RENDERED: DECEMBER 22, 2022; 10:00 A.M. TO BE PUBLISHED 

# Commonwealth of Kentucky Court of Appeals

NO. 2022

- CA

- 0003

- MR

MATTHEW WORKMAN APPELLANT

v. APPEAL FROM SIMPSON CIRCUIT COURT

HONORABLE JOHN D AVID SIMCOE, SPECIAL JUDGE

ACTION NO. 21

- CI

- 00029

KENTUCKY DOWNS, LLC AND KYD, LLC APPELLEES

OPINION AFFIRMING
**   **  **
BEFORE: CLAYTON, CHIEF JUDGE; JONES AND L. THOMPSON, JUDGES. CLAYTON, CHIEF JUDGE: Matthew Workman (“Workman”) appeals from the Simpson Circuit Court’s order granting Appellees’ motion to dismiss Workman’s
action under Kentucky’s Loss Recovery Act (the “Act”). Workman sought to

recover certain losses from wagers placed on historical horse racing under the Act

.- 2

-

Because the Appellees ’ actions fall under the safe

- harbor provisions of the Act contained in Kentucky Revised Statute (“KRS”) 372.005 , we affirm.

FACTUAL AND PROCEDURAL BACKGROUND This case center s around wagers on historical horse racing at a facility known as Kentucky Downs. The legal landscape of wagering on historical horse racing in Kentucky has a multifaceted history. As the Kentucky Supreme Court has discussed, “ [f] aced with serious finan cial challenges and seeking a means to develop new revenue sources, Kentucky ’ s horse racing industry expressed interest in developing the use of devices for wagering on historical horse races

. ” Appalachian Racing, LLC v. Family Tr ust Foundation of Kentucky, Inc. , 423 S.W.3d 726, 730 (Ky. 2014)

. As the Court went on to explain, “[h] istorical horse

rac es are horse races that have been run sometime in the past at an approved racing facility and are then currently presented in the form o f a video display on an electronic device, or terminal, at which individual wagerers may place bets. ” Id

. ( f ootnote omitted).

Thus, in July 2010, the Kentucky Horse Racing Commission (the “Commission”) revised the applicable administrative horse racing regulations and promulgated new regulations with an eye toward accommodating the racing industry’s appeal for wagering on historical horse races. Id . at 731 ( f ootnote omitted). The Commission did so pursuant to KRS 230.215( 1 ), which states that- 3

-

t he Commission has the authority to “ grant [] or den [ y ]” the “privilege” of “participat[ing] in any way in horse racing, or the entrance to or presence where horse racing is conducted [

. ] ” To that end, the General Assembly vested the Commission with “forceful c ontrol of horse racing in the Commonwealth” and “plenary power to promulgate administrative regulations prescribing conditions under which all legitimate horse racing and wagering thereon is conducted in the Commonwealt h [

. ] ” KRS 230.215(2).

Specific ally , the Commission added specific language to the administrative regulation permitting historical horse racing :

[w] agering on a n historical horse race is hereby authorized and may be conducted in accordance with KRS Chapter 230 and 810 [Kentucky Administrative Regulation (“ KAR ”) ] Chapter 1.
810 KAR 1:011 Section 3(1)

.

The Commission also revised and promulgated other regulations authorizing wagering on historical horse racing . Of note is 810 KAR 1:001 Section 1(48) , 1 which define d “pari

- mutuel wagering” as a “system or method of wagering approved by the [C] ommission in which patrons are wagering among themselves and not against the association and amounts wagered are placed in one or more designated wagering pools and the net pool is returned to the winning

1 This language has been revised, and the current version can be found in KRS 230.210(15) and 810 KAR 6:001 Section 1(53).- 4

-

patrons.” Additionally, 810 KAR 1:120 Section 4 (1) provide d that “[ a ] n association shall submit a written request to the [C] ommission for permission to offer any exotic wager on a n historical horse race” and set forth the requirements for the request and approval process.

Following the Commission’s promulgation of the regulations, the Commission and several racing facilities in Kentucky , including Kentucky Downs, filed a Joint Petition for Declaration of Rights in the Franklin Circuit Court (the “Franklin Court”) , asking for a declarato ry judgment affirming the validity of the regulations. Appalachian Racing , 423 S.W.3d at 731

. The Franklin C ourt permitted The Family Trust Foundation of Kentucky, Inc. ( the “ Foundation ”) , a Kentucky non

- profit corporation, to intervene in the action

. I d

. at 730. Thereafter, t he Franklin C ourt issued an opinion and order i n December 2010, determining that the Commission’s regulations for licensing of pari

- mutuel wagering on historical horse racing were a valid and lawful exercise of the Commission ’ s aut hority

. Following the Frankfort C ourt’s opinion , in September 2011, Kentucky Downs began offering historical horse race wagering using a system approved by the Commission.

