The opinion
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-03-00049-CV
Toby L. Keeton and James T. Hays, D.V.M., Appellants
v.
Texas Racing Commission, Appellee
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
NO. GN201681, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING
M E M O R A N D U M O P I N I O N
Appellants Toby L. Keeton and James T. Hays, D.V.M., appeal a district court
judgment which upheld an order by appellee Texas Racing Commission, imposing penalties after
a racehorse trained by Keeton and owned by Hays tested positive for a prohibited drug. In three
issues, appellants contend that the Commission's order is invalid because it is not supported by
substantial evidence and imposes new penalties not promulgated through "notice and comment"
rulemaking. Furthermore, the Commission's rule placing the burden on appellants to disprove the
Commission's allegations violates appellants' due process rights. For the reasons discussed below,
we affirm the judgment of the district court upholding the Commission's order.
FACTUAL AND PROCEDURAL BACKGROUND
On March 25, 2001, at Manor Downs racetrack near Austin, racehorse Sheza Special
Chick finished first in a timed trial. Immediately after the race, samples of the horse's serum and
urine were taken for drug testing, as required by the Commission's rules. See 16 Tex. Admin. Code
§§ 319.361 -.362 (2003). (1) The sample was split, with part of it sent to the Texas Veterinary Medical
Diagnostic Laboratory at Texas A & M ("Texas A & M laboratory") for testing and part of it frozen.
The Commission splits the samples so that if the original sample tests positive for a prohibited
substance, the owner or trainer of the horse may request that the retained sample be sent to another
lab for testing. Id. § 319.362.
The Texas A & M laboratory notified the Commission staff on April 5 that the urine
sample tested positive for Clenbuterol, a "Class 4" prohibited substance under Commission equine
medication guidelines. On the same day, Commission investigator Thomas Neely notified Keeton
of the test results and of his right to have the retained sample tested. Keeton requested testing by
the Louisiana State University (LSU) School of Veterinary Medicine laboratory in Baton Rouge.
As provided by Commission rules, Keeton was present when the sample was packed on April 11.
See id. § 319.362(d). Neely removed the sample from the freezer and packed it in a cooler with ice
packs. He placed a chain of custody form on the cooler then secured the lid of the cooler with a
metal shipping seal and locked it with a padlock. Lastly, Neely delivered the cooler to Airborne
Express at the Austin airport. Airborne then attached a shipping bill to the cooler. Keeton signed
a form stating that he had witnessed and approved the packing and shipping of the sample with no
objections.
On Friday, April 13, the cooler was returned to the Commission's office, never having
reached LSU because the shipping label had become detached. Pat Barker, an administrative
assistant with the Commission, thinking that LSU had returned the empty cooler to be reused, placed
the cooler in a file room that was neither refrigerated nor locked. The following Monday, April 16,
Barker received a message from LSU that it had not received the sample. She went to the file room
and found the cooler in the same place as she had left it, with the metal seal locked and chain of
custody form intact. Barker informed Neely about the problem, and he instructed her to move the
cooler to the freezer, which she did. Barker also informed her supervisor, deputy director of racing
John Williams. The next morning, Barker unlocked the freezer for Williams, who found the cooler
with the chain of custody form and the seal and lock intact. Williams took the cooler to Airborne
for shipment to LSU, which received the sample on April 18. LSU testing confirmed that the horse's
urine contained Clenbuterol.
On May 24, Keeton appeared at the board of stewards' (2) hearing concerning the drug
violation. At the hearing, the stewards suspended Keeton's trainer's license for forty-five days and
fined him $1,250 because of the positive tests, noting on their ruling that this was Keeton's third
medication violation within twelve months. The stewards also disqualified the horse from the March
25 race and redistributed the purse. Both Keeton and Hays appealed the ruling.
On October 30, an administrative hearing was held before an administrative law judge
(ALJ) at the State Office of Administrative Hearings (SOAH). The ALJ then issued a proposal for
decision (PFD) on December 18 in which she recommended that the stewards' ruling should be
upheld in all respects. In March 2002, the Commission issued a final order adopting all of the
findings of fact and conclusions of law in the PFD and upholding the stewards' ruling in full.
Appellants then sought review in a Travis County district court, which affirmed the Commission's
decision in all respects.
