University of Vermont AAHS

Colonial Downs v. Virginia Racing Commission

Virginia Circuit Court
2000 WL 305986
March 15, 2000

Summary of Opinion

Plaintiff Colonial Downs brought this lawsuit to challenge the allocation by defendant Virginia Racing Commission of meet days to it for the 2000 season. The commission conditioned its allocation by requiring that Colonial Downs produce 40 days of standardbred harness racing along with 32 days of thoroughbred racing and by imposing other conditions.

In this opinion, the trial court upholds virtually all of the conditions imposed by the Racing Commission on the allocation of meet days for the 2000 racing season.

Text of Opinion

The parties appeared on the Complainants' Colonial Downs, L.P., and Stansley Racing Corp., Diversified Opportunities Group Ltd., Premier Development Co., and Arnold W. Stansley's Petition for Appeal and the Virginia Racing Commission's Demurrer and Answer and memoranda were received and argument was heard.

This administrative appeal arises from an order of the Virginia Racing Commission on the application of Colonial Downs, L.P., and Stansley Racing Corp. for live horse racing days for the year 2000. Colonial Downs holds a license to own a racetrack in New Kent County and four satellite wagering facilities in Richmond, Chesapeake, Hampton, and Brunswick County. Stansley holds an operator's license to conduct race meets at the racetrack in New Kent and to conduct pari-mutuel wagering on simulcast races at the four satellite wagering facilities owned by Colonial Downs. Diversified Opportunities Group Ltd., Premier Development Co., and Arnold W. Stansley are "Related Parties" who have a contractual right to payment of "annual credit enhancement, development, and consulting fees" by Colonial Downs.

Complainants seek judicial review of an order entered by the Virginia Racing Commission on December 20, 1999. The Commission issued the order after a public hearing with notice sent by the Commission's Executive Secretary to the President of Colonial Downs by letter dated December 6, 1999. The hearing was held on December 15, 1999.

The Petition for Appeal cites error in the following rulings of the Commission: (1) that Colonial Downs perform pursuant to contracts it entered into with the Virginia Harness Horsemen Association by depositing 5% of handle from simulcast standardbred racing into a "Standardbred Purse Account" to fund purses for 2000, including that Colonial Downs update such deposits "retroactively" to November 17, 1999, to satisfy obligations under the contracts (2) that Colonial Downs bring all accounts payable with vendors current to within 90 days by February 29, 2000, (3) that the Commission's Executive Secretary determine whether Colonial Downs was meeting the requirement to bring accounts payable current and all other requirements of the written order before approving monthly simulcast schedules, (4) that Diversified Opportunities Group Ltd., Premier Development Co., and Arnold W. Stansley waive their credit enhancement, development, and consulting fees, and (5) that Colonial Downs conduct 40 days of live Standardbred racing in 2000.

The Commission opposes each assignment of error and asks that the Petition be denied with prejudice, that the action be dismissed, and that the court award the Commission attorneys' fees incurred in defending this action. The court considers the issues below.

Standards of Review of the Commission's Action.

The proper standards of review of agency action have been articulated by the Supreme Court:

Where the issue is whether there is substantial evidence to support findings of fact, great deference is to be accorded the agency decision. Where the issue falls outside the specialized competence of the agency, such as constitutional and statutory interpretation issues, little deference is required to be accorded the agency decision. Where, however, the issue concerns an agency decision based on the proper application of its expert discretion, the reviewing court will not substitute its own independent judgment for that of the agency but rather will reverse the agency decision only if that decision was arbitrary and capricious. Finally, in reviewing an agency decision, the courts are required to consider the experience and specialized competence of the agency and the purposes of the basic law under which the agency acted.

Johnston-Willis v. Kenley, 6 Va.App. 231, 246 (1988).

The Racing Commission's basic law found at Code 59.1-364 evidences the General Assembly's desire to delegate broad power, generally, to the Commission:

A. Horse racing with pari-mutuel wagering as licensed herein shall be permitted in the Commonwealth for the promotion, sustenance and growth of a native industry, in a manner consistent with the health, safety and welfare of the people. The Virginia Racing Commission is vested with control of all horse racing with pari-mutuel wagering in the Commonwealth, with plenary power to prescribe regulations and conditions under which such racing and wagering shall be conducted, so as to maintain horse racing in the Commonwealth of the highest quality and free of any corrupt, incompetent, dishonest or unprincipled practices and to maintain in such racing complete honesty and integrity. The Virginia Racing Commission shall encourage participation by local individuals and businesses in those activities associated with horse racing.

