Appalachian Racing, LLC Real Party in Interest v. Commonwealth of Kentucky, Kentucky Horse Racing Commission

RENDERED: DECEMBER 15, 2016
TO BE PUBLISHED

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APPALACHIAN RACING, LLC., AND APPELLANTS
FLOYD COUNTY, KENTUCKY, REAL
PARTIES IN INTEREST

ON APPEAL FROM COURT OF APPEALS
V. CASE NO. 2015-CA-001808
FLOYD CIRCUIT COURT NO. 15-CI-00836

COMMONWEALTH OF KENTUCKY, APPELLEES
KENTUCKY HORSE RACING COMMISSION,
AND HONORABLE JOHNNY RAY HARRIS,
JUDGE, FLOYD CIRCUIT COURT

OPINION OF THE COURT BY CHIEF JUSTICE MINTON

AFFIRMING

Appalachian Racing, LLC, appeals to this Court from the Court of

Appeals' order granting the Kentucky Horse Racing Commission a writ of

prohibition barring the Floyd Circuit Court from enforcing its restraining order

that prohibited the Commission from considering a license application. The

Court of Appeals issued the writ because it determined the circuit court

violated Kentucky's stringent separation of powers doctrine in issuing the

order. We agree for slightly differing reasons and affirm the Court of Appeals.
 I. FACTUAL AND PROCEDURAL BACKGROUND.
Keeneland Association, Inc., entered into a contract with Appalachian

Racing to preserve its interest in purchasing Appalachian Racing's ownership

of Thunder Ridge, a quarter-horse racing track in Prestonsburg, Kentucky. The

contract prohibited Appalachian Racing from taking any action that would

amount to an effort to enter negotiations to sell the track to anyone else for

approximately one year. Floyd County, Kentucky, also had an interest in this

contract because it held bonds that were to be paid upon Keeneland's purchase

of Thunder Ridge.

While the contract was pending, Keeneland applied for a license with the

Commission on behalf of Cumberland Run, LLC, to operate a quarter-horse

racing track in Corbin, Kentucky. The Commission issued public notice on

November 23, 2015, that it would review this application for racing and

wagering on December 1-an eight-day turnaround-to determine whether

Keeneland's proposal complied with the regulatory prerequisites to opening a

new racing facility.

Two days after the Commission's public notice Appalachian Racing,

joined by Floyd County, sued the Commission in the Floyd Circuit Court on a

theory of aiding and abetting fraud and tortious interference with a prospective

advantage. In addition to its complaint, Appalachian Racing sought two other

forms of immediate relief: (1) declaratory judgment that the Commission

violated its right to intervene in Keeneland's application with the Commission

and the Commission violated its obligation to provide twenty days' notice of its

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proceeding, and (2) a temporary restraining order to prevent the Commission
from issuing Keeneland a license. The circuit court issued a restraining order

on December 1, 2015, "prohibiting the Commission from considering or taking

any action on the license application identified as 'Keeneland's application to

establish Quarter Horse Race Track (Cumberland Run) in Corbin and to offer

wagering on Historical Horse Races[.]"'. The Commission then filed an original

action in the Court of Appeals seeking a writ of prohibition to prevent the Floyd

Circuit Court from enforcing its restraining order.

The Court of Appeals granted the Commission's request for a writ of

prohibition. The appellate panel concluded that there was no irreparable injury

if the trial court's restraining order remained in place, but instead issued the

writ under the "special cases" writ category-a limited category of writs granted

in instances when the "orderly administration of justice" so requires. In issuing

the writ, the panel determined that the trial court's order threatened the

integrity of the robust separation of powers enshrined in the Kentucky

Constitution, so this matter is most accurately deemed a "special case"

warranting this form of equitable relief. Appalachian Racing disagrees, and now

appeals to this Court as a matter of right, asking us to determine whether the

Court of Appeals overreached in prohibiting the circuit court from enforcing its

order. We conclude it did not.

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 II. ANALYSIS.
A. Standard of Review.
We employ a three-part analysis in reviewing the appeal of a writ action.