Appellants appeal the administrative proceedings by three issues. In their first issue,
appellants contend that the Commission violated the administrative procedure act (APA) by
modifying a rule of general applicability without notice and comment rulemaking. Specifically,
appellants argue, the Commission imposed a new penalty without prior notice by redistributing the
purse for the March 25 race. In their second issue, appellants contend that the Commission's order
is not supported by substantial evidence because the Commission failed to maintain the integrity of
the split sample, reship the sample within the required time, and notify Keeton of the return and
reshipment. Appellants contend in their third issue that the Commission's rule that "[i]n an appeal,
the appellant has the burden to prove that the stewards' or racing judges' decision was clearly in
error" violates appellants' due process rights. Id. § 307.67(c) (2003).
ANALYSIS
Promulgation of Rule without Notice
In their first issue, appellants contend that the Commission failed to follow the APA
by modifying a rule of general applicability without notice and comment rulemaking. Appellants
specifically argue that until early 2001, when a horse tested positive for Clenbuterol the "practice"
of the Commission's staff was to allow the owner of the horse to keep the purse and the horse's
winning position in the race. According to appellants, the Commission imposed a new practice in
this instance by redistributing the purse and disqualifying the horse. Furthermore, the Commission
failed to give owners and trainers notice of this change until March 29, 2001, four days after the race
in question and "too late for anyone in the regulated industry to change their behavior or practice
relating to a race that had already been run." The Commission's posting of the change is irrelevant.
At the time of the race, the Commission had publicly available rules and policies in effect that gave
notice to appellants of the range of penalties available if a horse tested positive for Clenbuterol.
The stewards' authority to impose penalties originates in section 3.07(b) of the racing
act:
The commission shall make rules specifying the authority and the duties of each
official, including the power of stewards or judges to impose penalties for unethical
practices or violations of racing rules. A penalty imposed by the stewards or judges
may include a fine of not more than $5,000, a suspension for not more than one year,
or both a fine and suspension. Before imposing a penalty under this subsection, the
stewards and judges shall conduct a hearing that is consistent with constitutional due
process.
Tex. Rev. Civ. St. Ann. art. 179e, § 3.07(b) (West Supp. 2003) (emphasis added).
Appellants argue that the Commission's "policy to redistribute the purse for
Clenbuterol positives" was never made public before the race. To the contrary, under the
Commission's rules in the administrative code, upon a finding by the stewards that a horse tested
positive for any drug, the stewards may
(1) disqualify the animal and order the purse redistributed ;
(2) declare the race animal ineligible to race for a period of time; and
(3) impose penalties authorized by Chapter 307 of this title . . . on . . . the animal's
trainer or . . . owner.
16 Tex. Admin. Code § 319.304 (2003) (emphasis added). The penalties under chapter 307 include
a fine of not more than $5,000 and license suspension of not more than a year. Id. § 307.64 (2003).
Under the Commission's Medication Classifications and Penalty Guidelines, issued in January 2001,
if a horse tested positive for a class 4 substance, the range of penalties included a fifteen- to sixty-day
suspension, up to a $1,000 fine, and possible loss of purse .
Appellants contend that the medication classifications are invalid because they were
not promulgated under notice and comment rulemaking. The racing commission rules, however,
broadly define what was a prohibited drug: "any stimulants, depressants, tranquilizers, local
anesthetics, drugs, [or] other drug metabolites which could affect the health or performance of a race
animal, however minimal." Id. § 319.1(b)(1) (2003). The guidelines then list the specific prohibited
substances. "Not every statement by an administrative agency is a rule for which the APA prescribes
procedures for adoption." Texas Educ. Agency v. Leeper , 893 S.W.2d 432, 443 (Tex. 1994). If
every agency policy or procedure had to be promulgated through notice and comment rulemaking,
agencies would be deprived of the powers delegated to them. See Brinkley v. Texas Lottery Comm'n ,
986 S.W.2d 764, 769-70 (Tex. App.--Austin 1999, no pet.). It makes sense that the Commission
listed specific drugs in guidelines instead of rules because agencies have greater flexibility in
revising guidelines than rules. In fact, through guideline revisions, the Commission lowered
Clenbuterol from a Class 3 to a Class 4 substance the year before the race in question.