B. The conduct of any horse racing with pari-mutuel wagering participation in such racing or wagering and entrance to any place where such racing or wagering is conducted is a privilege which may be granted or denied by the Commission or its duly authorized representatives in its discretion in order to effectuate the purposes set forth in this chapter.

The general delegation of "plenary power" in the Commission's basic law is limited by the provisions which follow in Chapter 29 of Title 59.1. See generally Va.Code 59.1-364-405 (1950 & Supp.).

In this case, the Racing Commission's actions were taken during a hearing to determine the assignment of racing days under the Commission's regulation, 11 VAC 10-20-220. The Commission promulgated the regulation through the power delegated to the Commission by the General Assembly under Virginia Code 59.1-369, generally, and specifically under Virginia Code 59.1-369(4) which reads in part:

The Commission shall promulgate regulations and conditions under which simulcast horse racing shall be conducted at a licensed horse racetrack or satellite facility in the Commonwealth and all such other regulations it deems necessary and appropriate to effect the purposes of this chapter.

The authority granted by this provision and the Racing Act generally affords the Commission broad power to accomplish the goals set out in the basic law. These goals include "ensur[ing] that horse racing is conducted on a sound financial basis, according to accepted business and management practices, in order to promote the success and growth of the horse racing industry in the Commonwealth." Virginia Jockey Club, Inc. v. Virginia Racing Commission, 22 Va.App. 275, 288 (1996). With these concepts in mind, the court addresses Colonial Downs' arguments seriatim.

1. The Commission's Decisions Concerning the VHHA Purse Agreements

Colonial Downs' first challenge argues that the Commission exceeded its authority when it considered the agreements between Colonial Downs and the VHHA. Colonial Downs argues that the Commission lacks the adjudicatory power exercised in construing the agreements.

As regards the Commission's power to review the contract at issue, the General Assembly's delegation of power in the Horse Racing Act "is not strictly limited to the narrow confines of the express language of the statute. Every power expressly granted, or fairly implied from the language used, or which is necessary to enable the commission [sic] to exercise the powers expressly granted, should and must be accorded." Virginia Jockey Club, 22 Va.App. at 287 (alterations in original omitted).

Although the General Assembly did not extend the Commission's power to set purse contributions "to the role of creating contracts, or enforcing the conditions once the contract has expired" as previously noted by the court, nothing in the Act and no authority cited by Colonial Downs limits the Commission's power to enforce a contract's conditions before the contract has expired. See Colonial Downs, L.P. & Stansley Racing Corp. v. Virginia Racing Comm'n, ended case no. 99H-1031 (April 13, 1999) (Markow, J .). It follows that the Racing Commission must have the power to determine whether the contract is within the scope of the Commission's authority and whether the contract exists or has expired.

The Commission properly exercised jurisdiction by inquiring how Colonial Downs would fund purses, a factor the Commission noticed for consideration at the hearing by reference to its regulations. See Letter from Executive Secretary, Stan Bowker, to Colonial Downs President, Ian Stewart, of 12/06/99; see also 11 VAC 10-20-220(C)(17). That inquiry led to a dispute at the hearing about the agreements between Colonial Downs and the VHHA which provided for purses. In the written Final Order, the Commission conditioned the grant of racing days upon Colonial Downs fulfilling what the Commission determined to be a valid and enforceable contract which provided for purses. The contract was directly relevant to the subject matter of the hearing, and the Commission' decision to condition the grant of racing days upon Colonial Downs' adherence to the contract did not exceed the Commission's authority.

Since the Commission does have adjudicatory power in this case, Colonial Downs contends that the Commission violated Virginia Code 9-6.14:11 of Virginia's Administrative Process Act, addressing informal fact finding in case decisions. Colonial Downs asserts that the Commission failed to specifically include the VHHA agreements among topics to be reviewed in its published notice of hearing on Colonial Downs' application for racing days found in the letter of December 6, 1999 from Stan Bowker, Executive Secretary to the Commission. See Va.Code 9-6.14:11(A). Thus, the Commission's notice was insufficient to vindicate Colonial Downs' due process rights.

Notice for the hearing was sent by the Commission's Executive Secretary to the President of Colonial Downs by letter dated December 6, 1999. The letter was offered as an exhibit.

