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DOUGLAS PARK JOCKEY CLUB v. GRAINGER et al.

(Circuit Court, W. D. Kentucky. May 24, 1906.)

1. COURTS-JURISDICTION OF FEDERAL COURTS-FEDERAL QUESTION.

A suit to enjoin officers or agents of a state from exercising powers conferred on them by a state statute, on the ground that their action is in violation of the property rights of complainant under the Constitution of the United States, is within the jurisdiction of a federal court, without regard to the citizenship of the parties, where the requisite amount is involved. [Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, § 820. Jurisdiction of federal courts in action involving federal question, see notes to Bailey v. Mosher, 11 C. C. A. 308; Montana Ore Purch. Co. v. Boston & M. C. C. & S. Min. Co., 35 C. C. A. 7.]

2. CONSTITUTIONAL LAW-ACTION OF STATE-EXERCISE BY OFFICERS OF AUTHORITY UNDER STATE STATUTE.

Where state officers, in the exercise or attempted exercise of their official authority, deny to any citizen, whether an individual or a corporation, the equal protection of the laws, or deprive him of his property without due process of law, the act is that of the state, and comes within the prohibition of the fourteenth constitutional amendment.

[Ed. Note:-For cases in point, see vol. 10, Cent. Dig. Constitutional Law, § 678.]

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The unconstitutionality of state legislation may be manifested either on its face in its express provisions, or in the manner of enforcing and carrying it into effect.

4. SAME-DENIAL OF EQUAL PROTECTION OF LAWS.

Act Ky. March 26, 1906, to regulate racing within the state, provides that any corporation formed for the purpose of racing and breeding or improving the breed of horses and conducting races and contests of speed "shall have the power and right, subject to the provisions of this act, to hold one or more running race meetings in each year." It creates a state racing commission, with power to prescribe the rules, regulations, and conditions under which running races shall be conducted, and provides that no such races shall be conducted except by a corporation or association duly licensed by said commission; that any corporation or association desiring to conduct such racing may apply annually to the commission for a license, which the commission may grant for one year if in its judgment a "proper case" for its issuance is shown. Complainant was a corporation chartered by the state, with power to establish and maintain a race track and to conduct races thereon, and was the owner of grounds, buildings, etc., used for such purposes of large value. Held, that such statute gave the commission no power to arbitrarily discriminate between applicants for licenses, by means of regulations governing the granting of such licenses or otherwise, and that its action in refusing complainant a license solely on the ground that it had "assigned a date" for the holding of a race meeting to another association, which would conflict with the date on which complainant desired to hold its meeting, was not within the authority given by the act, and whether so authorized or not was a denial to complainant of the equal protection of the laws, and deprived it of its property without due process of law, in violation of the fourteenth constitutional amendment.

In Equity. On motion for preliminary injunction.

Alfred S. Austrian, Bond, Marshall & Bond, Helm, Bruce & Helm, William Marshall Bullitt, and David W. Fairleigh, for complainant. Lewis McQuown, D. W. Sanders, and David W. Baird, for defendants.

EVANS, District Judge. An act to regulate the racing of running horses in the commonwealth of Kentucky, and to establish a state racing commission, and prescribing its powers and duties, was enacted by the General Assembly, and was approved by the Governor on the 26th day of March, 1906. Pursuant to its provisions, the Governor appointed the defendants to constitute the state racing commission. Section 1 of the act referred to is in this language:

"Any corporation formed for the purpose of racing and breeding or improving the breed of horses and conducting races and contests of speed, shall have the power and right, subject to the provisions of this act, to hold one or more running race meetings in each year, and to hold, maintain and conduct running races at such meetings. At such meetings the corporation or the owners of the horses engaged in such races, or others who are not participants in the racing, may contribute purses, prizes, premiums or stakes to be contested for; but no person or persons other than the owner or owners of a horse or horses contesting in a race shall have any pecuniary interest in a purse, prize, premium or stake contested for in such race, or be entitled to, or receive any portion thereof after such race shall have been finished; and the whole of such purse, prize, premium or stake shall be allotted in accordance with the terms and conditions of such race. Such meetings shall not be held except during the period extending from the 1st of April, to the 1st day of December, inclusive in each year. No running races are authorized or shall be permitted except during the period aforesaid, nor except between sunrise and sunset."