The Appalachian Racing case ultimately reached t he Kentucky Supreme Court , which determined i n February 2014 that “[b]ecause the regulations promulgated by the Commission for the licensing of historical horse race wagering- 5

-

are consistent with the statutory mandate for ‘pari

- mutuel wagering’ on ‘legitimate horse racing,’” the regu lations were not invalid. Id . at 738. The Supreme Court
further held that the regulatory definition of “pari

- mutuel wagering ” was consistent with the references to pari

- mutuel wagering in KRS Chapter 230. Id . at 737

- 38

.

In upholding the Commission’s regulations, the Court recognized that the Commission ’s and racing facilities’ purpose :

was to obtain before actually conducting operations for wagering on historical horse racing a ruling of the court on the issue in order to eliminate or minimize the ris k of wrong action and to ensure that the y may proceed without being subject to any legal penalties, including criminal liability under Kentucky’s penal code.
Id . at 741

- 42 (emphasis in original) (internal quotation marks omitted)

.

However, t he Supreme Court did remand the case to the Franklin
Court for “further proceedings relevant to the issue [ of ] whether the licensed operation of wagering on historical horse racing as contemplated by Appellants constitute [d] a pari

- mutuel form of wagering [

. ] ” Id

. at 742. This Court denied the Foundation’s requests for an injunction or stay during the appeals process

.

After several years of discovery , the Franklin C ourt held a bench trial in January 2018 . In October 201 8 , the Franklin C ourt issued an opinion “ that the
Encore s ystem [ of historical horse race wagering] constitute d a pari

- mutuel system of wagering , approved by the Commission and meeting the elements of 810 KAR
1:001 § 1(48).” Family Tr ust Foundation of Kentucky, Inc. v. Kentucky Horse- 6

-

Racing Commission , 620 S.W.3d 595, 599 (Ky. 2020), reh ’ g denied (Jan. 21, 2021)

. After accepting a transfer , t he Supreme Court disagreed with the Franklin C ourt, determin ing in September 2020 that the Frank lin C ourt “erred in its conclusion that pari

- mutuel wagering does not require patrons to wager on the same horse races, nor does it require reciprocity among patrons.” Id . at 601 (internal quotation marks and brackets omitted)

. The Supreme Court remanded the case to the Franklin C ourt for entry of a judgment consistent with its opinion

. Id

. at 603. Meanwhile, the General Assembly passed Senate Bill 120 in its 2021 session , which codified the definition of “ pari

- mutuel wagering ” to include wagering on historical horse races

. The Governor signed Senate Bill 120 on February 22, 2021 , after which it became immediately effective as KRS 230.210

. Additionally, f

ollowing the passage of Senate Bill 120, the Commission adopted new regul ations in accordance with the new definition of pari

- mutuel wagering.

In the meantime , the Franklin C ourt entered judgment in compliance with the Supreme Court’s opinion in March 2021 , holding that the subject wagering s ystem was “ not a form of pari

- mutu el wagering under the laws in effect at the time of the Kentucky Supreme Court’s September 24, 2020 , Opinion.” However, t he Franklin C ourt did not give the decision retroactive application , as it- 7

-

found that the racing associations had not operated the wag ering systems in violation of a court order. The Foundation moved to alter or amend and give the judgment retroactive application, which the Franklin C ourt denied.

On January 24, 2021, Workman filed the complaint underlying this appeal in Simpson Count y against Kentucky Downs. Workman sought to recover
under the Act, or KRS 372.040. The Simpson Circuit Court (the “Simpson Court”) entered a final order in this case on November 23, 2021. In its ruling , the Simpson
C ourt determined that the racing association had operated the gaming systems based up on their reliance on the Commission’s apparent authority, permission, and authorization. It further noted that, w hile the Kentucky Supreme Court found the Commission’s authoriz ation invalid, “[a] party has the right to rely on approvals of commissions and previous court opinions unless and until they are overturned, or injunctive relief is granted .” Thus , the Simpson Court granted the Appellees’
motion to dismiss . This appeal followed.

We will discuss further facts as they become relevant.

ANALYSIS As previously discussed, Workman’s claims rely on the Loss Recovery Act contained in KRS Chapter 372. KRS 372.020 affords a losing gambler with a first

- party cause of action to recover any losses he or she incurs . If a losing gambler fails to bring a recovery action under KRS 372.020 within a- 8

-

certain amount of time , KRS 372.040 permits “any other person” a third

- party

cause of action against the winning gambler and allows for the recovery of treble damages. Specifically, KRS 372.040 states:

[i] f the loser or his creditor does not, within six (6) months after its payment or delivery to the winner, sue for the money or thing lost, and prosecute the suit to recovery with due diligence, any other person may sue the winner, and recover treble the value of the money or thing lost, if suit is brought within five (5) years from the delivery or payment. However, KRS 372.00 5 contains a safe

- harbor provision, which provides that “[t]he terms and provisions of this chapter do not apply to betting, gaming, or wagering that has been authorized, permitted, or legalized , including, but not limited to, all activities and transaction s permitted under KRS Chapters 154A, 230, and 238. ” (Emphasis added

. )

In this case, Workman alleges he is entitled to maintain his third

- party action under KRS 372.040 for the un

- filed wager losses on historical horse racing at Kentucky Downs , or $200,2 43,797.00. Alternatively, the Appellees argue that
KRS 372.005 ’s exception applies in this case, as all wagers were “authorized , ” or “permitted” by the Commission and previous court rulings.

