1 1 VIRGINIA: 2 3 4 5 VIRGINIA RACING COMMISSION 6 May 20, 2009 7 Horsemen's Building 8 Colonial Downs 9 10700 Horsemen's Road 10 New Kent, Virginia 11 Commencing at 9:30 a.m. 12 13 In Re: Formal Fact-Finding Hearing 14 15 16 17 18 19 20 21 22 23 24 CRANE-SNEAD & ASSOCIATES, INC. 4914 Fitzhugh Avenue - Suite 203 25 Henrico, Virginia 23230 Tel. No. (804) 355-4335 2 1 APPEARANCES: 2 COMMISSION MEMBERS: 3 Peter C. Burnett, Chairman; 4 Mark T. Brown, Vice-Chairman; 5 William H. (Trip) Ferguson; 6 I. Clifton Miller; 7 David C. Reynolds. 8 9 COMMISSION STAFF: 10 Victor I. Harrison, Executive Secretary; 11 Kimberly M. Carter, Office Administrator; 12 David Lermond, Jr., Director of Parimutuels; 13 Joseph M. Roney, Director of Operations & Enforcement; 14 15 16 ATTORNEY GENERAL'S OFFICE: 17 Frank S. Ferguson, Esquire, Deputy Attorney General; 18 Amy K. Dilworth, Esquire, Assistant Attorney General. 19 20 ALSO PRESENT: 21 Frank Petramalo, Jr., Executive Director/General Counsel Virginia HBPA; 22 23 Althea Richards, HBPA. 24 25 CRANE-SNEAD & ASSOCIATES, INC. 3 1 APPEARANCES: 2 3 REPRESENTING COLONIAL DOWNS: 4 James L. Weinberg, Esquire; 5 Chandra D. Lantz, Esquire; 6 Ian M. Stewart, President of Colonial Downs. 7 8 REPRESENTING CHURCHILL DOWNS/TWINSPIRES: 9 Brad Blackwell, Vice President, TwinSpires and Deputy General Counsel. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 4 1 2 I N D E X 3 4 PAGE 5 Brad Blackwell - oral argument 4 6 James L. Weinberg - oral argument 24 7 Frank Petramalo, Jr. 34 8 Brad Blackwell - rebuttal argument 52 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 5 1 May 20, 2009 2 3 NOTE: The following matter was 4 called to be heard at 9:36 a.m., viz: 5 6 CHAIRMAN BURNETT: Good morning. 7 We'll bring the formal fact-finding conference into 8 existence right now. 9 I understand from the parties that 10 neither party intends to call a witness, and I think 11 the Commission thanks you for your briefs, which have 12 been circulated among all the Commissioners. And, I 13 think, at this point, we'll go ahead and move into 14 oral argument, unless there is some reason -- unless 15 anybody has any preliminary matters before that. 16 I think, Mr. Blackwell, we'll call 17 on you first. 18 MR. BLACKWELL: Sure. Brad 19 Blackwell on behalf of the Churchill Downs Technology 20 Initiatives Company, which is doing business as 21 TwinSpires. 22 Good morning, everyone. It's a 23 pleasure to be here once again. I'm becoming very 24 familiar with the Commonwealth of Virginia, based on 25 how many times I've been traveling here lately. But, CRANE-SNEAD & ASSOCIATES, INC. 6 1 anyway, I think today you obviously have our brief and 2 rebuttal, but I'll kind of try to highlight that. 3 And, of course, you'll have opportunity to ask any 4 questions regarding the brief or our presentations 5 today. 6 But, anyway, the matter before us 7 today, to me, is very simple. And I'll try my best 8 not to complicate that, and I'll do my best to try not 9 to allow others to complicate that in the interest of 10 getting you to focus somewhere else. Because, today, 11 what we're really talking about is our request, as you 12 know, our brief request that the Commission perform 13 its statutory obligation. 14 We've discussed this, I think, 15 now, this is the third meeting where we've discussed 16 this temporary license process. And, we feel that 17 it's very clear what the Commission is obligated to do 18 today. We are discussing the current ADW statute, 19 which is before us, which we have been operating under 20 and which we have been performing our obligations 21 under. So, anyway, what we're asking the Commission 22 to do is, of course, to one, extend our temporary 23 license through the end of the year, and then also to 24 set the hub rate that would be in place for the year 25 2010. CRANE-SNEAD & ASSOCIATES, INC. 7 1 Now, you may be wondering, you 2 know, why is this the case? How is this the case? 3 And really this is not a popularity contest. It's 4 obviously not a tug-of-war contest or I would be at a 5 huge disadvantage today. But it's really looking at 6 the black letter law in the statute. The statute that 7 exists today; the statute that we're operating under 8 again. 9 The first part of the temporary 10 license statute, really the first part of A, discusses 11 where we already have been, and that is that 12 TwinSpires and Colonial Downs was unable to reach an 13 agreement that we have had in place for the previous 14 two years in terms of what the source market will pay 15 Colonial Downs and the Virginia Horsemen for our 16 ability to take wagers out of the Commonwealth of 17 Virginia. 