The notice states:

Pursuant to 11 VAC 10-20-220, the Virginia Racing Commission will hold a public hearing on Colonial Downs' 2000 racing days request on December 15, 1999 at 9:30 a.m. in Courtroom B of the Tyler Building, 1300 East Main Street, Richmond Virginia.

After describing Complainants' request and inviting comment from "persons desiring to participate," the notice requests the personal appearance at the hearing of various horsemen's associations including the VHHA. Next, the notice announces:

The commission will consider the criteria in 11 VAC 10-20-2000[sic] in approving, denying or giving its qualified approval to the 2000 racing days request.

It was not contested that the notice incorrectly cited the intended regulation, 11 VAC 10-20-220.

In determining whether the Commission violated Colonial Downs' procedural rights to due process and notice, the court first decides whether the agency hearing was an informal or formal proceeding. The agency's decision in this regard receives no deference beyond the initial presumption that its action was correct. See, e.g. Virginia ABC Comm'n v. York St. Inn, 220 Va. 310, 313 (1979).

The parties disagree on which provision of the APA applied to the administrative proceeding. Citing Virginia Code 9-6.14:11, dealing with informal fact finding, Colonial Downs argues that the Executive Secretary's letter announcing the hearing did not give "reasonable notice" of the proceedings, nor did it provide Colonial Downs a right to appear for the purposes of presenting "factual data, argument, or proof" in connection with the proceeding. Colonial Downs asserts that the notice had to specifically enumerate the VHHA agreements as part of the Commission's consideration.

The Racing Commission assumes that Virginia Code 9-6.14:12, dealing with formal hearings, applies and that the notice was sufficient to tell Colonial Downs "(i) the time, place, and nature thereof, (ii) the basic law or laws under which the agency contemplates its possible exercise of authority, and (iii) the matters of fact and law asserted or questioned by the agency." The Commission fails to explain why Code 9-6.14:11 does not apply as a fair reading of the statutes demonstrates that it must.

Code 9-6.14:11(A) begins:

Agencies shall ascertain the fact basis for their decisions of cases through informal conference or consultation proceedings unless the named party and the agency consent to waive such a conference or proceeding to go directly to a formal hearing.

Code 9-6.14:12(A) says:

The agency shall afford opportunity for the formal taking of evidence upon relevant fact issues in any case in which the basic laws provide expressly for decisions upon or after hearing and may do so in any case to the extent that informal procedures under 9-6 .14:11 have not been had or have failed to dispose of a case by consent.

Thus, when considering the number of racing days to grant Colonial Downs, the Racing Commission must use procedures prescribed by Code 9-6.14:11 unless either (1) Colonial Downs, as the named party, and the Commission consent to a formal hearing or (2) the basic law of the Commission expressly provides that a hearing is required before the agency may make a decision. The Commission's basic law is found at Code 59.1-364-405 and, most relevant to the proceeding below, at Code 59.1-369, -364(B).

Here, there is no evidence on the record that the parties consented to a formal hearing, and the basic law of the Racing Commission does not provide for formal hearings when determining the number of racing days to grant a licensee.

Therefore, the Commission's action was an informal fact finding to weigh the appropriate considerations before granting racing days. The notice provisions which apply are those found in Virginia Code 9-6.14:11 and in the regulation passed by the Commission found in 11 VAC 10-20-220. The court deals briefly with the Commission's regulation before returning to the APA.

Notice under the Commission's Regulation

That the notice complied with the Commission's regulation is clear. Notice for this hearing required:

written notice to the licensee and ... due notice of the public hearing. The notice must include a brief description of the request, a statement that persons wishing to participate may do so in writing, the time and place of any public hearing on the request, and the earliest and latest date which the commission may act.

11 VAC 10-20-220(B)(1).

Here the Commission's notice that a hearing was set for December 15, 1999 was sent to Colonial Downs by letter. The letter, dated December 6, described the request as "Colonial Downs' 2000 racing days request" and stated that Colonial Downs was seeking a "30-day Thoroughbred meet running from Labor Day to mid- October, and a 30-day Harness meet running from late October to December." The letter invited oral or written comment from "persons wishing to participate." The letter also requested the appearance of representatives of, inter alia, Colonial Downs and the VHHA. The letter announced the time of the hearing to be "December 15, 1999 at 9:30 a.m." and the place to be "Courtroom B of the Tyler Building, 1300 East Main Street, Richmond, Virginia." "December 15, 1999" was declared the earliest date the Commission could act on the request, and the latest date was described as "45 days after the public hearing is adjourned." Each of the notice requirements under the Commission's regulation were adequately fulfilled by the letter.

