Breeders Lawsuit Motions Close

Published: March 19, 2019 02:11 pm EDT

After a three-month break, the proceedings pertaining to a civil lawsuit from a group of Ontario Standardbred racehorse breeders against the Province of Ontario and the Ontario Lottery and Gaming Corporation reconvened in Ontario Superior Court on Tuesday, March 19 in Brampton, Ont.

Ontario Lottery and Gaming lawyer Michael Rosenberg was front and centre during the opening session, as he continued the OLG’s defense to the breeders’ claims.

In a nutshell, Rosenberg stated that the OLG was not negligent nor did it misrepresent anything to the plaintiffs, whom were not a party of any contractual arrangement with the lottery corporation. He said that there was no proximity between the two entities, and cited prior cases which conveyed that although lobbying may have been conducted, that in itself does not constitute proximity. Citing the lack of a contractual arrangement between the parties, Rosenberg stated that there was zero negligence from the OLG when it regard to the Province of Ontario’s "core-policy decision" to ultimately cancel the Slots at Racetracks program.

Rosenberg stated that the OLG did not have a proximate relationship with the plaintiffs, and thus did not owe the plaintiffs any duty of care, seeing as the lottery corporation was only contractually obligated to the siteholders (racetracks) and not the breeders of Standardbred racehorses.

Additionally, Rosenberg made it clear that the OLG did not owe duty of care to the plaintiffs, did not conduct themselves in bad faith when it came to lobbying interactions with the plaintiffs, nor did it cause damage to the market, especially since the ultimate decision to cancel SARP came from the provincial government and not the lottery commission.

Rosenberg cited a recent case in Ontario where the province, after a change in the political party in power, pulled out of a three-year pilot program after just one year. The decision to pull out had been made at the cabinet level. The legal recourse from the decision had come from plaintiffs that were direct financial beneficiaries from the arrangement. The plaintiffs did not win their case.

Rosenberg stated that there was an indirect impact on the plaintiffs’ market when the Minister of Finance directed the OLG to terminate the siteholder agreements with the racetracks — 17 siteholder agreements in all. "Decisions were not irrational or made in bad faith," explianed Rosenberg, who went on to say that there was no contact with the breeders.

Citing prior case law, Rosenberg explained that just because government makes the decision to take, for instance, a dollar out if the marketplace, a well-removed entity located well down the line and not connected via a legal contract does not have the right to claim damages in court. He challenged anyone willing to undertake the process to find any case law where government cancelled a program and was then subsequently found to be negligent.

Rosenberg later spoke to the topic of the possibility of improper representation from the OLG to the breeders. He stated that any representations that the lottery corporation may have made to the plaintiffs in the past, prior to the announcement of the SARP cancellation, were based off of the true information that was reality at the time.

Rosenberg hammered home that the tail doesn’t wag the dog in terms of the OLG’s relationship with the Province of Ontario. If anything, Ontario may ask the OLG to merely bring forth recommendations for potential courses of action from time to time, but any decision of any weight comes at a higher level -- a government or cabinet level. Until cabinet decides to undertake a modernization plan, there is no modernization plan, said Rosenberg. He stated that when the order for the SARP cancellation came (the order to terminate the siteholder agreements), it came to the OLG from the government, not the other way around.

Rosenberg went on to say that the OLG did not recommend a particular level or amount of support for horse racing -- reiterating that the decision to cancel the siteholder agreements came from the government.

Rosenberg stated that, if you accept that there was no contract between the OLG and the plaintiffs, and accept that there was no fraud being conducted, how can the OLG possibly be negligent in regard to the plaintiffs?

Rosenberg got directly to one of the OLG’s main points late in his address. He stated that OLG is immune in this case due to the Province of Ontario having made a "core-policy decision" at the cabinet level when it opted to cancel SARP, an action which was downloaded to the OLG to execute via the termination of the 17 siteholder agreements with the Ontario racetracks.

Jonathan Lisus, lawyer for the plaintiffs, stepped up to mention to Justice Emery that the OLG is not a crown corporation, but an agent of the Province of Ontario. Lawyers for the lottery corporation clarified that the OLG is a crown corporation that also within its duties acts as an agent for the Province of Ontario.

A key aspect of the morning proceedings was the concept of ‘policy.’ The plaintiffs are contesting that the decision to cancel SARP was not a policy decision because the contracts that were at the core of the Slots at Racetracks Program were commercially-bargained financial deals and not in any way government policy deals.

Lisus then began his reply.

Lisus commenced his reply on the behalf of the plaintiffs just before lunch. The reply, which ultimately ran past 5 p.m., featured scores of objections from both the Province of Ontario and the OLG defenses.