Section 3 is as follows:

"Said commission shall have the power to prescribe the rules, regulations and conditions under which running races shall be conducted in this state, and no such races shall be conducted, except by a corporation or association duly licensed by said commission, as herein provided. Any corporation or association desiring to conduct such racing may annually apply to the state racing commission for a license so to do. If in the judgment of the commission a proper case for the issuance of such license is shown, it may grant the same for a term of one year; and every such license shall contain a condition that all races or race meetings conducted thereunder shall be subject to the rules, regulations and conditions from time to time prescribed by the commission, and shall be revocable by the commission for any violation thereof, or whenever the continuance of such license shall be deemed by the commission not conducive to the interests of legitimate racing. But if said license is refused or revoked, said commission shall publicly state its reasons for so doing, and said reasons shall be written in full in the minute book of said commission, which shall at all times be subject to inspection upon application of anyone desiring to do so; said finding of said commission shall be subject to the review of a court of competent jurisdiction; provided, that a refusal of the commission to grant any racing association a license or to assign any racing association at least forty days in each year if desired for racing at such association, and the decision of such commission revoking any license of any association shall be subject to review of the courts of the state."

Subsequent sections impose severe and comprehensive penalties for violations of the statute.

The complainant is a body corporate, organized under the laws of Kentucky, with the right and power, among other things, to establish and maintain a race track, to give exhibits of speed and races between horses, to charge the public for admission, to give premiums, and to engage in pool selling, bookmaking, and registering bets, to purchase real estate, and make improvements thereon. The charter of the complainant upon its face appears, therefore, to bring it within those provisions of section 1 of the act under consideration, which, in

terms, gives corporations like the complainant the right and power, subject to the provisions of the act, to hold one or more running race meetings in each year, and to hold, maintain, and conduct running races at such meetings. The legislation of the state being thus, the complainant has filed its bill of complaint, setting forth its rights under its charter, and averring that upon the faith thereof it had heretofore purchased very valuable real estate in Jefferson county, near the city of Louisville, and had erected very extensive and very costly and valuable improvements and tracks thereon, which are adapted only to the purpose of meetings for running races, the races themselves, and preparations and facilities therefor; that the defendants, as such state racing commission, and acting as such, have arbitrarily, unjustly, and without any good reason refused to license it under the provisions of the act for the period beginning April 1, and ending December 1, 1906, which conduct upon the part of the defendants, it is asserted, will greatly, and to the extent of many thousands of dollars, injure and destroy the complainant's property, and thus deprive complainant of the property so destroyed and diminished in value without due process of law; and it is further claimed that the alleged unjust and arbitrary conduct of the defendants set forth in the bill denies to the complainant the equal protection of the laws of the state of Kentucky. We have not undertaken to set forth in detail all the averments of the bill, but only to indicate, in very general terms, the grounds upon which the complainant insists that the acts of the defendants are in violation of the fourteenth amendment to the Constitution of the United States.

In every case brought here the first inquiry must be whether the court has jurisdiction. The judiciary act of 1887, as amended by the act of 1888, gives the Circuit Court of the United States original cognizance, concurrent with the courts of the several states, over all suits of a civil nature in law or in equity where the matter in dispute exceeds, exclusive of interest and costs, the sum or value of $2,000, and arising under the Constitution or laws of the United States. Under this provision, it is perfectly well settled that the courts of the United States have jurisdiction, without regard to the citizenship of the parties, over all such cases as are described in the judiciary act, and wherein what is called a federal question is raised by the plaintiff's petition or bill of complaint, and as the courts of the United States, especially the Supreme Court, are the final arbiters of constitutional construction, the power of those courts extends over all statutes, whether passed by a state Legislature or by Congress, which are claimed to be in contravention of the Constitution of the United States, though not to statutes claimed to be void under a state Constitution. No citation of authorities is necessary upon these propositions, but many of them are collected in section 84 of Desty's Federal Procedure.

Manifestly, the complainant in its bill claims rights under the Constitution of the United States in a case where the matter in dispute exceeds the sum or value of $2,000, exclusive of interest and costs, and we reach the conclusion, therefore, that this court has the right

and power to hear and determine the case presented by the bill, and that is jurisdiction.

When any legislation of a state comes under contention in a court of the United States, it is always to be regretted if its proper construction as to the interpretation of its language and as to its relation to the provisions of the state Constitution have not been determined by the highest court of the state, for, if the construction of such legislation in those respects has been determined by the state court, the result is at once uniformly accepted and followed by the federal courts. If, however, the state court has not determined those matters, the federal court, in pertinent cases, must deal with them as best it can. In the case before us we are gratified to find that we shall not be compelled to go very far into that work, for it seems to us that the questions here to be solved have reference in the main to the Constitution of the United States, and especially to the fourteenth amendment thereto, and in such cases a different rule prevails, for, however persuasive the decisions of the state courts upon questions of constitutional law may be, they are not binding as authority upon the federal courts. Having these general propositions in view, we have not been able to perceive how the act of 1906 violates the Constitution of the state of Kentucky, and we shall assume, rather than decide, that on its face it does not violate the Constitution of the United States, but we may, and in this case we must, go beyond the mere language of the act.

