horse Race Meeting from the Department since that date.

Appellant currently holds the following permits from the Department: 1) Commercial Racing Permit to Conduct a Horse Race Meeting; 2) Teletracking Permit; and 3) ADW permit.

The Department currently has the following statement on its website, at https://gaming.az.gov/racing/history:

Arizona has a rich history in Thoroughbred and Quarter Horse racing.

In 1954, Phoenix visionary Walter Cluer dreamed of building a world-class racing facility on 1400 acres of land he just purchased at 19th Avenue and Bell. That dream became a reality on January 7, 1956, when Turf Paradise opened its doors becoming one of Arizona's first sports franchises. In 2000, Phoenix businessman, Jerry Sims, bought the track and built the track's state-of-the-art equine swimming pool and continues to manage the facility today.

The track has been the winter home for thousands of horse owners, trainers and backstretch employees over the years and has been a staple of Thoroughbred and Quarter Horse racing in the Southwest.

TP, doing business as Turf Paradise, currently has the following statement on its website, at https://www.turfparadise.com/turf-history.html:

In 1954, Phoenix businessman Walter Cluer purchased 1,400 acres of barren desert which is now 19th Avenue & Bell Road with a vision. He wanted to build a first class race track in Phoenix. Only with his passion & dream Turf Paradise became a reality.

Turf Paradise opened its doors January 7, 1956, making Valley history as the first organized professional sports franchise in Arizona.

Appellant became a member of the National Thoroughbred Racing Association (NTRA) on July 1, 2021.

Appellant is a “Sports facility” as that term is defined in A.R.S. § 5-1301(18).

At hearing, Appellant presented the testimony of four witnesses and offered two additional exhibits into evidence. The Department did not present any witnesses nor any further exhibits.

The parties also submitted pre-hearing and post-hearing memoranda.

Appellant argued that it was the owner of an Arizona professional sports franchise, and that the racing at Turf Paradise is at the highest level for its sport. Appellant pointed to the Department’s website which states, “Turf Paradise opened its doors becoming one of Arizona’s first sports franchises.” Further, Appellant argued that although horseracing is not explicitly named in the statute, the word “includes” would leave open the possibility for other sports not listed to qualify for a license.

The Department argued that Appellant did not meet the requirements of the statute. The Department argued that Appellant is not a sports team or franchise under the statute, as it provides the racetrack where the races occur. Further, it is not the operator of a sports facility that hosts a tournament on the PGA Tour, nor is it a promoter of a national association for stock car auto racing. Finally, the racing is not a professional sport (according to the statute) because it is not at the highest level league or organizational play. The Department argued that because horseracing is licensed by each individual state, it is inherently different than the existing professional leagues for other sports.

Hearing Evidence

Vincent Francia

Mr. Francia is the current General Manger at Turf Paradise.

Mr. Francia testified as to his long history in horseracing including his time at a Tucson racetrack, and a Pennsylvania racetrack. Mr. Francia first commenced employment with Appellant in 1990, and has been the General Manager for his entire tenure, but for a few years.

Mr. Francia testified passionately about his love for horseracing and why he believed that Turf Paradise was a premier racetrack. He testified as to the fact that there are two tracks, namely a turf track and a dirt track. He also testified that Turf Paradise has one of the longest meet seasons at 125 days due to the weather in Phoenix. Further, he testified that because it holds races nearly every day of the week, it is very attractive to owners to have their horses’ race at Turf Paradise.

In addition, Mr. Francia testified that very successful owners (Bob Baffert), trainers (Robertino Diodoro), and jockeys have raced at Turf Paradise. Also, several horses who have raced at Turf Paradise have gone on to race at the Kentucky Derby and Breeder’s Cup races.

Mr. Francia also testified that it holds several popular races such as Super Saturday where there are multiple races on one day, the Cotton Fitzsimmons Cup, and the Phoenix Gold Cup, just to name a few.

Mr. Francia testified as to how horses were selected to race in the Kentucky Derby and the Breeder’s Cup. He testified that for the Kentucky Derby, horses are selected based upon a point system and how horses have raced in events leading up to the Derby. He testified that currently, there were no races at Turf Paradise where points were awarded for consideration into the Derby. For the Breeder’s Cup there were races which were “win and you’re in”. Again, there were no races currently held at Turf Paradise which would qualify for invitation.

Mr. Francia also testified that Appellant recently joined the NTRA, and stated that it was an organization that would essentially help with networking for track owners and the like.

Mr. Francia stated that there is no national commission, board or league regulating horseracing, because each state has its own rules and regulations. He testified that usually states will enforce suspensions from other states, but there is no formal requirement requiring the same.

Finally, Mr. Francia testified that he believed that Appellant was at the highest level of play and contribute approximately 90 million dollars per year to the Phoenix economy.

Robertino Diodoro

Mr. Diodoro is an Arizona licensed Thoroughbred horse trainer. He testified that he has competed in over 13,000 horse races and has earned over 55 million dollars in his position as a trainer.

Mr. Diodoro testified that there are several organizations that rank trainers by earnings and wins, and is considered one of the top 15 trainers in the country.

In addition, Mr. Diodoro testified that he currently has 140 horses in his care and would be sending 25-30 horses to race at the Turf Paradise meet season.

Mr. Diodoro testified further that he believed that Turf Paradise attracts the top jockeys and trainers due to the high quality facilities (two tracks and a horse swimming pool), one of the longest meet seasons, weather, and that it offers many races during the week in addition to the traditional weekend races.