Notice Under the Administrative Process Act

As regards the applicable notice requirements of Virginia's Administrative Process Act, Virginia Code 9-6.14:11(A) states in relevant part:

[s]uch conference-consultation procedures include rights of parties to the case (i) to have reasonable notice thereof, (ii) to appear in person or by counsel or other qualified representative before the agency or its subordinates ... for the informal presentation of factual data, argument, or proof in connection with any case, (iii) to have notice of any contrary fact basis or information in the possession of the agency which can be relied upon in making an adverse decision....

Here, the Executive Secretary's letter of December 6 clearly fulfilled the requirements in parts (i) and (ii) as described above. However, the court must determine whether the evidence relied upon for an appealed decision may have been deemed "contrary fact basis or information." Therefore, some analysis is required to determine whether the information relied upon by the Commission in its adverse decision against Colonial Downs was in the possession of the Commission when the Executive Secretary issued the notice. If so, the Commission had an obligation under Code 9-6.14:11(A)(iii) to give notice prior to the hearing to Colonial Downs that the Commission had the information and that the information could become the basis of an adverse decision against Colonial Downs. Conversely, if the Commission learned of the information at the same time as Colonial Downs, then prior notice could not be required.

Regarding the VHHA purse agreements, the record shows that if the Commission did possess the agreements on December 6, the Commission was not aware until the hearing that the agreements could be relied upon for an adverse decision against Colonial Downs. Although the record shows that the Commission was aware of the agreements between Colonial Downs and the VHHA, the Commission, at pages 0137 to 0145 of the record, only learned of the issue of termination during the hearing in testimony from the VHHA as the VHHA and Colonial Downs spoke on the issue. Thus, the Commission could not have noticed its consideration of the termination of the agreements as potentially adverse evidence because these circumstances show that the Commission did not know at the time of issuing the notice that the information could be relied upon in rendering a decision adverse to Colonial Downs.

Colonial Downs argues that despite the Commission's ignorance of the contract issue prior to the hearing, Colonial Downs should have had further opportunity to litigate the status of the VHHA agreements and to present evidence which Colonial Downs admittedly possessed, but did not bring to the hearing. The status of the purses, Colonial Downs argued, were in negotiation at the time of the hearing.

In light of the reference in the Commission's notice to 11 VAC 10-20-220, however, Colonial Downs had the burden of preparing for inquiries relevant to the criteria mentioned in the regulation including "purses." 11 VAC 10-20- 220(C)(17). Furthermore, 11 VAC 10-20-220(B)(2), (3) and (4) answer Colonial Downs' contention that the Commission exceeded its authority when it ruled without waiting for Colonial Downs to supplement the record after the close of the oral hearing. Those paragraphs read:

2. The licensee will be afforded the opportunity to make an oral presentation, and the licensee or its representative shall be available to answer inquiries by the commissioners.

3. Any affected parties, including horsemen, breeders, employees of the licensee, representatives of other state and local agencies will be afforded the opportunity to make oral presentations. The public may be afforded the opportunity to make oral presentations and shall be given the opportunity to submit written comments.

4. If, after a request is received, the commission determines that additional information from the licensee is necessary to fully understand the request, the commission shall direct the licensee to submit additional information.

The paragraphs comprise the process due to Colonial Downs on its application for racing days.

In this case, Colonial Downs exploited an opportunity both to submit written responses and to make an oral presentation to the Commission. Under the regulation, the Commission, and not a given licensee, has the right to keep the record open so that a licensee may supplement it. The Code requires nothing more.

Supplementation may only be done where the Commission determines additional information was necessary to fully understand Colonial Downs' application. Here, the Commission understood Colonial Downs' request and gave Colonial Downs opportunity to submit written and oral responses in support of the application. Thus, the Commission did not abuse its discretion in proceeding to a final ruling at the end of the oral hearing.

The Circumstances Surrounding the Closed Meeting

Since notice of the hearing was proper, Colonial Downs asserts that the Commission violated Va.Code 2.1-344.1, addressing proceedings in closed meetings under Virginia's Freedom of Information Act, when the Commission did not specifically identify, in its motion to convene the closed meeting, the VHHA agreements as a topic to be discussed. See generally Va.Code 2.1-344.1(C).

