Hadges v. Yonkers Racing Corp.

Facts

Hadges (P) was first licensed by the New York State Racing and Wagering Board (Racing Board) in 1972. His license was suspended and revoked in 1974 because he failed to disclose the full extent of his criminal arrest record in his initial license application. P was relicensed in 1976. In early 1989, the Racing Board again suspended P's license for six months after determining that P had illegally passed wagering information to a member of the betting public at Roosevelt Raceway in 1986. According to the Racing Board, as P approached the starting gate, he trailed behind the other horses and shouted, 'Get the '7',' to someone in the stands. The number seven horse did win, and P's horse, number two, drove erratically and interfered with the other horses. In September 1989, although the Racing Board had reissued P's license, YRC (D) denied Hadges the right to work at its racetrack. In response, P filed an action against YRC in the district court under 42 U.S.C. § 1983. P alleged that D had violated his Fourteenth Amendment right to due process in banning him. In the course of the litigation, D submitted an affidavit of its General Manager, Robert Galterio, who stated that the D ban did not prevent P from pursuing his profession because he could still work at other regional tracks, including the Meadowlands in New Jersey. In March 1990, the district court granted D's motion for summary judgment, finding that D's practices were not state action and thus could not give rise to liability under §1983. In two footnotes, the district court indicated its apparent understanding that P was not barred from racing at other facilities but 'that proof that other tracks in the state followed D's decision could establish state action.' In 1992, P commenced another suit against DC, this time in New York state court. He alleged several causes of action including that all the harness tracks in New York State were engaged in a civil conspiracy and that the racetracks had blackballed him in violation of the Donnelly Act, New York's anti-trust law, N.Y. Gen. Bus. Law § 340 (McKinney). The state court ruled against P on all of his claims. In 1993, Hadges brought another §1983 action, this time against the Meadowlands Raceway, in federal district court in New Jersey. He alleged that in 1992 Meadowlands had improperly banned him from racing without a hearing. Because Meadowlands is run by a state agency, the New Jersey Sports & Exposition Authority (Sports Authority), there was no dispute as to whether the banning constituted state action. The parties settled that litigation. In the course of that action, Meadowlands General Manager Bruce Garland submitted an affidavit stating that Meadowlands had banned P based on the D ban. After successfully settling the Meadowlands suit, and with the appeal from dismissal of the New York state court action pending, P brought the instant Rule 60(b) action in the Southern District of New York. He sought to vacate the court's decision in first suit against D on the ground that D had perpetrated a fraud on the court in that action by submitting the Galterio affidavit stating that P could continue to work at other tracks despite the D ban. P did not inform the district court of the then-pending state court appeal. The district court ruled against P and granted D's motion for summary judgment. The court also imposed sanctions under Fed.R.Civ.P. 11 on both P and his attorney Kunstler. To support his claim for relief in the Rule 60(b) action, P submitted a sworn statement that 1993 was his 'fifth year . . . out of work, with the boycott by Yonkers still in effect.' In addition, he stated that 'there was a secret agreement among all of the racetracks, that barring a licensee from one, will result in his being barred from all.' Plaintiff's memorandum of law, signed by Kunstler, also asserted that P 'has not worked for more than four years.' D produced documents revealing that Hadges had raced at Monticello Raceway five times in 1991 and seven times in 1993. The most recent race took place less than one month before P submitted his affidavit stating that he had been banned from racing by all tracks in New York State for more than four years. D also submitted letters of current and former Racing Secretaries from race tracks in Saratoga, Batavia Downs, Fairmount Park, Vernon Downs and Buffalo who asserted that P had not applied (or they had no recollection of his having applied) for racing privileges at their respective tracks in the relevant time period. D requested that the court impose sanctions on Hadges and, if warranted, on his counsel for this misrepresentation and for failing to disclose the state court action to the district court. P submitted an affidavit dated December 28, 1993, admitting that he had raced in Monticello in 1991 and 1993, but explaining that he considered the races insignificant because he had earned less than $100 in the two years combined. That affidavit also described a so-called 'scratching incident' that P claimed had taken place at Yonkers Raceway on October 31, 1989. He stated that although his state racing license had been restored in 1989, New York State Racing Board judges 'scratched' him from that race, in which he was to have ridden the horse 'Me Gotta Bret.' After this scratching incident, D informed him of its independent ban. P argued to the district court that this sequence of events supported his theory that D was acting as a state agent in banning him and thus could be held liable in a §1983 action. Hadges submitted to the court a 'scratch sheet,' purporting to document his version of the event. D then submitted what the district court later described as 'overwhelming proof' that the scratch sheet did not refer to an October 1989 race, but rather to a November 1987 race. The court further found that submission of the undated scratch sheet was a 'flagrant misrepresentation . . . suggesting the need for sanctions, certainly against the plaintiff and possibly against his counsel.' Id. The judge invited Hadges and Kunstler to submit papers opposing the imposition of sanctions. The court did not refer to the nondisclosure of the state court action as a possible basis for sanctions. P stated that this error was the result of a simple memory loss and that the scratch sheet involved was bona fide proof of his having been scratched in 1987 rather than in 1989. He went on to describe yet another 1989 incident in which he had been scratched from racing the horse 'Dazzling GT' at D. Hadges also submitted an affidavit of his then-assistant Erik Schulman, which also described the 1989 Dazzling GT scratching incident. Kunstler also submitted a sworn response, which stated that he 'had no idea' that the scratch sheet was from 1987 rather than 1989, and set forth the facts of the Dazzling GT incident. Kunstler maintained that the error regarding the date of the scratch sheet was unintentional but would not have affected the outcome of the case in any event. Regardless of its date, he argued, the scratch sheet was evidence that YRC was acting as an agent of the state Racing Board and could, therefore, be held liable in a §1983 action. Thus, he maintained that submission of the document was not sanctionable. The judge imposed a Rule 11 sanction of $2,000 on Hadges as an appropriate sanction for his misrepresentations. The judge also censured Kunstler under Rule 11 for failing to make adequate inquiry as to the truth of Hadges's affidavits and for failing to inform the court of the pending state court litigation.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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