18 The Commission rightfully granted 19 TwinSpires a temporary license back in December. It 20 was a six-month license that would run through 21 June 30th of this year. And, the Commission also 22 mandated that the parties attend mediation if we were 23 unable to reach an agreement before a certain date. 24 That mediation was supposed to take place before 25 February. CRANE-SNEAD & ASSOCIATES, INC. 8 1 We did attend the mediation. 2 Mediation was unsuccessful. And, from January 1 until 3 today we've been operating under our temporary 4 license. That's not disputed; that's where we are 5 today. And, again, we can read through word for word, 6 which we may end up having to do at some point today, 7 but that's where we are with the first part of the 8 temporary license, Section A. 9 The portion of the temporary 10 license statute that really mandates your obligation 11 today starts with the second part of A, which I will 12 read because it's really of grave importance today. 13 That language states that: If, during the term of the 14 temporary license -- which I think we'll all agree 15 we're currently operating under -- the parties are 16 unable to reach an agreement through mediation -- and 17 that's a singular form of mediation, a mediation -- 18 which we have documented, and I don't think anyone 19 will contest the fact that we went through mediation. 20 It was unsuccessful. And, it has been clear that the 21 parties here today have not, cannot, and probably will 22 not reach an agreement. 23 And, so anyway, that mediation was 24 unsuccessful. So, if during this term, again, that 25 mediation is unsuccessful, the Commission shall, and CRANE-SNEAD & ASSOCIATES, INC. 9 1 we've documented in our brief "shall" means must, and 2 we can go into a further explanation of that if need 3 be, specify the percentage of the total gross handled 4 wagers placed with the account-wagering applicant from 5 within the Commonwealth be paid by the applicant to 6 unlimited licensee and representatives of the 7 Recognized Majority Horsemen's Group. So, at this 8 point, it is the obligation of the Commission to set 9 this rate. 10 The statute further provides that 11 in doing so, the Commission shall consider, among 12 other factors, contractual agreements that other 13 account-wagering licensees have with an unlimited 14 licensee and representatives of the Recognized 15 Majority Horsemen's Group. So the statute does 16 provide some guidance in terms of how to set this 17 rate. 18 The statute goes on to say: The 19 percentage specified by the Commission shall be the 20 best offer made by either: A) the account-wagering 21 applicant; or, B) the unlimited licensee and the 22 representatives of the Recognized Majority Horsemen's 23 Group. 24 Now, what I really expected to 25 happen during our mediation was to reach a point, and CRANE-SNEAD & ASSOCIATES, INC. 10 1 every mediation I have ever been a part of, basically 2 a mediator brings the parties together to try to get 3 the parties to cooperate, to try and get the parties 4 to kind of reach their best offer, their walk-away 5 position. And, usually, in a mediation, if the 6 mediator does his job, then both parties walk away 7 unhappy, because they basically brought the parties 8 together, they've reached some sort of compromise. 9 Now, we went through our mediation 10 here. We did not reach that point. I requested the 11 mediator, let's get to the point, is that their best 12 offer? Is that the offer they want to take to the 13 Commission and say this was our best offer, and I was 14 going to give our best offer, and I thought the 15 process would work and he would come back and say, 16 here's what the mediation resulted in. 17 The mediation did not reach that 18 point, and I was at least told by the mediator that 19 Colonial Downs and the Virginia Horsemen did not want 20 to reach that point. They wanted to reserve that time 21 to come back to the Commission and then make that 22 argument as to what their best offer was. 23 So, anyway, here we are today, 24 and, again, the Commission, through this language, 25 which I don't think anyone would disagree this is the CRANE-SNEAD & ASSOCIATES, INC. 11 1 current statute, obligates the Commission to solicit 2 the best offer of either party, and then that rate 3 that the Commission decides between the two best 4 offers would be in place. And, for that period of 5 time, the statute goes on to say: The percentage 6 specified by the Commission shall be effective for one 7 year from the one-year term of the applicant's 8 temporary license. Now, there could be some confusion 9 here, because this portion of the statute talks about 10 a one-year temporary license. The Commission has 11 issued a six-month temporary license pursuant to the 12 statute, and the statute goes on in other sections to 13 talk about a six-month temporary license. 