The statute, rule, and policy manual were in effect before March 25, 2001, giving
appellants and the regulated industry at large notice of the rules and policies in place at the time of
the race. All of the penalties imposed upon Keeton and Hays were within the range of the publicly
available rules and policies: suspension of forty-five days, fine of $1,250, loss of purse, and
disqualification of the horse. Furthermore, both appellants were aware of certain aspects of the rules
and policies. Keeton was fined and suspended in December 2000 after another horse tested positive
for Clenbuterol. Hays testified at the SOAH hearing that he was specifically aware of Commission
rule 319.304, which gives notice of a possible loss of purse and disqualification of the horse. Thus,
we reject appellants' contention that the Commission imposed new penalties on them without notice.
We overrule appellants' first issue.
Lack of Substantial Evidence
Appellants contend in their second issue that the Commission's order is not supported
by substantial evidence. Under substantial evidence review, w e must uphold an agency action unless
we find, among other factors, that the action is "[n]ot reasonably supported by substantial evidence
considering the reliable and probative evidence in the record as a whole" or is "arbitrary or
capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion."
Tex. Gov't Code Ann. § 2001.174 (2)(e), (f) (West 2000). Under substantial evidence review, we
may not substitute our judgment as to the weight of the evidence for that of the agency. Texas
Health Facilities Comm'n v. Charter Med.-Dallas, Inc. , 665 S.W.2d 446, 452 (Tex. 1984). We
must first determine whether the evidence as a whole is such that reasonable minds could have
reached the conclusion that the agency must have reached to take the disputed action. Texas State
Bd. of Dental Exam'rs v. Sizemore , 759 S.W.2d 114, 116 (Tex. 1988); Ramirez v. Texas State Bd.
of Med. Exam'rs , 995 S.W.2d 915, 919 (Tex. App.--Austin 1999, pet. denied). The test is not
whether the agency made the correct conclusion but whether some reasonable basis exists in the
record for the agency's action. Railroad Comm'n v. Pend Oreille Oil & Gas Co. , 817 S.W.2d 36,
41 (Tex. 1991); Charter Med.-Dallas, Inc. , 665 S.W.2d at 452 . Nevertheless, even after applying
a substantial evidence standard of review, we must ensure that the actions of the Commission were
not arbitrary and capricious. Agency decisions not supported by substantial evidence are deemed
to be arbitrary and capricious. Charter Med.-Dallas, Inc. , 665 S.W.2d at 454 .
Appellants contend that the Commission's order is not supported by substantial
evidence because the Commission failed to follow its rules by not (i) properly storing the sample
when it was returned, (ii) reshipping the sample within the required time, and (ii) giving Keeton
notice of the return and an opportunity to observe the reshipment to LSU. Appellants further argue
that the finding of fact holding Keeton as absolute insurer of the horse "ignores the fact that [the
Commission] bases its conclusion on findings tainted by its own failure to follow its rules and
procedures."
Appellants' chief complaint in its substantial evidence challenge is that the
Commission was obligated to follow the same rules when handling the returned split sample as it
followed when it first shipped the sample to LSU. We disagree. The Commission's rules set forth
requirements for initially storing and sending split samples, not contingency plans for handling a
returned split sample. Appellants do not dispute that the Commission complied with its procedures
when first shipping the split sample to LSU: Keeton observed the first packing and shipping of the
split sample on April 11 and attested that he had "witnessed and approved, with no objections, the
packing and shipping of [the] sample." Appellants also agree that the Commission initially complied
with the ten-day deadline to ship the split sample: (3) the Commission notified Keeton of the positive
test result on April 5 and initially shipped the sample to LSU on April 11, six days later.
Appellants' complaint is with the handling of the sample after it was returned on
April 13. On that day, the receptionist at the Commission's offices signed for the cooler, which
Airborne returned because the shipping label had become detached. The receptionist notified Pat
Barker, an administrative assistant, who placed the cooler in a file room at room temperature,
mistakenly thinking that the cooler had been returned empty. On the following Monday, April 16,
after receiving a message from LSU that it had not received the sample, Barker went to the file room
and found the cooler in the same place as she had left it, with the metal seal locked and chain of
custody form intact. Barker informed Commission investigator Thomas Neely, who instructed her
to move the cooler to the freezer, which she did.