The applicable clause of section 1 of the fourteenth article of Amendments to the Constitution of the United States is as follows:

"No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within the jurisdiction its equal protection of the laws."

It is entirely well settled that when state officers, in the exercise or attempted exercise of their official authority, deny to any citizen the equal protection of the laws, or deprive him of his property without due process of law, it is the state itself which does it, and such official action therefore comes within the constitutional prohibitions (Ex parte Virginia, 100 U. S. 313, 25 L. Ed. 667; Neal v. Delaware, 103 U. S. 370, 26 L. Ed. 567; Yick Wo v. Hopkins, 118 U. S. 356, 6 Sup. Ct. 1064, 30 L. Ed. 220; Carter v. Texas, 177 U S. 442, 20 Sup. Ct. 687, 44 L. Ed. 839), and that corporations are within the protection of the fourteenth amendment was held in Santa Clara County v. Railroad, 118 U. S. 394, 6 Sup. Ct. 1132, 30 L. Ed. 118, and Pembina v. Pennsylvania, 125 U. S. 187, 8 Sup. Ct. 737, 31 L. Ed. 650.

It has also been held that the unconstitutionality of the state legislation may be manifested in either one or two ways, namely—either (1) upon its face in its express provisions; or (2) in the manner of enforcing and carrying into effect such legislation. Owensboro, etc., Bank v. City of Owensboro, 173 U. S. 664, 19 Sup. Ct. 537, 43 L. Ed. 850; People v. Weaver, 100 U. S. 539, 25 L. Ed. 705; Whitbeck v. Bank, 127 U. S. 193, 8 Sup. Ct. 1121, 32 L. Ed. 118, and other cases. If in the latter way, the facts should be carefully inquired

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into, and nothing left to mere inference; but if in the former, the question can be determined upon consideration of the mere language of the legislative enactment. In this case we are to inquire into the manner in which it has been attempted to carry into effect the act of the Legislature to which we at first referred, and ascertain whether, by the official conduct of the defendants, the complainant has been deprived of any of its property without due process of law, or whether it has been denied the equal protection of the laws. It may be that the latter clause will be the one most nearly applicable to this case, though possibly both clauses may require very earnest consideration.

What we have said may sufficiently indicate, in a general way, the questions with which we are to deal, though notice of one other general propositon may be appropriate. It is this: The public policy of Kentucky as to permitting horse racing has been very plainly manifested for many years, although never more plainly than in the charter of the complainant and in the act of 1906, and there can be no pretense that it is or has ever been the policy of the state to prohibit it as immoral, any more than does the public policy of England, France, Tennessee, California, Louisiana, Maryland, New York, and other states. And this is true, however much public scandal and immorality in various ways may sometimes result from the apparently inevitable accompaniments of horse racing in our day. Hence, a court of equity may not fairly say in a contest like this that the complainant comes into court to ask its aid in support of an immoral and vicious practice. The state has decided otherwise. Nor could a court properly under that decision invoke a plague upon all race tracks and racing associations, unless defendants' description of at least some of them be true, nor unless there was reasonable hope that the invocation would be promptly and favorably responded to.

Having ascertained that the bill of complaint presents, prima facie, a case upon which this court may exercise jurisdiction for the purpose and with the aim of protecting a right claimed under the Constitution of the United States, and having found that the right for which protection is asked is not one which the public policy of the state of Kentucky forbids, we have reached the inquiry, whether a case for an injunction was made at the hearing? However, before passing to that general question, it may be well to advert to another phase of the law of Kentucky.

Section 2 of the Constitution of the state is in these important words: "Absolute and arbitrary power over the lives, liberty and property of freemen exists nowhere in a republic, not even in the largest majority."

Section 27 divides the powers of the commonwealth into three distinct branches, to wit, the legislative, executive, and judicial, and section 28 prohibits officers of one department from exercising the rights and powers of the officers of any other of those departments. Doubtless, it was in deference to these provisions that the General Assembly incorporated into the act of 1906 these provisions which provide for a review by the courts of the action and decisions of the state racing commission. This was an important provision, which might possibly

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