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New Jersey PASPA Damages Battle: Leagues Deny Wrongful Enjoinder Claim

The ongoing battle over damages in the wake of May’s US Supreme Court dismemberment of PASPA between Monmouth Park parent New Jersey Thoroughbred Horsemen’s Association [NJTHA] and the five prominent American sports associations that opposed New Jersey’s sports-betting legalization efforts rolls on. This week, counsel for the leagues filed their latest response as to why NJTHA isn’t entitled to any sort of damages claim.

The two sides continue warring over NJTHA’s attempts to not only claim a damages bond of $3.4 million posted by the leagues when they brought suit against New Jersey to block that state’s legalization efforts, but for compensatory and punitive damages of nearly $150 million more over years of lost sports-betting revenue at Monmouth Park. The racetrack claims that is was indirectly and wrongfully enjoindered by the leagues’ ongoing lawsuits against the state, which successfully prevented New Jersey’s licensed gambling facilities from offering sportsbook services for several years, until PASPA itself was overturned.

ScalesAmong the first points that the leagues’ letter of opposition to NJTHA’s claims is that the $3.4 million bond (itself doubled earlier in the case) was issued in conjunction with a temporary restraining order, or TRO, that was later replaced by a permanent mandate blocking New Jersey’s legalization efforts. That mandate was rescinded following the US Supreme Court ruling that nullified PASPA. The leagues’ latest response argues that even if they were somehow liable for damages, that liability would extend only to the four weeks that the TRO was in effect, rather than the four years that elapsed between the enjoinder and PASPA’s eventual downfall.

“First,” counsel writes for the benefit of the US Third Circuit Court of Appeals, where this damages battle is being fought, “Third Circuit law is clear that any liability under a bond issued pursuant to a TRO does not extend beyond the expiration or dissolution of the TRO. But NJTHA does not limit its claim to the four-week period when the TRO was in effect. …

“Second, NJTHA’s attempt to expand its recovery to include damages that exceed the amount of the bond and that  were allegedly sustained after the expiration of the TRO by asserting that the leagues acted in bad faith in pursuing their rights under PASPA is specious, and should be rejected as a matter of law.”

That points to the key problem that Monmouth Park faces in extracting damages from the leagues, whether or not the racetrack faced financial extinction or whether PASPA was being misapplied all along: “Given that this Court and the Third Circuit had previously upheld the constitutionality of PASPA, the Supreme Court’s subsequent invalidation of the statute is wholly irrelevant to the question of whether the Leagues acted in good or bad faith in October 2014, when they sought and obtained the TRO and posted the $3.4 million bond in support thereof.”

The letter continues by offering four legal arguments that are expected to be the basis for the leagues’ defense moving forward. Those are the following:

  • As a matter of law, any liability under the TRO bond is limited to costs and damages sustained during the four-week pendency of the TRO, which expired on November 21, 2014;
  • NJTHA’s argument that the leagues acted in bad faith in pursuing their rights under PASPA is frivolous;
  • NJTHA is not entitled to recover anything under the bond because, as a matter of law, it was not “wrongfully enjoined” by the TRO;
  • NJTHA has not proven the existence or amount of any alleged damages during the four weeks it was restrained by the TRO.

NJTHA is expected to battle strenuously against these countering claims. The five sports associations — the NFL, NBA, NCAA, MLB, and NHL — are hoping for a quick legal knockout here, while they also continue to prepare for a lengthy battle, which we’ll get to in our next post.

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