In response, the Commission directs the court's attention in part to Colonial Downs' alleged violations of regulations dealing with simulcast schedules. However, Colonial Downs' alleged violations are irrelevant to this court's inquiry into the Commission's failure to adhere to the procedures of FOIA.

Here, the Commission went into closed meeting on motion of Chairman Williams whose statement at page 0166 of the record reads:

At this time, I offer the following motion. In accordance with the provisions of Section 2.1-344(A)(7) of the Code of Virginia, I move that the Commission go into closed meeting for the purpose of consultation with legal counsel and briefings by staff members or consultants pertaining to actual or probable litigation, where such consultation or briefing in open meeting would adversely affect the negotiating or litigating posture of the Commission, and consultation with legal counsel employed or retained by the Commission regarding specific legal matters requiring the provision of legal advice by such counsel regarding Colonial Downs' request for racing days in 2000.

The Commission, thereafter, went into closed meeting for approximately one and a half hours. When the Commission returned, Chairman Williams reopened the public session and explained the absence of Commissioner Beck. Chairman Williams then moved for the adoption of a resolution, presumably pursuant to Code 2.1-344.1(D), by which the Commission would certify that the closed meeting was held in conformity with Virginia law and that, to the best of each member's knowledge, the matters discussed in closed meeting were lawfully exempted by Virginia law and were only those matters which were identified by the Chairman's motion which convened the closed meeting. The resolution was passed unanimously in a roll call vote among Chairman Williams and the remaining three members of the Commission.

Thereafter, Chairman Williams continued, as reflected at pages 0168 to 0169 of the record:

While we were in closed session, we discussed Colonial Downs' request for race days in 2000, and with respect to that request we have considered all the evidence from the various parties in the industry, as well as Colonial Downs, and have come up with a plan to award 32 days of thoroughbred racing and 40 days of harness racing.

In the ensuing announcement during which no discussion of the Commission took place, Chairman Williams declared the decision of the Commission with respect to (i) the deposit of of simulcast handle retroactively, at page 0169 of the record, (ii) the instruction to Colonial Downs to continue to respect the contract, on the same page of the record, and (iii) the instruction to Colonial Downs to bring payables current to within 90 days by February 29, 2000, also at the same page in the record. Next on pages 0169 and 0170 of the record, Chairman Williams placed the above comments in the form of a motion with a second by Commissioner Bates, which motion was passed unanimously by the Commission.

Next, Chairman Williams continued with an item-by-item review of the stabilization plan offered by Colonial Downs, declaring the position of the full Commission without any discussion, at pages 0170 to 0171 of the record. Regarding the stabilization plan, Chairman Williams noted, "As a final matter, we expect the Related Parties of Colonial Downs to waive their enhancements and consulting fees as they have proposed. Do I need to make that a motion?"

Furthermore, at pages 0171 and 0172 of the record, Chairman Williams announced, "[W]e have decided, and we'll probably have to vote on this, we have decided that the executive secretary will not be approved to authorize simulcast schedules unless he's satisfied that progress is being made towards this February 29th deadline of bringing your payables current. Ms. Griggs, do I need to make any of this a motion. [sic]"

Commissioner Bates then moved for the Commission to approve two matters not at issue which related to the Commission's support for modification of its basic law by the General Assembly. The motion carried unanimously.

Finally, Commissioner Bates made closing comments which are not the basis of this appeal. Then, Chairman Williams asked for questions or comments. Hearing none, the Chairman closed the proceedings.

Notice for Agency Meetings Under FOIA

Virginia Code 2.1-344.1(C) states:

The public body holding a closed meeting shall restrict its discussion during the closed meeting only to those matters specifically exempted from the provisions of this chapter and identified in the motion required by subsection A.

Subsection A reads:

No closed meeting shall be held unless the public body proposing to convene such meeting has taken an affirmative recorded vote in an open meeting approving a motion which (i) identifies the subject matter, (ii) states the purpose of the meeting and (iii) makes specific reference to the applicable exemption from open meeting requirements provided in 2.1-343 or subsection A of 2.1-344. The matters contained in such motion shall be set forth in detail in the minutes of the open meeting. A general reference to the provisions of this chapter, the authorized exemptions from open meeting requirements, or the subject matter of the closed meeting shall not be sufficient to satisfy the requirements for holding a closed meeting.