14 The statute also goes on to say 15 that the Commission has the authority to grant an 16 additional six-month license. So, therefore, we're 17 talking about a temporary license having the ability 18 and the expectation of going for a full year. Now, we 19 could be here today and just ask the Commission to 20 extend our temporary license, and I don't think that 21 would be unexpected by anyone here, because, 22 typically, the license process in Virginia and any 23 other state, that process of establishing a license 24 takes place before a license would expire. We come 25 out here each year, I think, in December, get our CRANE-SNEAD & ASSOCIATES, INC. 12 1 license for the next year so that there's not any time 2 in between us operating in the Commonwealth of 3 Virginia. There's an expectation of that license 4 being able to enjoy that right in the present and then 5 also enjoy that right in the future so that we can 6 conduct our business. 7 You know, when we look at this 8 statute, obviously it's in place for a reason. This 9 whole temporary license process is in place for a 10 reason. And, the reason that it is in place is to 11 prevent a party like ourselves, an out-of-state 12 provider, from coming in and meeting all the 13 qualifications of an applicant, which we have done now 14 three years in a row, and then having someone else be 15 able to prevent us from operating in the state. And 16 what prevents us currently from having a regular 17 license and what has almost prevented us in the past 18 from having a regular license is that we have been 19 unable to reach an agreement with Colonial Downs and 20 the Horsemen's Group. Now, I'm not going to spend 21 time today getting into that, because, again, the 22 focus should be on this very simple task by the 23 Commission today of fulfilling your obligation. 24 But, anyway, we're in a position 25 today where we have met the qualifications and the CRANE-SNEAD & ASSOCIATES, INC. 13 1 statute says in Part B that such temporary license 2 shall expire at the end of the six months and shall be 3 subject to one renewal. 4 Now, I know the word shall states 5 that you have some authority to decide whether that 6 takes place. But this next sentence is very important 7 in determining what that "shall" be based on. If a 8 temporary license is not granted, the applicant is 9 entitled to a hearing on the issue of qualifications. 10 Now, this is clearly pointing out 11 that the only reason you could deny a temporary 12 license is if we weren't qualified. And, again, I 13 don't think anyone would argue whether we're qualified 14 or not. We have been qualified for three years 15 straight. There's nothing that's changed in our 16 company. There's nothing that's changed in our 17 management of the company. We're not in bankruptcy. 18 We have no issues pending that would not make us 19 qualified to do business in the Commonwealth of 20 Virginia, or be entitled to a license. 21 The one fact that does exist, that 22 has existed since last year, is we don't have this 23 agreement in place, and, we've done everything 24 possible. We have negotiated with Colonial Downs and 25 the Horsemen. We've attended Commission-ordered CRANE-SNEAD & ASSOCIATES, INC. 14 1 mediation. We've done everything obligated by us 2 under this statute. We are paying source market fees 3 on a monthly basis based on the Commission and based 4 on this statute. We're fulfilling our obligations. 5 We're operating under them right now. No one is 6 asking us to stop those obligations. 7 And, so, at this point, we're here 8 to ask you to fulfill your obligations, and that is to 9 grant us the substantive right that's granted to us in 10 the statute, and it's a statute that exists today. 