We review the Court of Appeals' factual findings for clear error.I Legal

conclusions we review under the de novo standard.2 But ultimately, the

decision whether or not to issue a writ of prohibition is a question of judicial

discretion. So review of a court's decision to issue a writ is conducted under

the abuse-of-discretion standard. 3 That is, we will not reverse the lower court's

ruling absent a finding that the determination was "arbitrary, unreasonable,

unfair, or unsupported by sound legal principles." 4

B. The Court of Appeals Did Not Abuse Its Discretion in Issuing the
Writ.
A writ of prohibition is an extraordinary remedy and is one that is issued

with caution. In Hoskins v. Maricle, we recognized two specific situations where

this form of relief is appropriate:

[U]pon a showing that (1) the lower court is proceeding or is about
to proceed outside of its jurisdiction and there is no remedy
through an application to an intermediate court; or (2) that the
lower court is acting or is about to act erroneously, although
within its jurisdiction, and there exists no adequate remedy by
appeal or otherwise and great injustice and irreparable injury- will
result if the petition is not granted. s

1 See Grange Mut. Ins. Co. v. Trude, 151 S.W.3d 803,810 (Ky. 2004).
2 See id.
3 See id.
4 Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999).
s 150 S.W.3d 1, 10 (Ky. 2004).

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 The first class of writs refers to subject-matter jurisdiction; that is, the

lower court's core authority to hear the case at all. 6 The Court of Appeals

summarily held that this writ class was unavailable to the Commission in this

case-of course the Floyd Circuit Court has subject-matter jurisdiction over

declaratory judgment actions. So this case is best analyzed under the second

class of writs. For the second class of writs, the Commission must show that

(1) it had no adequate remedy by appeal or otherwise and (2) it would suffer

great and irreparable injury if denied relief.

The Court of Appeals admitted that the Commission in fact maintained

an adequate remedy on appeal for part of the trial court's order; it may

certainly appeal the trial court's issuance of declaratory judgment in

Appalachian Racing's favor. But the panel determined that it did not possess

an adequate remedy for the trial court's restraining order-a non-appealable

interlocutory order. Appalachian Racing does not appear to dispute this aspect

of the panel's analysis, so we are confident that the Court of Appeals was

correct in determining the Commission met its burden of showing no adequate

remedy by appeal.

The Court of Appeals then proceeded to evaluate the Commission's

alleged injury from the Floyd Circuit's order. Under the "special" class of writs,

where "the requirement of 'great and irreparable harm' [is] treated with a

degree of flexibility permitting intervention if the administration of justice,

6 See Goldstein v. Feeley, 299 S.W.3d 549 (Ky. 2009); Petrey v. Cain, 987
S.W.2d 786, 788 (Ky. 1999) (overruled on other grounds by Masters v. Masters, 415
S.W.3d 621 (Ky. 2013)).

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[rather than the petitioner], would suffer great and irreparable injury."7 One

such instance where this type of writ is appropriate is to "preserve the orderly

administration of the laws. "B The Court of Appeals labeled the Floyd Circuit

order an assault on Kentucky's separation of powers and considered it within

this class of writs. So it issued the writ of prohibition against enforcement of

the order. We agree that the writ was proper.

As the Court of Appeals articulated, the Kentucky Constitution offers a

"double-barreled, positive-negative approach" to separation of powers, making

our provisions among the most powerful in the country.9 We also echo the

sentiment that "The essential purpose of separation of powers is to allow for

independent functioning of each coequal branch of government within its

assigned sphere of responsibility, free from risk of control, interference, or

intimidation by other branches."10 We certainly agree that preserving the

integrity of this constitutional principle can mandate the issuance of a writ to

ensure the "orderly administration of justice." But before we can affirm the

Court of Appeals' issuance of the writ, we must first conclude that the circuit

court order did indeed intrude on this well-established Kentucky constitutional

value.

The Commission is an administrative agency whose constitutional

powers derive from the executive branch's authority. And the Floyd Circuit

1 Wal-Mart Stores, Inc. v. Di.ckinson, 29 S.W.3d 796, 801 (Ky. 2000).
s Inverultra, S.A. v. Wilson, 449 S.W.3d 339, 348-49 (Ky. 2014).
9 Legislative Research Comm'n v. Brown, 664 S.W.2d 907, 911-12 (Ky. 1984).