Here, the Commission cited Code 2.1-344(A)(7) as its basis for having a closed meeting. That paragraph exempts the Commission from public deliberation for:

Consultation with legal counsel and briefings by staff members or consultants pertaining to actual or probable litigation, where such consultation or briefing in open meeting would adversely affect the negotiating or litigating posture of the public body; and consultation with legal counsel employed or retained by a public body regarding specific legal matters requiring the provision of legal advice by such counsel.

Clearly, the Commission erred in citing the above exemption for its closed deliberations during which Chairman Williams admitted the Commission "discussed Colonial Downs' request for race days in 2000, and with respect to that request ... considered all the evidence from the various parties in the industry, as well as Colonial Downs, and [came] up with a plan to award 32 days of thoroughbred racing and 40 days of harness racing." The purpose of FOIA is not to allow an agency such as the Commission the luxury of weighing the evidence and deciding upon a proposal out of the public view. See generally, Marsh v. Richmond Newspapers, 223 Va. 245 (1982); see also City of Danville v. Laird, 223 Va. 271 (1982); Nageotte v. Board of Supervisors, 223 Va. 259 (1982). In fact, FOIA quite clearly works to effect the opposite result.

Given the Chairman's representations in the record of the Commission's discussions in closed session, the Commission did not enter closed session to consult with legal counsel and staff members or consultants on matters "pertaining to actual or probable litigation." The Commission entered closed session to deliberate and to come to a unified decision on a comprehensive plan for Colonial Downs as announced by the Chairman when the public session was reopened. Such closed deliberations are in violation of FOIA and abrogate the General Assembly's purpose of keeping such agency meetings open to the public. A licensee's non-compliance with regulations in the past, as argued by the Commission, may be frustrating, but it is not justification for disregarding the public hearing requirements of FOIA. However, the Commission's error does not de facto warrant reversal of the Commission's decisions.

The Virginia Supreme Court has held that an agency's violations of FOIA may not invalidate actions voted upon in open meeting. See Nageotte, 223 Va. at 267. Construing an earlier version of FOIA, the Court refused to invalidate agency action even after deciding that the agency violated FOIA. See id. The Court found that the agency entered closed session in good faith, at the advice of counsel, and then voted in open meeting on all the matters at issue on review. See id. Thus, where the Racing Commission did the same, its action should also be upheld.

Here, the Commission's resolution after the meeting leads to the inference that the Commission was simply ignorant of its violation of FOIA and that the Commission did not act in bad faith. There is no evidence of the advice of counsel to the Commission in this case. However, the record reflects that the Commission voted on all matters except the Related Parties' waiver of their contractual benefits and the Commission's delegation of authority to its Executive Secretary. Thus, as regards the VHHA contracts, the FOIA violation under these facts and circumstances is not reversible error.

Since the procedural arguments fail, Colonial Downs asserts that there was not "substantial evidence" to support the Commission's decision that the agreements were, in fact, enforceable contracts which had not yet terminated. Here, the court will also deal with Colonial Downs assertion that the Commission acted arbitrarily in requiring Colonial Downs to pay purses retroactively and to respect the terms of the contracts.

"Substantial evidence" is that evidence which "a reasonable mind might accept as adequate to support a conclusion." Virginia Real Estate Comm'n v. Bias, 226 Va. 264, 269 (1983). "[T]he court may reject the agency's finding of fact only if, considering the record as a whole, a reasonable mind would necessarily come to a different conclusion." Id. (citing B. Mezines, Administrative Law 51.01 (1981).

The evidence before the Commission regarding the purse agreements included the written agreements and testimony by Colonial Downs and the VHHA regarding the status of those agreements. Counsel for Colonial Downs went so far at the December 15 hearing as to assert that the contracts were not terminated in a single written notice, but that the intent to terminate was evidenced in a series of correspondence, negotiating a new contract.

The question before the court is not whether that evidence was complete, but rather whether the evidence was substantial to support the decision. Considering the written terms of the contracts and the conflicting testimony of the parties on the record, the court does not find that a reasonable mind would necessarily come to a different conclusion from that reached by the Commission. Therefore, the Commission's finding was based on substantial evidence. The subsequent order directing Colonial Downs to fund purses pursuant to the contracts was within the Commission's broad authority under the basic law as discussed above and, therefore, was not arbitrary.

2. The Requirement to Bring Accounts Payable Current

Colonial Downs also challenges the Commission's rulings on the Final Order's accounts payable requirement. Although the Petition for Appeal first raises the issue of the Commission's authority, the court begins with the procedural issue of notice.