Lisus kicked off his reply by stating that the primacy of the evidence found during the fact-finding process and the rule of law were paramount in the plaintiffs’ case.

Lisus stated that the case comes down to four questions.

First: What was the nature of the relationship that was struck in the 1998 Letter of Intent and the amendment in 2001? Was it a government/business enterprise that involved government, tracks and breeders that gave rise to proximity and duty of care? Or was the relationship an undocumented government program that generated billions of dollars to an industry?

Second: What was the character/nature of monies that went from a customer’s pocket in a casino to a trust fund (the court will have to determine what the state of that money was, and what the nature of those monies was). Was the Slots at Racetracks program a ‘partial subsidy’ or market stimulus – something that the OLG and Province of Ontario wants the court to agree with.

Third: Did Ontario break its contractual duties and duty of care when it decided it was going to cancel SARP with zero transitional considerations at the time of decision? Lisus argues that transitional actions came well after the initial announcement.

Fourth: Was the decision to cancel SARP a core-policy decision or an operational decision? Lisus stated that the LOI was a binding contract and that the SARP deal was ultimately a commercial contract which was crafted after two years of back and forth bargaining between Ontario and the provincial horse racing industry.

Lisus was clear in stating that the matter at hand was not a relational/economic-loss case, but a case based on proximity developed over the course of a 14-year relationship between the province, the OLG and the plaintiffs; which is a collection which consists of a group of Ontario equine breeders that produced Standardbred racehorses for the market under the encouragement of Ontario via the LOI and siteholder agreements, which make up the core of the Slots at Racetracks program.

Lisus stated that the government ‘cut a deal’ with Ontario racetracks to introduce slot machines to their premises – a move which Lisus vehemently hammered home was a commercial deal, not a policy decision from government. Lisus pointed out that SARP – which the government has opted to characterize as a ‘subsidy’ only after the cancellation of the wildly successful program – was, interestingly enough, never recorded as a line item by the government during its 14-year existence. Lisus pointed out that the LOI and siteholder agreements were never part of any legislation, nor were they ever part of any government policy. That was, according to Lisus, because SARP was a bargained-for, commercial deal.

Lisus continued his reply after a lunch break. He started back by saying that the money at issue was never in the consolidated revenue fund. He said, in terms of government accounting, it wasn’t and it couldn’t be. “Government can’t have a policy to take money from an account that isn’t theirs,” explained Lisus, who went on to state that is why the nature of the funds is so central to the case (the monies went to a segregated fund, or a trust fund, for lack of a better term).

Lisus went on to state that the LOI was amended in 2001 and that it’s clear that the amendment contained ‘the language of business’ and not ‘the language of policy.’ Why, Lisus asked rhetorically, would that be the case if the LOI wasn’t a legal document? Lisus stated that the LOI wasn’t referred to in any 1998 cabinet material, which reinforces that it was not a piece of policy, but a commercial deal. He also said that the LOI was also not referred to in any 2012 cabinet material.

Lisus also took the opportunity to state that the one-year ‘out’ clause in the siteholder agreements were not designed to be executed en masse, but was included in the agreements in case of racetracks failing to meet perceived benchmarks. According to Lisus, the defendants purposefully manipulated the out clauses to terminate all 17 of the siteholder agreements in effect at racetracks across the province in order to reset the deck so that the OLG’s gaming modernization plan to be introduced and implemented.

A significant aspect of the plaintiffs’ case rests on the development – which was cultivated over the course of 14 years, according to Lisus – of a relationship of proximity between the group of Ontario breeders and the Ontario Government and the OLG. Lisus again highlighted the fact that official representatives of the Standardbred Breeders and Owners Association of Ontario sat in what were somewhat regular meetings with members of the Minister of Finance during the latter years of SARP. Just as he did throughout the entire motion, Lisus pointed out that the plaintiffs were still receiving the ‘green light’ from Ontario to continue to breed horses even as the OLG was in the midst of cultivating a gaming modernization plan behind the scenes that could/would cause financial harm to Ontario breeders.

Continuing on in terms of the relationship of proximity, Lisus highlighted the fact that Ontario breeders were being mentioned specifically in official government documents, even though the defendants have now chosen in court to characterize the Ontario racehorse breeders as downstream marketplace/industry entities – not the key cogs that produced horses via protracted cycles to fill both races and provincial racing programs.