The Commission's rules mandate that the Commission's "veterinarian or designee
shall store the [split sample] in a matter that ensures the integrity of the specimen." 16 Tex. Admin.
Code § 319.362 (b); see also id. § 319.338 (2003) ("split specimen shall be stored in a manner that
ensures the safety and integrity" of the specimen). The Commission's guidelines construing these
rules require that "[s]plit samples must be locked in the freezer" before the head test technician
leaves for the day, and the freezer must also be locked. Undoubtedly, the Commission followed
these rules before the first shipment of the split sample to LSU. Granted, before the second shipment
the sample was in an unlocked, unrefrigerated file room from April 13 to April 16. However, Barker
found the cooler with the sample undisturbed on the 16th: it was in the same place, with the metal
seal locked and chain of custody form intact. Although Barker could have "done some things
differently" on the 13th, in the words of the PFD, she immediately notified Neely when she learned
that the cooler contained a sample and followed his instructions to place the cooler in the freezer.
Barker acted reasonably under the unique circumstances, and there is no evidence of tampering with
the sample while it was in an unsecured room.
Appellants further contend that the Commission should have notified Keeton when
the sample was returned, allowed him to witness the reshipping of the sample, and reshipped the
sample within the ten-day deadline instead of waiting to reship on April 17. As with the rules for
freezing the samples, the Commission's rules do not set forth any procedures for handling a returned
sample. The Commission undoubtedly complied with notifying Keeton of the positive test, allowing
him to request testing of the split sample at a laboratory of his choice, id. § 319.362(c), and allowing
him to witness the packing and first shipment. Id. § 319.362(d). Nothing about the packing of the
container changed between the time that Keeton witnessed it and the time of the reshipment. The
cooler contained the metal seal, intact and locked, and chain of custody form throughout the shipping
and reshipping. The record does not show that the cooler had been opened. The Commission's rules
simply do not address whether a trainer should be notified of a returned sample or be allowed to
witness the reshipping of the sample. What is clear is that the Commission officials reshipped the
sample just one day after learning of its return, which was reasonable under the circumstances.
Appellants then contest the integrity of the split sample because it was frozen, thawed,
then refrozen before LSU tested it. Appellants point to the discrepancy between the two tests. The
Texas A & M laboratory found Clenbuterol in the first sample but did not quantify the amount
because of the Commission's zero-tolerance policy: any presence of Clenbuterol constitutes a
violation. The head of the Texas A & M laboratory averred in his affidavit that if he had to make
a "ballpark" estimate, the concentration of Clenbuterol was one to ten nanograms per milliliter of
urine and administration of drug was twelve to forty-eight hours before testing. The head of the LSU
laboratory testified that the split sample contained an estimated sixty-six nanograms per milliliter.
The LSU laboratory received the sample in good order and was able to detect the
presence of Clenbuterol in the sample. When questioned if the freeze-thaw cycle might impair
testing, the head of the LSU laboratory responded, "That's not been my experience. Clenbuterol
appears to be a very stable drug. We've had a number of samples that were involved in research . . .
that had not been stored properly, but we were still able to detect and confirm the drug in those
samples." He went on to say that although the usual result after freezing and thawing would be a
lower concentration of Clenbuterol, finding a higher concentration would not be out of the question.
The important point is that the LSU laboratory confirmed the presence of Clenbuterol, which is
prima facie evidence of a violation. Id. § 319.361(e). Had the LSU laboratory not been able to test
the split sample because of "accident . . . or any other event, beyond the control of the commission,"
such as a lost shipping label in this case, the original findings would have been "prima facie evidence
of the condition of the horse at the time of the race." Id. § 319.362(g). We agree with the ALJ that
as a matter of theory the sample may have been compromised but as a matter of fact it was not, as
evidenced by the LSU test confirming that the sample contained Clenbuterol.
Having concluded that the Commission acted reasonably in storing and resending the
split sample and that the integrity of the split sample was not compromised to render the LSU test
results unreliable, we further conclude that the finding of fact holding Keeton responsible as absolute
insurer of the horse is supported by the record. This conclusion is not based on "findings tainted by
[the Commission's] own failure to follow its rules and procedures" but on the Commission's rules
for trainers and evidence that Keeton was responsible for the horse on race day. A trainer is licensed
by the Commission to train racehorses. Tex. Rev. Civ. Stat. Ann. art. 179e, § 1.03(36) (West Supp.