Colonial Downs states that the evidence supporting the adverse decision was not properly noticed to Colonial Downs to afford the applicant sufficient opportunity to prepare a response. Thus, Colonial Downs argues that the ruling was rendered in violation of Code 9-6.14:11(B)(iii) which is quoted above and need not be reprinted here.

After a review of the record including the Commission's statement of its reasons for the payables requirement, the court agrees that the Commission failed in its obligation to notify Colonial Downs of some of the evidence which the Commission considered in its ruling. See Final Order at 4 3 (December 20, 1999) (listing a letter from Teleview as a basis for the payables requirement). Among that evidence were ex parte conversations between Commissioners and vendors, described the Commission at pages 0096 to 0098, where the vendors alleged they were owed debts by Colonial Downs. The language of the Final Order indicates that the Commission relied upon the adverse evidence in making its ruling, as required to invoke the notice protection of Code 9- 6.14:11(B)(iii). The Final Order at page 4, paragraph 3, states in relevant part:

On December 6, 1999, the Commission requested the Licensee to supply certain additional information concerning their application for racing days, including updated financial information. That request has yet to be honored. However, the Commission was provided with a letter from one of the track's vendors, Teleview, which supplies audio and closed circuit television systems for the Licensees' satellite wagering facilities and race track. Teleview states that its balance due has increased, and that it may not be in a position to continue its business relationship with the Licensees. The Licensees' accounts payable appear to be worsening, rather than improving, and the Commission finds that the constant turmoil associated with the Licensees' payables casts doubt on the track's long-term viability. The racing industry needs confidence that Colonial Downs will be viable and able to run live racing. Therefore, as a condition of the award of racing days, the licensees [sic] are to bring all accounts payable current (not more than 90 days in arrears) by February 29, 2000.

According to the express words in the Final Order, the Commission did consider the letter from Teleview in its finding that Colonial Downs' accounts payable are worsening, rather than improving. The court finds that the letter was "contrary fact basis or information in the possession of the agency" as stated in Code 9-6.14:11. Although Colonial Downs does not assert when the Commission received the letter, the court can infer from the record and argument of both parties that the Commission received the letter before the hearing. Furthermore, the conversation which Chairman Williams had with Ron Saletto of Teleview is also "contrary fact basis or information" under Code 9-6.14:11 and its consideration for the Commission's decision was equally inappropriate.

Independent of the letter and ex parte conversations, however, the Commission received substantial evidence at the December 15 hearing to support its finding that the condition to bring payables current was necessary to effect the purposes of the Commission's basic law. See Code 59.1-364, et seq. (1950); see also Virginia Jockey Club, 22 Va.App. 275 (1996). The record reflects, at page 0098, that Colonial Downs provided the Commission with accounts payable listings over several months before the hearing. The Commission alleges, and Colonial Downs did not contest, that the Commission asked Colonial Downs for information about the licensees' accounts payable for the purpose of considering them in the Commission's decision.

Additionally, as Colonial Downs knew prior to the December 15 hearing, the broad authority granted the Commission by the General Assembly extends to the financial viability of the racing industry. See Virginia Jockey Club at 287- 89. To that end, the General Assembly delegated to the Commission the plenary power to "promulgate regulations and conditions under which simulcast horse racing shall be conducted ... to effectuate the purposes of this chapter." Code 59.1-369(4) (1950 & Supp.).

Here, the Commission had substantial evidence to find that Colonial Downs' accounts payable were worsening instead of improving. The Commission then set a condition within its statutory authority which Colonial Downs would have to meet to prove financial viability.

In applying for racing days, Colonial Downs knew that its financial viability would be a consideration. Given Colonial Downs' failure to provide the requested information, the Commission did not exceed its wide authority by setting a condition such as this in the interest of the "health, safety, and welfare" of citizens of Virginia and in the interest of maintaining high standards for the racing industry as directed by the General Assembly.

The court is not deaf to Colonial Downs pleas that the Commission may be "micro-managing" the industry and interfering with private business. However, the delegation from the General Assembly to the Commission is clear in its breadth, and the law governing agency action is clear. Any appeals to the extent they disagree with the wisdom of regulatory policy imposed upon the horse racing industry are properly pled in the Capitol, not in the courts.

