The federal case Brooks v. USTA has been logged before U.S. District Judge Alvin Hellerstein, a veteran jurist of the Southern District of New York. He will need every moment of his experience on the bench to fully comprehend the dynamics at work between the parties and between the Brooks family and the rest of the industry. This lawsuit, like evidence of most disputes, represents just a tiny fraction of the larger story. Here's a guide to how the case has begun.
Regulators have reportedly been eyeing Brooks and his stable, Bulletproof Enterprises, for quite some time, allegedly dubious of the sudden dominance of the ownership group and its trainers, notably Josh Marks and Tracy Brainard. The latter have astounded many observers of the sport with their swift rise to the top of its training ranks despite virtually no experience. For example, although Brainard is trainer of record, many industry watchers believe it's actually Marks who trains the horses for Bulletproof. They've never been caught cheating-- let's be clear--but they are widely suspected. When the United States Harness Writers Association nominated its trainers of the year, for example, Brainard was not on the ballot despite dominating her peers.
This background makes paragraph 5 of the complaint noteworthy. The plaintiffs allege that they are "one of the largest and most successful harness racing operations in North America." No one in the industry disputes that. But there are a good many people in the sport who would welcome the pre-trial discovery that might emanate from this paragraph 5, including the under-oath depositions of both Marks and Brainard. How, indeed, did Bulletproof become so successful that its horses in 2009 won twice as much as any other owner had ever won in the history of the sport? It's a question that spans the gulf between two contradictory principles--"innocent until proven guilty" and "where there's smoke there's fire." Hopefully the trial will give us answers.
Jeffrey Brooks' brother is David Brooks, who also was a dominant owner before allegedly transfering his interests in his horses to his brother. When David Brooks' zany criminal trial began last month in another federal district in New York, federal prosecutors made an allegation that implicated Jeffrey Brooks, who now controls Bulletproof's horses. Those allegations spawned a rash of regulatory action. First, Canada's dominant harness racing jurisdiction, Ontario, suspended Jeffrey Brooks and ended his ability to enter his horses. Then it was the USTA and New York regulators and then regulators in Delaware and New Jersey and Pennsylvania as well. This complaint is the Brooks family's response to those suspensions.
And that makes paragraph 15 of the complaint a stand-out as well. It states: "In a classic case of guilt by association, virtually the entire rationale contained in [the license suspension] was the conduct of Jeffrey's brother, and former licensee, David Brooks, who is presently on trial for securities fraud..." (Emphasis added). Swallowed up in that word "virtually" is the in-court allegation by federal prosecutors that Jeffrey Brooks was recently seen on an undercover tape taking millions of dollars in cash in duffel bags out of a safety deposit box purportedly controlled by his brother; funds which were and are subject to a court stay. This revelation, which directly preceded the horse industry's suspensions, and which appears to be the direct cause of those suspensions, would seem to place Jeffrey in jeopardy of some sort of criminal or civil sanctions. Whether it justified the horse suspensions is a question the trial hopefully will answer.
For their first claim, the plaintiffs allege that officials of the New York State Racing and Wagering Board deprived them of their property, "without an opportunity to be heard at a meaningful time and a meaningful manner." This is the classic catch-all count which individuals may allege when the government (here, state officials) takes something away from them (here, the ability of their horses to race for money) without some sort of due process, usually in the form of a hearing. It will be interesting to learn whether and to what extent New York officials first alerted Bulletrproof to the suspension.
The second claim in the complaint is against the USTA and Mike Tanner, in his individual capacity as executive director of the organization. The restraint-of-trade theory here is that by suspending Bulletproof's license, the USTA effectively excluded it from participating in the harness racing industry. Less plausibly, the plaintiffs argue that "interstate and international commerce" has suffered by the preclusion of the sport's leading owner. If you listen closely now you'll hear a roar of laughter from Bulletproof's competitors, who have been waiting for the day when the startlingly successful enterprise would be challenged by regulators. In their view, competition in the industry now has been enhanced by the absence of Bulletproof's nearly unbeatable horses.
We can't determine precisely how badly we've been damaged, Brooks alleges, but we are going to start at $36 million and then treble it up to $108 million, for starters. The third claim in the complaint, also against the USTA and Tanner and also for restraint of trade, offers the theory that Bulletproof has lost value in its "property" because its horses now cannot be sold or otherwise transferred. If Brooks wins this case and forces the USTA to pay anything remotely close to $108 million--or if Brooks wins and precludes the USTA and regulators from enforcing their suspension powers--the fragile governance of the sport will likely crumble.
The fourth and final claim in the complaint alleges "tortious interference with business advantage" and marks the case's foreshadowed dark turn. Brooks alleges that the USTA is part of a conspiracy to benefit every other owner, trainer, driver and track operater in the sport by eliminating from competition the sport's most successful owner. The USTA kicked out Bulletproof, Brooks says, in order to make more purse money available to other owners who, presumably, aren't the subject of a vendetta by the USTA. The circle is complete. An owner suspected of dubiously earning his way to a record now is saying he's being persecuted and punished for being so successful.
Which makes it easy to see why this could be a death struggle for all the parties. Clearly, Brooks's attorneys included New York racing officials in the complaint in order to be able to make its constitutional argument. And clearly those lawyers felt that New York's license denial was more vulnerable legally than either the Ontario license suspension which preceded it or the New Jersey license suspension which followed it.
The lawsuit raises important (and in many cases valid) questions about due process and the notice to be heard. It raises important questions about the sport's ability to govern itself and about burdens of proof and persuasion in extraordinary circumstances. It raises vital questions about who is going to take care of all those horses--hundreds and hundreds of them--caught in the middle. Hold onto those reins. It's going to be a bumpy ride.
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