The administrative law judge (ALJ) handling Phil Serpe's appeal to the Federal Trade Commission (FTC) stemming from a two-year suspension imposed by a Horseracing Integrity and Welfare Unit (HIWU) arbitrator over a contested clenbuterol positive case has upheld the sanctions imposed against the veteran trainer.
However, Jay Himes, the ALJ, also wrote in his Sept. 12 decision that he would “modify the award to add a $25,000 fine against Serpe,” even though the ALJ also ruled that, “I hold without merit Serpe's argument that he is entitled to a jury trial under the Seventh Amendment.”
The issue of a fine, which was not imposed by HIWU, is a central part of a nearly year-old federal lawsuit Serpe initiated last October against the Horseracing Integrity and Safety Authority (HISA) and the FTC.
Serpe's lawsuit is separate from the HIWU, HISA and FTC proceedings, although all of the adjudicatory proceedings are intertwined.
And even though the ALJ offered an opinion that Serpe's Seventh Amendment argument is “without merit,” that question has yet to be decided by the federal judge in charge of Serpe's lawsuit.
A key component of Serpe's renewed request for a preliminary injunction in his lawsuit is that HIWU and HISA did not pursue any monetary fine against him, which is a departure from how the agencies handled a dozen other clenbuterol detections since the Anti-Doping and Medication Control Program (ADMC) went into effect in May 2023.
The 66-year-old trainer has claimed that the non-pursuit of a fine by HISA and HIWU is an alleged end-around by those agencies to stymie his efforts to prove in his lawsuit that he has been wrongfully denied a constitutional right to a jury trial.
Citing a United States Supreme Court case that previously ruled that a federal regulatory agency's enforcement for civil monetary penalties must be brought in a federal court, Serpe asserted in a July 15 legal filing in U.S. District Court (Southern District of Florida) that his Seventh Amendment rights are being violated by “gamesmanship” in the form of HISA and HIWU initially imposing a monetary penalty, but then withdrawing it when the case was eight months old and on the brink of going to arbitration.
Serpe alleged that this move “strategically” attempted to deprive him of federal-court jurisdiction over the facts of liability required for any sanction.
HISA, in an Aug. 15 legal filing, denied the allegations of gamesmanship, writing that Serpe “has completely turned this case on its head” by “begging for an additional penalty…”
The ALJ's 130-page ruling dated last Friday affirmed the anti-doping rule violation (ADRV) against Serpe, then went into detail about the circumstances surrounding the HIWU arbitrator's non-imposition of a fine.
“With Serpe's liability proven, I address next the matter of sanctions, specifically, whether the Arbitrator erred in failing to award a fine. I first consider the Authority's argument that Serpe is not aggrieved by the absence of a fine and, therefore, cannot complain of its omission in the sanctions award under review,” the ALJ wrote.
“HISA § 3058(b)(1) provides, in relevant part, that review by an FTC ALJ may be taken 'on application by…a person aggrieved by the civil sanction' that has been 'imposed by the Authority…' The Authority maintains, however, that HISA's review provision 'does not permit a Covered Person to challenge the absence of a sanction….'
“As the Authority puts it, '[t]he Arbitrator's decision not to impose a fine only benefitted' Serpe,” the ALJ wrote.
Phil Serpe | Sarah Andrew
“But the Authority's argument misses the forest for the trees. Serpe contends that, while HIWU initially sought a fine in charging him, after he objected that arbitration proceedings under HISA and the Rules violated his right to a jury trial under the Seventh Amendment, the Authority directed HIWU to drop its fine request with a view to mooting Serpe's Seventh Amendment objection,” the ALJ wrote.
“Having litigated to conclusion HIWU's presence charge against him before the Arbitrator, Serpe has been held liable for an ADRV and had sanctions imposed–actual injury resulting in a proceeding he contends violates his right to Seventh Amendment protection. Serpe's objection is not to the absence of fine in the sanctions award. He maintains that he was entitled to have his liability for the alleged presence ADRV resolved by a jury in an action governed by discovery rules less 'restrictive' [than] those available in a HIWU-prosecuted arbitration,” the ALJ wrote.
“While arguing here that, since no longer subject to a fine, Serpe has no Seventh Amendment objection capable of review, at the same time the Authority contends in the Federal Action that, '[b]ecause Plaintiff's Seventh Amendment claim depends on a fine that does not and will not exist, he cannot prevail on the merits…'
“So, according to the Authority, Serpe cannot have his Seventh Amendment claim heard either on this review or in his Federal Action. It's a catch-22,” the ALJ wrote.