10 Nixon v. Fitzgerald, 457 U.S. 731, 760-61 (1982).

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Court obviously wields the judicial power of the Commonwealth as a trial court

of general jurisdiction. Our statutory scheme does provide for judicial review of

agency decisions, but it also goes out of its way to declare precisely when a

case is ripe for review. And we are certain this specific administrative action is

far from ripe for meaningful judicial review.

Appalachian Racing takes particular issue with the Court of Appeals'

characterization of the Commission's exercise of power in this capacity as using

its "legislative power." The panel, in issuing the writ, relied on an old aphorism

declaring that administrative agencies "perform a mixed bag of legislative,

executive, and judicial functions. "11 The appellate panel differentiated these

functions by stating that an agency acts legislatively when it carries out duties

according to statute but judicially when adjudicating rights of parties adversely

affected by agency decisions. So according to the Court of Appeals, "When the

Commission meets to decide whether to grant a license to an applicant it

employs a legislative function: exercising authority granted to it in KRS

Chapter 230." Appalachian Racing disagrees, and contends the Commission

was performing its judicial role. As it happens, both characterizations are

imprecise and ignore the realities of our constitutional structure.

Sections 27 and 28 of the Kentucky Constitution contain some of the

most powerful restrictions on government power-sharing in the country. In

Legislative Research Comm'n v. Brown, we held that "Our present constitution

contains explicit provisions which, on the one hand mandate separation among

11 Bourbon County Bd. of Adjustment v. CUrrans, 873 S.W.2d 836, 838 (Ky. App.
1994).

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the three branches of government, and on the other hand, specifically prohibit

incursion of one branch of government into the powers and functions of the

others." 12 Although it is true that the Commission acts according to the organic

law created by the legislature when it charts a particular course under those

powers to which it is entrusted, it is still exercising a purely executive function.

An agency may indeed act in quasi-legislative or quasi-judicial capacities in

performing that function, but it is not those particular sub-functions

themselves that prohibit the Floyd Circuit Court from interfering. And it is

something of an absurdity to suggest otherwise; the problem cannot be that the

Floyd Circuit, as a court of law, cannot enjoin the Commission because it is

acting legislatively. The Commission has no literal legislative power. It may not

create law. It only executes clear commands from the General Assembly, albeit

in a variety of ways. So, we think it is outlandish to postulate that a separation

of powers issue arises and a circuit court is without jurisdiction to enjoin the

Commission from exercising a power it does not constitutionally wield in the

first place. Agencies are awarded vast discretion, and the legislature often

delegates broad authority. But no matter how open-ended its power may at

times be, an administrative agency may not act in the legislature's stead. And

this forms a faulty basis for the Court of Appeals' decision below.

Instead, the real reason the Floyd Circuit Court may not enjoin the

Commission from considering the application is because the circuit court

exercises the judicial authority of the Commonwealth and the Commission

12 664 S.W.2d 907,912 (Ky. 1984) (emphasis added).

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exercises executive authority, and there is currently no justiciable claim for a

court of law to decide. This is precisely the type of intrusion our separation-of-

powers provisions were enacted to prevent. In Clark v. Ardery, our predecessor

court held that we may not "approve the exertion of judicial power to perform a

function vested in an executive body. Otherwise, our courts would be invading

the domain of another branch of government, and gratuitously assuming

responsibilities with which the latter is invested." 13 In short, there is nothing in

the present suit that authorizes the Floyd Circuit Court to prevent the

Commission from considering Keeneland's application.

