Horsemen: CDI Owes Wagering Fees, Purses

Horsemen claim CDI owes purse funds up to $3 million; request purse cut be rescinded.

In a flurry of responses filed recently in federal court, Kentucky horsemen claim Churchill Downs Inc. owes purse funds upward to $3 million in unpaid fees from wagering revenues, and have asked a judge to force the racetrack company to pay out funds lost from a 20% purse cut.

The Kentucky Horsemen's Benevolent and Protective Association, one of several defendants named in a federal antitrust lawsuit originally filed April 24 by CDI and other entities, claims CDI has breached its current contract in at least two regards: by not honoring a clause that treats bets made through advance deposit wagering outlets as on-track wagers, and by unjustly reducing purses on May 14 without consulting horsemen’s groups first.

Horsemen claim CDI has failed to pay any portion of the wagering revenues earned by its platforms in 2007 or 2008. They charge CDI with breaching a contractual clause they say gives them the right to 50% of fees paid from wagering processed through telephone account outlets and other "electronic media."

In effect, horsemen claim the contract says wagers processed through CDI’s are to be treated as “walk-up” betting at the track. Filings estimate the figure not paid by CDI under terms of the agreement to be about $3 million.

Attorney Douglas L. McSwain, who represents the horsemen, said in a telephone interview the clause governing account wagering was put into contracts “a number of years ago” in anticipation of CDI developing its own ADW platforms. was launched in April 2007, and expanded its holdings by adding several AmericaTab platforms last summer.

“We didn’t want to have to battle them in this fashion, but we’ve been left with no choice,” McSwain said of the lawsuit sparring.

CDI and horsemen’s groups are battling over revenue sharing plans for dollars wagered through certain ADWs. Horsemen in their filings claim the purse cut was “coercive” and “retaliatory” to the stalled negotiations, and, thus, in defiance of the three-year contract signed in 2006.

A horsemen’s proposed counterclaim notes the contract states CDI cannot “threaten, intimidate or otherwise coerce any horseman, HBPA member, employee or representative thereof.” Horsemen claim CDI breached that clause by executing an excessive purse cut, and by publicly laying blame on horsemen for projected handle decline.

“CDI’s action to cut the payment of purses by 20% is a wrongful and intentional exercise of dominion and control over the Horsemen’s Account for its own benefit and not for the benefit of Kentucky horsemen …” said the counterclaim, which was written by McSwain.

CDI spokesman Kevin Flanery said the company’s attorneys are reviewing the 200-plus pages of filings.

“Obviously, we will let the court proceedings take place, and let the pleadings speak for themselves,” he said, adding the company is still willing to negotiate with horsemen.

In its complaint, CDI claims certain horsemen groups and individuals have violated the federal Sherman Antitrust law by conspiring to have the Thoroughbred Horsemen’s Group negotiate on their behalf. The THG, which is also named as a defendant in the lawsuit, is a collective of 18 horsemen’s associations.

In a separate motion for temporary injunction, the horsemen are asking U.S. District Court Judge John G. Heyburn II to return the amount of purse money underpaid by the 20% purse cut, and to order CDI to “consult” with the Kentucky HBPA “on any (and) all matters touching upon the purse account.”

Since the purse cut was executed May 14, Churchill Downs has paid out $765,055 less in purses, or a decline of 19.73%, in comparison to the same time period of the 2007 spring meet, according to data compiled by The Jockey Club Information Systems. All-sources handle, not including separate pool wagering, fell 20.63% to $62,929,729 when compared to the same time period.