3. The Delegation of Authority to the Executive Secretary

Colonial Downs also argues that the Commission exceeded its authority in delegating authority to approve simulcast schedules to the Commission's Executive Secretary until the Commission can meet to ratify the Executive Secretary's action as described in the Commission's regulation at 11 VAC 10- 40-330. First, Colonial Downs cites FOIA, and specifically Code 2.1- 344(B), and argues that the Commission never voted upon the delegation to the Executive Secretary in a public meeting.

While the record of the Commission's action subsequent to the closed meeting, as quoted above, shows that the Commission did not vote on the delegation, the court finds such a vote unnecessary as the action is one of "internal management or routine of an agency." See Code 9-6.14:15(ii) (1950). Such matters are outside the jurisdiction of the court as prescribed by statute. See id. Therefore, the agency's action in delegating to the Executive Secretary survives the appeal.

The Commission also did not exceed its authority when it limited the delegation to allow approval only if the Executive Secretary is satisfied that Colonial Downs is meeting the terms of the order of December 20, 1999. The noted difference between the written order and the Commission's oral ruling is not a violation of FOIA as the delegation is "internal management" and not subject to the open meeting requirement. Finally, any action of the Executive Secretary, whether fact finding or otherwise, will be passed upon by the Commission, so the enforcement power delegated to the Executive Secretary remains in the context of a check by the heads of the administrative body.

Thus, Colonial Downs failed to provide a basis upon which the delegation can be reversed on appeal. The delegation in the written order, as the final memorial of the Commission's ruling, stands.

4. The Waiver of Related Parties' Fees

Colonial Downs further argues that the Commission exceeded its authority when it conditioned the grant of racing days upon whether the Related Parties waive their fees. The court agrees that the Commission improperly included the condition in its final order without a vote at a public meeting.

The court's review of the record, relating to the Commission's action after the closed meeting shows that the Commission voted on all matters except the delegation of authority to the Executive Secretary and the requirement that Related Parties waive their fees. The delegation survived as an action of "internal management." However, the decision regarding waiver of the Related Parties fees is an action not protected by the statutory exemption.

The Commission argues that it had the authority to include the condition in its order despite Colonial Downs arguments that the waiver was only acceptable as part of the entire Stabilization Plan. The Commission did not address Colonial Downs assertions that the Commission violated the procedural requirements of FOIA by not publicly voting on the issue before ruling. Therefore, the court finds no alternative, but to reverse the Commission's requirement that the Related Parties waive their fees and strikes that clause from the conditions of the Final Order.

5. The Requirement to Conduct 40 Days of Standardbred Racing

Colonial Downs final contention is that the Commission ignored the evidence before it in ordering Colonial Downs to conduct 40 days of Standardbred racing. The last argument of Colonial Downs asserts that the Commission improperly regarded the VHHA agreements and that the Commission ignored the substantial evidence demonstrating the destructive financial impact that 40 days of Standardbred racing would have on Colonial Downs. Thus, it is contended, the Commission disregarded the horse racing industry's interest in having a financially viable racetrack in Virginia.

As explained above, the Commission properly acted within its broad authority to consider the VHHA agreements and, except as regards that Related Parties' fees, did not violate Colonial Downs' procedural rights in any way asserted by the licensees in this appeal. Also, the testimony of the various associations and of Colonial Downs itself, in addition to the documentary evidence included in the record provided substantial evidence for the Commission's decision such that a reasonable person would not necessarily come to a different conclusion. See Bias, 226 Va. at 269.

Finally, the court declines Colonial Downs' implied invitation to review the wisdom of the Commission in choosing 40 days over Colonial Downs' proposal or some other amount. The Commission is presumed to have the necessary expertise and knowledge for such a determination. The court "will not substitute its own independent judgment for that of the agency but rather will reverse the agency decision only if that decision was arbitrary and capricious." See Johnston- Willis, 6 Va.App. at 246. Such a finding is not warranted on the record in this case.

It is, therefore, ORDERED, that the Virginia Racing Commission's Demurrer to the Petition for Appeal is overruled and the Final Order of the Virginia Racing Commission dated December 20, 1999 is affirmed in its entirety except for the last clause in paragraph four (4) of Final Order which requires the waiver of fees owed to Diversified Opportunities Group Ltd., Premier Development Co., and Arnold W. Stansley as "Related Parties." No costs or attorney's fees are awarded.

Both parties' objections are noted. Copies of this order were this day mailed to counsel of record.


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