This is not to say that agency actions may go unchecked by courts of

law. To the contrary, Commission actions are no doubt subject to judicial

review, but only once the matter is properly appealable. As the Court of

Appeals panel recognized, if the Commission does issue Keeneland a license,

that action may be appealed to the Franklin Circuit Court.14 At that point, a

judicially cognizable case or controversy is in fact mature, and the circuit court

may decide whether the agency acted "arbitrarily or in excess of the authority

conferred upon [it] by statute."15 Or, alternatively, as the Court of Appeals

opined, Appalachian Racing could file an independent action against the

Commission if it finds itself aggrieved by its decision on this matter. 16 But until

13 222 S.W.2d 602, 605-06 (Ky. 1949).
14 See KRS 230.300.
1s Foster v. Goodpaster, 161 S.W.2d 626,628 (Ky. 1942).
16 See Lexington Retail Beverage Dealers Ass'n v. Dept. of Alcoholic Beverage
Control Bd., 303 S.W.2d 268, 269-70 (Ky. 1957).

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then, the Floyd Circuit may not constitutionally stop the Commission from

carrying out its duty as an executive agency.

We are confident that the Court of Appeals did not abuse its discretion in

issuing the writ of prohibition.

III. CONCLUSION.

For the foregoing reasons, we affirm the Court of Appeals' decision

issuing a Writ of Prohibition to bar enforcement of the Floyd Circuit Court's

restraining order.

All sitting. Minton, C.J.; Cunningham, Hughes, Keller, Noble and

Venters, JJ., concur.

Wright, J., Dissents by separate opinion.

Appalachian Racing v. Ky. Horse Racing Commission, 2016-206-MR

WRIGHT, J., DISSENTING: I respectfully dissent from the majority's

grant of a writ in this matter. I disagree that "the Commission met its burden

of showing no adequate remedy by appeal." Rather, I would hold that what the

Floyd Circuit Court called a "restraining order" from which there is no right to

appeal was, in actuality, a temporary injunction from which the Commission

could have moved the Court of Appeals for interlocutory relief.

Our Rules of Civil Procedure provide for when a restraining order may be

authorized. Specifically, CR 65.03 reads, in pertinent part, that a restraining

order may be authorized when "the applicant's rights are being or will be

violated by the adverse party and the applicant will suffer immediate and

irreparable injury, loss or damage before the adverse party or his attorney can

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 be heard in opposition .... " (Emphasis added.) Here, the Floyd Circuit Court

order states "having heard from all parties .... " If the court had, indeed,

heard from the parties, then the order was actually a temporary injunction-

not a restraining order-regardless of how the court captioned it. Following

this logic, if the Floyd Circuit Court's order was a temporary injunction, then

the Commission could have filed for interlocutory relief under CR 65.07.

An appeal from a temporary restraining order is unavailable, as the court

has only heard from one side of the case at the time it grants such an order.

By its very nature, the order is temporary rather than final and appealable.

Even assuming the order the Floyd Circuit Court entered actually was a

restraining order, the Commission could have filed a motion to dissolve the

restraining order and the Floyd Circuit Court would either have dissolved the

order or entered a temporary injunction. At that point, assuming the circuit

court had entered a temporary injunction, the Commission could have moved

the Court of Appeals for interlocutory relief. This is an appropriate and readily

available avenue for the Commission. Our Rules provide this means of

resolution, rather than the parties resorting to the extraordinary action of

seeking a writ.

Under either of the scenarios outlined above, an adequate remedy by

appeal exists. The issuance of a writ is simply inappropriate. Since I would

hold the Commission had an adequate remedy by appeal, my analysis would

end there-with no need to determine whether the Commission experienced

· irreparable injury or fit under the "special cases" exception.

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COUNSEL FOR APPELLANT, APPALACHIAN RACING, LLC, REAL PARTY IN
INTEREST:

Jason Michael Nemes
Nemes Law, PLLC

COUNSEL FOR APPELLANT, FLOYD COUNTY, KENTUCKY, REAL PARTY IN
INTEREST:

Keith Bartley
Floyd County Attorney

Johnny Ray Harris, Judge, Floyd Circuit Court, Division 1

COUNSEL FOR APPELLEE, COMMONWEALTH OF KENTUCKY, KENTUCKY
HORSE RACING COMMISSION:

Barry Lee Dunn
Carmine Gennar Iaccarino
Public Protection Cabinet
Office of Legal Services

John Lawrence Forgy
Susan Bryson Speckert
Kentucky Horse Racing Commission

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