Standardbred breeders’ lawsuit against Ontario government and OLG continues as the province argues for dismissal.
Lawyers representing the Government of Ontario and the Ontario Lottery and Gaming corporation (OLG) recently filed a motion with the province’s Superior Court to have a lawsuit brought by the Standardbred Breeders Association of Ontario (SBOA) thrown out.
The April 24 motion for a summary judgement is just the latest salvo in an ongoing legal battle between 35 members of the SBOA, and the provincial Liberals and the OLG’s Board of Directors.
Back in March of 2015, the SBOA filed a legal challenge arguing the way in which the Slots of Racetrack Program (SARP) was cancelled amounted to a financial ruinous, “non-justifiable policy decision.” The initial motion sought a $60 million payment to Ontario’s standardbred breeders for “negligence and/or intentional misrepresentation, breach of contract and unjust enrichment” due the way in which the government handled the end of the province’s 13-year slots revenue sharing agreement with Ontario racetracks.
An additional $5 million was sought for punitive damages based on allegations that, subsequent to the first court challenge in 2015, enhancement payments through the Horse Improvement Program (HIP) were withheld from the province’s standardbred breeders by John Snobelen, head of the horse racing Transition Panel. Despite attempts by the Wynne government to repair the situation, Snobelen allegedly decided to deny payments as punishment for the SBOA’s initial Court challenge. None of the allegations have been proven in court.
According to legal documents filed on behalf of the SBOA in 2015, the Ontario government’s decision to pull out of the SARP was made as early as 2011. However, then-Premier Dalton McGuinty and former Minister of Finance, Dwight Duncan, chose not to inform the horse racing industry of the government’s decision. In February of 2012, the government publically announced the program would end on March 31, 2013. As a result, Ontario standardbred breeders and stallion owners say they were unprepared for the financial repercussions.
Walter Parkinson, president of the SBOA and assistant farm manager at Seelster Farms in Lucan, ON, said that his farm took a deep financial hit as little as one month after the SARP cancellation was announced. Seelster, which used to stand nine standardbred stallions, including Canadian Horse Racing Hall of Fame and the United States Living Horse Hall of Fame inductee Camluck, saw a sudden sharp decline in stallion bookings. Major revenue losses at yearling auctions soon followed.
“We saw a 50 per cent decline in average yearling purchase prices from 2011 to 2012,” Parkinson said. “The fall yearling sales averaged $30,000 for the farm in 2011 and $14,000 in 2012 as direct result to how the government handling of the situation.
“The end of SARP, and the way it was done, with no willingness to restructure or renegotiate, destabilized the industry drastically.”
Parkinson said breeding farms generally operate on a five-year, financial market plan. By abruptly ending the SARP, after assuring the racing industry that future restructuring talks would take place, the Ontario government and OLG effectively undermined provincial racehorse breeding industry’s ability to create a viable long-term fiscal strategy.
“We were assured we’d have time to make a transition, but we were left with no time at all,” says Parkinson. “There was no way we could get plans in place. They left us with no room to maneuver.”
Despite attempts at engaging the government and OLG in negotiations in 2012, the SBOA was not granted private or public consultations. With a two-year statute of limitation looming, a group of 35 SBOA members decided legal action was their only recourse.
Ian Matthews of Lax O’Sullivan Lisus Gottlieb LLP, the legal firm representing the 36 SBOA members, believes the standardbred breeders’ case has legal merit, and thinks the government’s latest gambit requesting dismissal will likely be unsuccessful.
“This (latest) filing comes during the discovery phase when both sides are to exchange documents such as internal emails and minutes of meetings, and ask questions in relation to SARP on both sides of the case,” Matthews said.
“The government has had documents and gotten examinations from 17of the SBOA plaintiffs in the case and we were preparing to examine government and OLG representatives when the OLG and Ontario government delivered a motion for summary judgement.
“It was clearly a move done to pre-empt our examination attempts.”
In particular, Matthews and plaintiffs’ counsel team has issued legal summons to: Karim Bardeesy, former Director of Policy and Research for Dalton McGuinty; Dwight Duncan, former Minister of Finance; John Wilkinson, a former Liberal cabinet minister and member of the Horse Racing Industry Transition Panel; Rod Seiling, the former Chair of the ORC; Tim Shortill, the former Chief of Staff for the Minister of Finance; Don Drummond; Blair Stransky; Darcy McNeill; and John Snobelen.
A hearing is set for Superior Court in Guelph on June 19 to decide if the plaintiffs’ counsel is entitled to examine these individuals, and to determine if the government’s motion for summary judgment has any merit.
In the meantime, lawyers and spokespersons for the Ontario government are arguing that the SBOA’s case is a criticism of governmental taxation policy and, as such, has neither legitimate grounds nor legal merit. This allegation is strikingly similar to the provincial Liberals’ current critique of Canadian Union of Public Employees (CUPE) lawsuit on behalf of Hydro One workers against the sale of Hydro One. A government statement released on May 8 says CUPE has “no basis for challenging government policy” since “[T]his claim appears to be a political complaint dressed up as a legal claim”.
What’s next? How soon could this be resolved? That’s tough to say in legal proceedings. After all, this case has been in motion for years.
What could it mean for the thoroughbred industry if the SBOA were to win this case? The best answer is uncovering the truth as to why SARP was cancelled. Any other possible benefits accruing to the thoroughbred industry would mostly be conjecture at this point. For sure, the statute of limitations has expired, limiting or nullifying any thoroughbred group’s ability to file a similar lawsuit.
Yet, Matthews and SBOA plaintiffs say they are hopeful their lawsuit will have positive ramifications for whole of Ontario’s horse racing industry by holding the government accountable for what Matthews says is a breach of contract.
“The way in which the government does business directly impacts the health and viability of the provincial horse racing across all sectors of the industry,” says Matthews.
When revenue-sharing agreements between the industry and the government are made in bad faith investors will naturally be disinclined to fund development projects such as the “city-within-a-city” expansion plans unveiled by Woodbine Racetrack on April 25. If governmental contractual agreements can be summarily ended with little warning and no consideration of the financial toll to Ontario’s rural agri-business sector, labour and expertise are lost as workers look for more secure locations for employment.
Furthermore, the breach of contract that severely undercuts racehorse breeders of one breed increases the costs of doing business for all breeds. As birthrates decline, racing entries disappear, translating to fewer race dates and less gambling revenue. And the price of everything from stabling and hay to medical care increases with fewer racing operations to care the load.
Most importantly, by abruptly ended the SARP and choosing to fight racehorse breeders in court rather than conduct negotiations the provincial government is causing Ontario to lose ground to other North American racing jurisdictions.
“What the plaintiffs wants is a vibrant racing industry – thoroughbred, standardbred and quarter horses,” says Matthews. “This court case is an opportunity for the government to demonstrate a commitment to the industry, to the future of the industry.”
To date, that demonstration is far from promising.