11 Colonial Downs, through its brief, 12 has basically asked you to ignore the present statute; 13 to ignore your obligation under the statute. They've 14 cited that it's a moot point because it's a new 15 statute in place, but that does not -- that new 16 statute is not effective today, and our rights are 17 vested right today. And to deny us that is to deny us 18 the right while maintaining that we should fulfill our 19 obligations under the statute, and I don't think 20 that's the expectation this Commission has. And I 21 don't think it's fair to ask this Commission to 22 enforce a statute that's not in place. The 23 legislators could have established that that statute 24 was effective whatever date they wanted it to be 25 effective. But, clearly, that was not the case. CRANE-SNEAD & ASSOCIATES, INC. 15 1 And it's also very important to 2 note that the Virginia Code and also Virginia -- the 3 Supreme Court of Virginia has held that a new statute 4 cannot retroactively take away a right from a previous 5 statute. And, it states clearly in the Supreme Court, 6 and I'm quoting from the City of Norfolk vs. Betty 7 Kohler, that both substantive and vested rights are 8 included in those interests protected from retroactive 9 application of statute. 10 So if we have a right, under a 11 current statute, a subsequent statute cannot take away 12 that right. And, so, one, it's invalid to argue that 13 this new statute is effective today; it's clearly not. 14 It's also ineffective to say that this new statute 15 should prevent you from taking action under your 16 current obligations. 17 That is our opening right now. 18 And, of course, if we're operating under the 19 procedures, we would reserve any time for later in the 20 proceeding. 21 CHAIRMAN BURNETT: Thank you, 22 Mr. Blackwell. 23 I think it might expedite matters 24 if we had any questions from the Commission to you at 25 this point to be clear what your position is and to CRANE-SNEAD & ASSOCIATES, INC. 16 1 help opposing counsel understand and respond to it. 2 MR. BLACKWELL: Sure. 3 CHAIRMAN BURNETT: Do any 4 Commissioners have any questions at this time of 5 Mr. Blackwell? 6 7 NOTE: (No response.) 8 9 CHAIRMAN BURNETT: Let me ask you 10 a couple of points. 11 MR. BLACKWELL: Sure. 12 CHAIRMAN BURNETT: Your, in your 13 earliest part of your statement, your argument, you 14 are asking us to extend the license through the end of 15 2010, and to set a hub rate for 2010. 16 MR. BLACKWELL: Correct. 17 CHAIRMAN BURNETT: I didn't hear 18 you comment on what your position is with respect to 19 the hub rate for this year. 20 MR. BLACKWELL: And I appreciate 21 you bringing that up, because that's something I may 22 have neglected to bring up. But right now, as you 23 know, what the Commission has ordered and what the 24 statute provides is that if, and this is in Part C of 25 the temporary license statute, if a temporary license CRANE-SNEAD & ASSOCIATES, INC. 17 1 is granted, which it obviously has been granted, it 2 goes through what the temporary licensee should pay, 3 and there's one-half percent to the Commission for 4 regulating the activity, and then it says that each 5 month a temporary licensee shall also pay an amount 6 equal to the average of all account wagering licensees 7 in the Commonwealth, as calculated by the Commission. 8 Now, back in December, when we 9 received our temporary license, I think the Commission 10 Staff did its best to estimate what that would be, but 11 they were obviously working from historical data that 12 I think covered the first three quarters of 2008. 13 Since that time, I've been in communication with 14 Staff, and I was expecting that that same rate does 15 not exist. And I think the whole point of this is to 16 ensure that someone going through this process, like 17 ourselves, is competing on a level playing field. So, 18 it's the average of what everyone else is being 19 charged so that we're not held at a distinct 20 disadvantage. 21 So, this also talks about each 22 month the temporary licensee shall pay an amount equal 23 to the average of what everyone else is paying. So, I 24 think that really needs to be trued up. And in my 25 conversations with Staff, I think that that number, CRANE-SNEAD & ASSOCIATES, INC. 18 1 where it was set at 8.3 back in December, actually is 2 the number that is more representative of what others 3 are paying for this year. It's more 7.9 percent. So, 4 we would, of course, ask the Commission to follow the 5 statute and enforce that rate or whatever rate the 6 Commission and its Staff deems is the true average 7 being paid by others. 8 And, so, that is what, at least, 9 and the Commissioners have to weigh in on this, but it 10 sounds like that's what the average that has been paid 11 so far this year, and we would expect the Commission 12 to follow the statute and also be allowed to compete 13 on a level playing field and have whatever that 14 average is applied retroactively or on a 15 month-by-month basis to make sure that we're 16 continuing to compete on a level playing field. 