In beginning our analysis of the safe

- harbor language contained in
KRS 372.00 5 , we note that “[i] t is an elementary rule of construction that effect must be given, if possible, to every word

. . . of a statute

. ” Hampton v

.- 9

-

Commonwealth , 257 Ky. 626, 630, 78 S

. W

. 2d 748, 750 (1934) (citations omitted)

. Moreover, “ a statute should be construed, if possible, so that no part of its provisions are rendered meaningless

. ” Bob Hook Chevrolet Isuzu , Inc

. v . Com monwealth Transp

. Cab inet , 983 S

. W

. 2d 488, 492 (Ky

. 1998) (citation omitted)

. Further, a statute’s words should be given their “normal, ordinary, everyday meaning [ , ] ” and an unambiguous statute should be applied as written

. Stephenson v

. Woodward , 182 S

. W

. 3d 162 , 169

- 70 (Ky

. 2005)

.

In his appeal, Workman concentrates primarily on the legality of historical horse racing when discussing the exception under KRS 372.005

. Stated differently, Workman’s action was based on the idea that, because the Supreme Court ultimately determined that historical horse racing systems did not qualify as pari

- mutuel wagering, the operation of historical horse racing systems was illegal at all points in time. However, KRS 372.005’s safe

- harbor provision not only protect s bett ing , gaming, or wagering that is “lawful,” but also protects betting, gaming, or wagering that is “authorized” or “permitted.”

Indeed, Black’s Law Dictionary broadly defines “a uthorize ” in two
ways: “ [t]o give legal authority; to empower,” and “ [t] o formally approve, to sanction

. ” Likewise, “ p ermit ” has three definitions : “ [t] o consent to formally ; to allow (something) to happen, esp. by an official ruling, decision, or law ” ; “ [t] o give opportunity f

or ; to make (something) happen ” ; or “ [t] o allow or admit of

. ”- 10

-

B LACK ’ S L AW D ICTIONARY (11th ed. 2019). Under their “normal, ordinary, everyday meaning , ” the Commission “authorized” and “permitted” historical horse racing at Kentucky Downs at all times tha t Kentucky Downs offered historical horse racing.

Specifically, in July 2011, the Commission approved KYD’s request to offer historical horse racing using the Instant Racing S ystem, which Kentucky Downs used from September 2011 to March 2015. In March 2015, the Commission approved KYD’s request to use the Exacta System, which Kentucky Downs used from April 2015 to March 2019. In August 2020, the Commission approved Kentucky Downs’ request to use the Ainsworth System. Thus, under the definition of “aut horize” discussed above, the Commission “ formally approve [d]” or “ sanction [ ed ] ” Kentucky Downs’ use of wagering systems for historical horse racing. Further, under the definition of “permit,” the Commission “allow [ ed ] ” the wagering at issue by an “official ruling [or] decision.”

Moreover, multiple levels of Kentucky courts have authorized and permitted Kentucky Downs’ operation of historical horse racing wagering. The Franklin Court initially allowed historical hor se racing and licensed operation of terminals allowing for pari

- mutuel wagering in 2010. While the Foundation appealed, it did not post a bond and was not granted injuncti ve relief during the extensive appeals process.- 11

- I n 2014, while the Supreme Court remanded the matter to the Franklin
C ourt for further fact

- finding, the Supreme Court held that the regulations and definition of “pari

- mutuel” were valid and “consistent with the statutory mandate for ‘pari

- mutuel wagering’ on ‘legitimate horse racing [

. ] ’ ” Appalachian Racing , 423 S.W.3d at 73 8 . Again, the courts granted no injunctions.

Additionally, the Supreme Court’s September 2020 opinion did not hold that the regulations were invalid or that Kentucky did not permit historical horse racing, and it did not instruct the racing associations to cease operations. Thus , we find that t he Appellees fall within the Act’s safe

- harbor provisions.

Because we have already determined that the Appellees fall under the safe

- harbor provision of the Act contained in KRS 372.005, we decline to address Workman’s “apparent authority” argument. Additionally, because the Simpson Court did not discuss the issue of whether Workman had standing in this matter, we decline to address Workman’s arguments concerning such issue

. CONCLUSION
For the for e going reasons, we affirm the Simpson Circuit Court.

ALL CONCUR.- 12

-

BRIEF S FOR APPELLANT: Andre F. Regard Lexington, Kentucky

ORAL ARGUMENT FOR APPELLANTS: Andre F. Regard Lexington, Kentucky BRIEF FOR APPELLEE S : Jay E. Ingle Christopher F. Hoskins Lexington, Kentucky Timothy J. Crocker Franklin, Kentucky
ORAL ARGUMENT FOR APPELLEES: Jay E. Ingle Christopher F. Hoskins Lexington, Kentucky
AMICUS CURIAE BRIEF FOR CHURCHILL DOWNS INCORPORATED : Philip W. Collier Chadwick A. McTighe Jeffrey S. Moad Bethany A. Breetz Louisville, Kentucky