“That cannot be right. HIWU itself argued in the arbitration that Serpe's constitutional argument is properly heard in this review proceeding: 'the ADMC Program and the de novo review process provide a forum in which Trainer Serpe can raise constitutional issues and have those issues addressed' [and] case law supports HIWU's position,” the ALJ wrote.
“As I discuss below, the Authority's gloss on de novo review in this proceeding is too narrow, and how HIWU came to withdraw its request for a fine matters,” the ALJ wrote.
“Suffice it to say at this point that, in my view the Authority and HIWU have sought to deprive Serpe of the opportunity to have his Seventh Amendment claim heard and resolved, and they also may well have induced Arbitrator error in this case,” the ALJ wrote.
“[Serpe] is, therefore, 'aggrieved' for purposes of this review,” the ALJ wrote.
“Equally important, there is something unseemly about the Authority's constitutional avoidance strategy, which would enable it to forego often minor monetary fines while continuing to expose those covered by HISA and the Rules to banishment from Thoroughbred horseracing for substantial periods of Ineligibility–here, two years for Serpe's first ADRV,” the ALJ wrote.
“As Serpe rhetorically asks in the Federal Action: 'Will Defendants run this set of plays every time a Covered Person is prosecuted under HISA and seeks to vindicate his Seventh Amendment right?'” the ALJ wrote.
“The Authority and HIWU's voluntary cessation of allegedly unconstitutional enforcement conduct 'does not make the case moot,'” the ALJ wrote. “If that avoidance strategy were permitted, the issue Serpe raises would be capable of repetition, yet evading review'–not only in federal court, but also in HISA review proceedings.
“Simply put, HIWU does not work for, nor is it subject to the direction or control of, the Authority the way an employee or even an independent contractor might be,” the ALJ wrote.
“Under HISA and the Rules, HIWU has a vital role in the national enforcement system that governs the horseracing industry, and that system's integrity calls for, and requires, preserving HIWU's independence from the Authority–except in the most exceptional of circumstances,” the ALJ wrote.
“Whatever the scope of those exceptions might be, intervening to direct HIWU's charging prerogative in an individual, ongoing enforcement proceeding–as the Authority did here–is not one of them,” the ALJ wrote.
“The conclusion is inescapable: The Authority intervened in HIWU's case in an attempt to avoid a resolution of Serpe's claimed constitutional violation, either by the Arbitrator or the District Court. The Authority's interference with HIWU's independent prosecutorial authority in this case is inconsistent with its statutory responsibility, under HISA itself, to 'provide for adequate due process' to those charged with ADMC Program violations,” the ALJ wrote.
“In executing the Authority's directive, HIWU became complicit in the Authority's wrongful conduct,” the ALJ wrote.
“Nonetheless, Congress intended HISA to rid Thoroughbred horseracing of the scourge of doping, and there is a public interest in effective enforcement of the statute and its implementing Rules. On the facts in this case, either: (1) a fine of some amount greater than $0 should have been awarded; or (2) an explanation for the decision to dispense with any fine at all was necessary,” the ALJ wrote.
“The Arbitrator, however, offered no explanation, and nothing extraordinary is suggested that could account for the omission,” the ALJ wrote.
“The Arbitrator's failure to explain his decision to omit any fine 'is clearly against the logic and effect of the facts found' and thus 'a clear error of judgment,'” the ALJ wrote.
On Monday, a HISA spokesperson declined to comment on the ALJ's decision. Serpe's legal team could not be reached for comment.
Serpe's suspension stems from a clenbuterol positive detected in the urine (but not blood) samples taken from his trainee, Fast Kimmie (Oscar Performance), after her Aug. 10, 2024 victory in a $30,000 claiming race at Saratoga Race Course.
Clenbuterol is a bronchodilator that is approved by the U.S. Food and Drug Administration for the management of horses with airway obstruction. Clenbuterol cannot be administered to any HISA “covered horse” other than in the context of a valid veterinarian-client-patient relationship in accordance with the conditions set forth in ADMC rules.
Clenbuterol is classified as a “banned” substance by the ADMC, meaning it is never to be present in any HISA-regulated Thoroughbred.
In the 1990s and 2000s decades, clenbuterol first started being regulated by American racing commissions because of its propensity for abuse as a drug known to mimic the muscle-building properties of anabolic steroids.
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