17 The second part of that is that's 18 where we feel like the rate should be, and we feel 19 that the temporary license mandates, the language 20 mandates that license, that temporary license should 21 be governed under those rates. It should be the 22 average that everyone else is paying. But, again, to 23 ensure that everyone is on a level playing field. 24 But, then when we get into the rate for 2010, the 25 statute clearly states that that rate is actually the CRANE-SNEAD & ASSOCIATES, INC. 19 1 best offer chosen by the Commission of the two 2 parties. So that's the rate that takes place after 3 the one-year temporary license and the average rate 4 being applied to those on a month-by-month basis. 5 CHAIRMAN BURNETT: Let me follow 6 up on that -- 7 MR. BLACKWELL: Sure. 8 CHAIRMAN BURNETT: -- and see if I 9 can summarize what your interpretation of the statute 10 is. 11 MR. BLACKWELL: Sure. 12 CHAIRMAN BURNETT: I understand 13 you to say that you believe the legislature intended 14 that if this kind of an impasse occurs, that during 15 the -- or absent any problems with qualifications, 16 during the first year of these two six-month temporary 17 licenses, the rate is set at the average of all ADW 18 providers' payments. And, during the second year, it 19 would be as set forth in A, that the choice made by us 20 between the best offers of each party. 21 MR. BLACKWELL: Correct. 22 CHAIRMAN BURNETT: All right. You 23 indicated earlier in your argument that you have a 24 vested right in the second six-month license. And my 25 question to you is: What is your authority or basis CRANE-SNEAD & ASSOCIATES, INC. 20 1 for saying that? 2 MR. BLACKWELL: Well, we have a 3 substantive right, and a substantive right is clearly 4 the right mandated by statute. The statute basically 5 says that we have temporary license, and we have the 6 right to be heard on temporary or second extension. 7 And the statute is clear that the only thing that can 8 really prevent us from receiving that extension is if 9 we're not qualified. And I'm prepared today to go 10 through a process to establish whether we're 11 qualified, if that is an issue. 12 But, we feel that the statute is 13 clear that there is an expectation that there is a 14 six-month renewal period for a temporary license, 15 which would prevent us from being excluded from the 16 market and not be able to compete, you know, 17 competitively with other providers and certainly an 18 in-state provider. 19 CHAIRMAN BURNETT: So, your 20 position is, is the legislature intended, through this 21 statute, to give you, essentially, a one-year license, 22 but it was subject to a six-month review as to whether 23 your qualifications remained intact. Is that a fair 24 way of putting it? 25 MR. BLACKWELL: Correct. And, I CRANE-SNEAD & ASSOCIATES, INC. 21 1 think that in A it talks about a one-year term of a 2 temporary license. So I think the expectation is 3 that, at some point, we're not going to be excluded 4 from the market just because someone is, you know, 5 either we're unable to or someone is refusing to enter 6 into an agreement with us. There is an expectation 7 that we would have the opportunity to compete with 8 other providers in the State for up to a year, 9 consistent with the licenses that are granted to other 10 providers that meet the same qualifications that we 11 meet, other than having this one agreement that was 12 really outside of our control. 13 CHAIRMAN BURNETT: Under your 14 interpretation of the statute, would you be required 15 to apply for another license at the end of the first 16 year of temporary licensing? 17 MR. BLACKWELL: I think if the 18 rate is set, to me, the statute is not necessarily 19 clear what that process would look like. But I think, 20 typically, we submit an application on an annual 21 basis, which reflects that our information is up to 22 date. If there would be a change in that, we would 23 not be qualified. I think that's really what the 24 Commission is looking at is whether we're qualified. 25 The agreement with the track has been outside the CRANE-SNEAD & ASSOCIATES, INC. 22 1 control of the Commission. Really what the Commission 2 is looking at is have you met the statutory 3 obligations. The statutory obligation is being met in 4 that the Commission is being asked to set the rate. 5 And, if we're not qualified, at any point, whether 6 it's in March or March of next year, I think the 7 Commission would have the authority and ability to 8 step in and say this business is no longer qualified, 9 for whatever reason. 