Mr. Diodoro testified that the Phoenix Gold Cup attracts some of the fastest horses to run the race along with higher quality jockeys.

Also, Mr. Diodoro testified that he brings a mixture of horses with him to the races so some will run in all three types of races (claimant, allowance and stake).

Mr. Diodoro testified that the decision to enter races is up to the owners and trainers, and that there is no racetrack organization which allocates horses amongst tracks.

Mr. Diodoro testified that he keeps bringing his horses back each year because it was hard to find a track open for seven months and the high quality surfaces of the tracks.

Robert J. Romano

Mr. Romano testified that he a professor of Sports Management at St. John’s University.

Mr. Romano testified that he reviewed the Arizona Event Wagering Statute. He testified that he did not believe that a team from the Indoor Football League (Arizona Rattlers) was at the highest level of the sport. He testified that he believed the National Football League was the highest level of football in Arizona.

In addition, Mr. Romano testified that the Indoor Football League is a different sport due to the size of the field, and other rule differences.

CONCLUSIONS OF LAW

The Department is charged with issuing licenses for Event Wagering in the State of Arizona, and as such the Department has jurisdiction to resolve this matter. Hearings on appeals from the Department’s decisions are conducted through the Office of Administrative Hearings.

Appellant must establish that it meets the standards by clear and convincing evidence. Clear and convincing evidence is “[e]vidence indicating that the thing to be proved is highly probable or reasonably certain.”

A.R.S. § 5-1304(A)(1) states in pertinent part, the following:

The department may issue not more than ten event wagering operator licenses to applicants other than an Indian tribe... The department shall issue event wagering operator licenses only to applicants that are either of the following in compliance with this chapter:

1. An owner of an Arizona professional sports team or franchise, operator of a sports facility that hosts an annual tournament on the PGA tour, promoter of a national association for stock car auto racing national touring race conducted in this state or the owner's, operator's or promoter's designee, contracted to operate event wagering for both retail event wagering at a sports facility or its complex as prescribed in subsection D of this section and mobile event wagering throughout the state. If a designee is used, the designee shall be considered the applicant and be subject to any requirements of the application process rather than the owner, operator or promoter.

Appellant is clearly not the operator of a sports facility that hosts a PGA tour event, nor the promoter of a national association for stock car auto racing. Further, Appellant is not the owner of an Arizona professional sports team. Appellant argues however that it is a professional sports franchise.

A.R.S. § 5-1301(14) defines “professional sports” to mean, “a sport conducted at the highest level league or organizational play for its respective sport and includes baseball, basketball, football, golf, hockey, soccer and motorsports.” First, the Administrative Law Judge agrees with Appellant that this list is not necessarily inclusive. That being said however, the Administrative Law Judge disagrees with Appellant that it is a professional sports franchise.

The testimony of Vincent Francia and Robertino Diodoro, was not persuasive that Turf Paradise conducts races at the highest level league. For example, the witnesses testified that arguably the most famous event, the Breeder’s Cup, uses “win and you’re in” races and a point system to determine who receives an invitation to race in the events. Both witnesses testified that currently, Turf Paradise does not host any races which either are “win and you’re in”, or which allow horses to earn points to qualify for the Breeder’s Cup. Therefore, the races conducted cannot be considered as being at the highest level, if even if it is very attractive for owners/trainers to race at Turf Paradise.

Likewise, both witnesses acknowledged that there was no overarching governing body for horseracing. The fact that Appellant is a member of NTRA is unpersuasive, as Mr. Francia testified that it was more analogous to a networking organization, rather than a governing body. Make no mistake there are many famous horseracing events such as the “Triple Crown” or Breeder’s Cup. But there is no league which oversees and assigns races. Both Messrs. Francia and Diodoro testified that it is up to each individual state to approve meets and then it is up to the track operators, horse owners/trainers to decide which horses compete. Thus, because there is no organizational play, or in this case, scheduling which horses race at which tracks and when, Appellant has not shown it qualifies as a “professional sport” under the definition provide by statute.

In addition, Appellant’s argument that it is a franchise, is also unpersuasive. Turf Paradise merely provides the facilities to host the horseracing. It is analogous to the TPC of Scottsdale which qualifies under the statue and received a license. The TPC of Scottsdale golf course cannot be said to be a franchise under any definition of the word. It hosts an event on the PGA Tour. The legislature decided to carve out an exception for TPC of Scottsdale, and presumably would have done the same for Appellant had it saw fit to do so. In fact, the legislature did carve out rules for Appellant to qualify under A.R.S. § 5-1307(A), Neither party provided any evidence as to why the legislature chose to have racetracks apply for a limited license, however, the Administrative Law Judge is bound by the statutes as they are written.

For the reasons mentioned above, the Administrative Law Judge finds that Appellant did not meet its burden to show it was an Arizona professional sports team or franchise, under A.R.S. § 5-1304(A)(1).

RECOMMENDED DECISION

Based on the foregoing, the Administrative Law Judge recommends that on the effective date of the Order, the Department dismiss T.P. Racing, L.L.L.P.’s appeal and affirm its decision to deny its application for an event wagering operator license.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification.

-54864001

001

-137160-45720000Done this day, October 8, 2021.

/s/ Adam D. Stone

Administrative Law Judge

Transmitted electronically to:

Ted Vogt , Director

Department of Gaming

-54864001

001

-137160-45720000