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From Antitrust Law Daily, March 15, 2016

Racetrack operator’s conspiracy, monopolization counterclaims finish out of money

By Greg Hammond, J.D.

Conspiracy and monopolization counterclaims filed by a horse racetrack operator and pari-mutuel gaming system provider against a competing gaming system provider were dismissed by the federal district court in Bowling Green, Kentucky. The court found that the defendants did not suffer any actual injury to support a conspiracy claim and the monopolization claim was precluded by the Noerr-Pennington doctrine (RaceTech, LLC v. Kentucky Downs, LLC, March 11, 2016, Stivers, G.).

Plaintiff RaceTech, LLC and defendant Encore Gaming, LLC provide competing horse racing pari-mutuel gaming systems that allow players to place wagers on past races via computer monitors with winnings paid out of a wager pool, rather than by the racetrack. Encore obtains the horse racing data from Equibase Company, LLC, the sole provider of data in the thoroughbred horse racing industry. In their counterclaims, Kentucky Downs, LLC and Encore Gaming, LLC allege that RaceTech conspired with other companies—through various communications and actions involving Equibase—intending to harm the defendants’ historical racing operations. RaceTech moved to dismiss the Sherman Act and Kentucky Consumer Protection Act antitrust claims.

Conspiracy. The court granted RaceTech’s motion, first finding that the conspiracy counterclaim fails to allege an actual injury. In particular, the court determined that Kentucky Downs and Encore claimed only a potential injury to their business and “what could happen” if RaceTech’s efforts are successful. Encore’s licensing agreement with Equibase is currently in effect until December 31, and neither defendant has stated that access to the data from Equibase has actually been adversely affected by RaceTech’s actions. Consequently, the defendants failed to allege any actions by RaceTech that have ripened into an actual injury, as required to state a private cause of action under Section 1 of the Sherman Act.

Noerr-Pennington doctrine. The defendants’ monopolization counterclaim was also dismissed by the court as precluded under the Noerr-Pennington doctrine, which the court determined extended to RaceTech’s alleged pre-suit communications to third parties that have not resulted in litigation. The alleged communications at issue included: (1) a letter sent to a trade association claiming that Encore’s system improperly used data without compensating jockeys; (2) a discussion between a RaceTech officer and Equibase concerning intellectual property concerns regarding Encore’s gaming system; and (3) a letter to Encore, asserting that Encore was required to obtain advance permission from two racetracks before using data from races conducted at those tracks.

The court found that the sham exception to the Noerr-Pennington doctrine was not applicable because the communications were not objectively baseless or patently frivolous. In particular, the court determined that since it appears Encore represented to Equibase that it had authorization from host tracks, but the host tracks have denied such authority was given, the alleged communications by RaceTech could not be considered patently frivolous. In addition, the communications from RaceTech to the trade association did not appear to be baseless because there were no allegations in the counterclaim contradicting that the tracks, owners, and jockeys were paid a portion of the wagers made through RaceTech’s gaming system, and that Encore does not pay such commissions to the horsemen.

The case is No. 1:15-CV-00082-GNS.

Attorneys: Daniel Sakaguchi (Armstrong Teasdale LLP) and E. Kenly Ames (English, Lucas, Priest & Owsley LLP) for RaceTech, LLC. David A. Barnette (Jackson Kelly, PLLC) for Kentucky Downs, LLC and Encore Gaming, LLC.

Companies: RaceTech, LLC; Kentucky Downs, LLC; Encore Gaming, LLC

MainStory: TopStory Antitrust KentuckyNews

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