10 So I think that we would -- this 11 is a right, it's a vested right to have, to be able to 12 operate next year. It's applying all the terms that 13 would be in this other agreement or the terms that are 14 outside the qualifications that the Commission and 15 Staff looks at. 16 CHAIRMAN BURNETT: Okay. And, 17 this will be my last question. 18 MR. BLACKWELL: Sure. 19 CHAIRMAN BURNETT: Taking the old 20 statute, the one we're interpreting now -- 21 MR. BLACKWELL: Right. 22 CHAIRMAN BURNETT: -- together 23 with the new statute, it's TwinSpires' position, I 24 take it, that the legislature intended that you be 25 entitled to a license, provided you meet the routine CRANE-SNEAD & ASSOCIATES, INC. 23 1 qualifications for 2010, and that you be permitted, if 2 you will, to ignore the rate set by that statute by 3 the new statute and be entitled to the best offer 4 selected by the Commission for the year 2010. Is that 5 a fair characterization? 6 MR. BLACKWELL: And that's 7 correct, and that's based on Virginia Code Section 8 1-239 and also the Supreme Court case of Virginia that 9 I cited. 10 CHAIRMAN BURNETT: All right. 11 MR. BLACKWELL: And, again, that 12 Virginia Code states that no new acts of the General 13 Assembly shall be construed to repeal a former law as 14 to any right accrued under the former law or in any 15 way whatever to affect any right accrued before the 16 new act of the General Assembly takes effect. 17 And, it's been clear under the 18 Virginia retroactivity principles that you can't go 19 back and take away the rights that have already been 20 established. And we feel that this statute clearly 21 establishes rights and obligations right now. And, 22 again, we've operated and performed our obligations 23 under the statute and now you're being asked to have 24 our rights recognized. 25 CHAIRMAN BURNETT: Thank you. In CRANE-SNEAD & ASSOCIATES, INC. 24 1 light of my questions, are there other questions? 2 3 NOTE: (No response.) 4 5 CHAIRMAN BURNETT: Anything 6 further, Mr. Blackwell? That's your opening? 7 MR. BLACKWELL: Not at this time. 8 Thank you. 9 CHAIRMAN BURNETT: All right. 10 Thank you very much. 11 Mr. Weinberg? 12 MR. WEINBERG: Good morning. I am 13 Jim Weinberg appearing on behalf of Colonial Downs, 14 and I'd like to try to narrow the issue even further. 15 Colonial Downs is supportive of 16 granting Churchill Downs a license, not a temporary 17 license, a license for the period July 1 through the 18 end of 2009, and that license should be granted under 19 the Racing Act in effect on July 1 when this current 20 license expires, so that all we are debating, 21 candidly, is not whether or not Churchill Downs has a 22 license, but under which act it has a license for the 23 reasons I'll go into a little further detail. 24 We believe the proper action by 25 this Commission is to consider Churchill Downs' CRANE-SNEAD & ASSOCIATES, INC. 25 1 application for a license commencing July 1 under the 2 law in effect on July 1. And the legal basis for this 3 is as follows: We just spent the last several minutes 4 talking about whether Churchill Downs has a vested 5 right in an extension of the existing license. It 6 does not. It does not under Virginia law. This 7 Commission granted a license to Churchill Downs 8 through June 30th. The record is clear, undisputed 9 on that. 10 TwinSpires' argument that it has a 11 vested right rests on the interpretation of the 12 existing statute, and, in effect, two references to 13 the word "shall." But we also have to read that 14 section fairly carefully in that the "shall" says 15 "shall be subject to renewal." The "subject to" makes 16 it clear that there is an opportunity for this 17 Commission to exercise some discretion on whether or 18 not that license is renewed. Given that discretion, 19 there is no vesting. There is no substantive right. 20 The cases cited by Churchill Downs, one is a 9th 21 Circuit case, not applicable in Virginia; the other is 22 a case also not applicable under Virginia law. 23 If we look at the Virginia cases 24 that are referenced in our brief, it is clear that 25 there is not a substantive right that is protected CRANE-SNEAD & ASSOCIATES, INC. 26 1 from any new legislation. There are a couple of 2 Supreme Court cases that are cited in our brief. 3 There are also cases involving ABC licenses, which are 4 found, under Virginia law, not to be a substantive 5 right that is protected from changes in the 6 legislative structure. 