Lisus stated that the OLG and the then-ORC were agents of the Province of Ontario, and the two organizations and the Government of Ontario, collectively, should be treated as a single ‘party’ when it comes to law. Lisus explained that while the ORC was announcing via industry PR, marketing and promotions that breeders should keep breeding, the OLG, which, according to Lisus, is part of the same party, was actively working on altering the racing landscape behind the scenes via modernization efforts.

Lisus stated that, after having examined all of the evidence, the breeders were doing exactly what they were encouraged to do by Ontario: breed for the market. The eventual transitional-panel members, John Snobelen, John Wilkinson and Elmer Buchanan, each went on the record as agreeing with that fact. Lisus pointed out the fact that Ontario was publishing documents about breeders’ financials and projections during this time, to which Lisus stated was just more proof of proximity and assurances from Ontario.

Lisus then made a slight pivot and pointed to the announcement of the Ontario Racing Program in 2010. Ontario racetracks were getting ‘locked in’ to having to host certain amounts of Standardbred race dates per year. Horses would be needed to fill the ensured amount of annual race dates (and thus races). Lisus said that the race-date guarantees and the trumpeting of the ORP in 2010 was a clear sign from Ontario that the breeders were encouraged to continue breeding, just like they had since the late ‘90s.

Lisus followed his ORP point up by shining his light on the fact that, later in 2010, it was announced to the provincial Standardbred industry that there would be a five-year extension to the siteholder agreements. Lisus explained that this announcement was yet another sign to the breeding industry that Standardbred racehorses would be needed. The announcement came a very short time after prominent breeder Jim Bullock, whom is now one of the plaintiffs, met with Ontario Minister of Finance Dwight Duncan on behalf of the SBOA to discuss the short-term future of the provincial Standardbred breeding industry going forward.

As the provincial horse racing industry is well aware, then-Ontario-Premier Dalton McGuinty’s cabinet would go on to make the unexpected decision to cancel the Slots at Racetracks program in 2012, something that is another key aspect of Lisus’ and the plaintiffs’ case against Ontario. Was the 2012 cabinet decision a core-policy decision or an operational decision? Cabinet would receive immunity if it were a core-policy decision, but Lisus and the plaintiffs are saying that cancelling the revenue sharing deal by taking slots from racetracks was an operational decision. “‘Modernization’ may have been a core-policy decision,” Lisus contended, “but the decision to remove slots from tracks would’ve been operational.” He bolstered his claim by referring to the record, which contained testimony from Steve Orsini, former deputy minister of Finance, who clearly stated that the decision to pull the slots from tracks was “operational.”

One of the last main points that Lisus made Tuesday afternoon involved Ted McMeekin, who had been Ontario’s Minister of Agriculture at the time that SARP cancellation was initially announced – an announcement which caught McMeekin by surprise, as well. Referring to the record, Lisus pointed out that McMeekin said under oath that the characterization of the decision being a ‘policy decision’ was ‘an out’ by the government.

Lisus also wanted to clear up the misconception of there was transitional funding announced when the SARP cancellation was publicly unveiled. He explained that the facts have shown that the OLG had been working on concepts for the implementation of transitional funding away from SARP, but that Ontario’s Finance department abruptly took a ‘go to zero’ stance for horse racing. The hard-landing approach by his cabinet peers spurred McMeekin to plead with Finance for transitional funding, according to Lisus. Finance ultimately agreed to figure out transitional funding, but that came months after the announcement and only after persistent pleading by McMeekin, according to Lisus. The efforts resulted in the aforementioned transitional panel being assembled, although, at the that time, with the lack of a transitional funding announcement alongside the SARP cancellation announcement, the breeders bore the brunt of the decision. Lisus thought it was prudent to refer to Dwight Duncan’s testimony on the record that no transitional funding had been factored for in the budget.

Lisus would conclude his reply minutes later.

Lawyer Robert Ratcliffe, representing the Province of Ontario, stood up next for a brief response. He referred back to case law in regard to core-policy decisions and rulings. He also stated that although the Province of Ontario’s decision may have caused harm to some parties, that doesn’t make the decision an impractical one at a government level.

Awanish Sinha, representing the OLG, then also issued a response. He stated that the Ontario cabinet chose to direct the OLG to terminate the siteholder agreements en masse, which effectively ended SARP. He referred to that decision as a core-policy decision, period. He also said that the LOI is not a legally-binding document and not a contract, nevertheless, he said, the OLG abided by it in full. Sinha also pointed out that the termination provisions were clearly within the siteholder agreements.

With that, submissions for the motions came to a close.

Justice Emery is taking his decision under reserve.

For previous coverage on this court case, be sure to check out the recap from the final court session of 2018, as well as the final recap from the first week of court sessions.

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