2003). As "absolute insurer" of the horse, a trainer "shall ensure the health and safety" of a horse
and "shall ensure that a horse . . . that runs a race while in the care and custody of the trainer . . . is
free from all prohibited drugs, chemicals, or other substances." 16 Tex. Admin. Code
§ 311.104 (b)(1), (2) (2003). The record contains no evidence demonstrating that the horse was in
the care and custody of anyone other than Keeton before the race. Therefore, he was the absolute
insurer of the horse on the day of the race, March 25, 2001.
In light of the fact that the return of the sample was a unique occurrence that the
Commission did not cause, the Commission acted reasonably in storing and resending the sample.
Moreover, we find nothing in the record to demonstrate--or even suggest--that any compromise to
the integrity of the sample rendered the LSU test results unreliable. A reasonable basis exists in the
record for the Commission's action in upholding the stewards' ruling. Pend Oreille Oil & Gas Co. ,
817 S.W.2d at 41 ; Charter Med.-Dallas, Inc. , 665 S.W.2d at 452 . Accordingly, we hold that the
Commission's order is supported by substantial evidence. Furthermore, nothing in the record
demonstrates that the Commission's actions were arbitrary or capricious. We overrule appellants'
second issue.
Unconstitutional Shifting of Burden of Proof
Appellants contend in their third issue that under the Commission's rule placing the
burden of proof on appellants in the appeal of a stewards' ruling, "the accused is unjustly saddled
with the obligation to disprove an allegation made against him," in violation of appellants' due
process rights. The rule states that "[i]n an appeal, the appellant has the burden to prove that the
stewards' or racing judges' decision was clearly in error." 16 Tex. Admin. Code § 307.67 (c) (2003).
In its drug testing procedures, the Commission collects specimens from every horse
finishing first in a race to test for the presence of prohibited substances. See id. § 319.361(b). The
sample is then split, with part tested for the Commission. See id. § 319.362(a). A positive finding
in the first test is "prima facie evidence that the prohibited drug, chemical, or other substance was
administered to the animal and was carried in the body of the animal while participating in a race."
Id. § 319.3(f). The owner or trainer then may request testing of the split sample. Id. § 319.362(c).
"If the test on the split specimen confirms the findings of the original laboratory, it is considered to
be a prima facie violation of the applicable provisions of the chapter." Id. § 319.361(e).
We do not perceive any violation of due process in the Commission's rule placing
the burden on appellants to show error. As proponent of the charges, the Commission has the burden
of establishing appellants' culpability throughout the proceedings. Here, the parties stipulated that
the first test detected the presence of Clenbuterol. The second test confirmed the presence of
Clenbuterol, which is prima facie evidence of a violation. Id. Prima facie means "[s]ufficient to
establish a fact or raise a presumption unless disproved or rebutted." Black's Law Dictionary 1209
(7th ed. 1999). Once the Commission presents prima facie proof, the burden of going forward
properly shifts to appellants to rebut that proof. Appellants' constitutional challenge is without
merit. Accordingly, we overrule appellants' third issue.
CONCLUSION
Having overruled appellants' issues, we affirm the judgment of the district court
upholding the Commission's order.
Jan P. Patterson, Justice
Before Justices Kidd, B. A. Smith and Patterson
Affirmed
Filed: August 14, 2003
1. Because the relevant provisions of the Texas Administrative Code have not changed
substantively during the pendency of this case, for convenience we will refer to the current code
provisions.
2. A steward is a "racing official with general authority and supervision over . . . all licensees
at a racetrack during a race meeting." Tex. Rev. Civ. Stat. Ann. art. 179e, § 1.03(35) (West Supp.
2003). Racehorse trainers fall under the ambit of the stewards' authority because they are licensed
by the Commission. Id. § 1.03(36).
3. "To ensure the integrity of the specimen, the split specimen must be shipped to the selected
laboratory no later than 10 days after the day the trainer is notified of the positive test." 16 Tex.
Admin. Code § 319.362 (d) (2003).