7 It's also important to look at 8 some of the details in the new legislation. There 9 isn't a grandfather clause, meaning that if there are 10 existing licenses in effect, they remain in effect, 11 notwithstanding the new statute. There is no such 12 clause in this new legislation, and obviously the 13 General Assembly could have done that if it so 14 desired. 15 This is also an instance where the 16 state is exercising its police powers. The regulation 17 of gaming in Virginia is well established under 18 Virginia Supreme Court decisions as an exercise of the 19 state police powers. That's important because in the 20 exercise of state police powers, courts have given 21 great discretion to make sure those police powers are 22 fully implemented. And to thwart the commencement of 23 the new legislative structure by extending the license 24 under an old legislative structure would thwart the 25 General Assembly's assertion of police powers in this CRANE-SNEAD & ASSOCIATES, INC. 27 1 instance. The General Assembly has said, look, the 2 source market fee is 10 percent. All ADW providers 3 need to contribute 1 percent to the breeders' fund; 4 that begins July 1. By extending, as requested by 5 Churchill Downs, its temporary license, this 6 Commission would be ignoring that mandate. 7 We don't think that's proper under 8 Virginia law, and for the reasons and the cases cited 9 in our brief. 10 I'm really happy to pause there 11 for questions. That is the narrow issue that I think 12 we have before us. 13 CHAIRMAN BURNETT: Understood. 14 Gentlemen, any questions of 15 Mr. Weinberg? 16 Mr. Miller? 17 COMMISSIONER MILLER: I have a 18 question. 19 CHAIRMAN BURNETT: Go ahead, 20 Mr. Miller, then we'll go to Trip. Go ahead. 21 COMMISSIONER MILLER: Okay. 22 Mr. Weinberg, as a general proposition, in any 23 licensure situation, if a temporary license grants 24 authority to do something, during that period of 25 temporary licensure, cannot a permanent license be CRANE-SNEAD & ASSOCIATES, INC. 28 1 granted by a licensing agency, just as a general 2 proposition? 3 MR. WEINBERG: I would agree that 4 you could -- that, as a general proposition, a 5 temporary license can be converted to a permanent 6 license. Now, that, under the terms -- what are the 7 terms of that license, we can discuss. 8 COMMISSIONER MILLER: Right. And, 9 as a general proposition and statutory interpretation, 10 when the legislature passes a statute, and is silent 11 on grandfathering rights, is it not true that despite 12 the legislature's failure to recognize grandfathered 13 situations where they decided to expressly protect 14 substantive rights, that even without such 15 grandfathering recognition by the legislature, that 16 substantive rights are still protected, in many 17 instances, under the law, even though a new statute is 18 passed. That if certain conditions, if certain 19 contractual situations are in existence, that the 20 passage of the new legislation cannot affect those 21 substantive rights that have been established prior to 22 the passage of the new legislation? 23 MR. WEINBERG: In certain 24 instances I agree with you. I don't believe any of 25 those instances are applicable here. There are no CRANE-SNEAD & ASSOCIATES, INC. 29 1 contractual rights. The -- 2 COMMISSIONER MILLER: Okay. 3 MR. WEINBERG: And I'm happy to 4 elaborate. 5 COMMISSIONER MILLER: No-no, you 6 don't need to. 7 MR. WEINBERG: Okay. 8 COMMISSIONER MILLER: Your 9 position is that even with that general proposition 10 that, in this instance, TwinSpires has no substantive 11 rights that are protected. 12 MR. WEINBERG: Correct. 13 COMMISSIONER MILLER: Okay. 14 CHAIRMAN BURNETT: Mr. Ferguson. 15 COMMISSIONER TRIP FERGUSON: 16 Commissioner Miller asked the question that I was 17 going to ask about grandfathering. Thank you. 18 CHAIRMAN BURNETT: I have a couple 19 of questions, Mr. Weinberg. 20 Do I understand Colonial Downs' 21 position to be that in a circumstance where there 22 is -- an agency has a licensing authority, if, in a 23 circumstance where there is any discretion at all in 24 the renewal of that license, there is no vesting or 25 substantive or accrual of a right to that license, any CRANE-SNEAD & ASSOCIATES, INC. 30 1 discretion will remove a substantive right to the 2 continuation of that license? 3 MR. WEINBERG: I believe, yes. 4 Right. There is no expectation that I have a right to 5 that extension, given the discretion of the licensing 6 agency to renew or not renew. 7 CHAIRMAN BURNETT: To make my 8 point in the extreme, the statute said: Provided 9 TwinSpires has not been convicted of a felony, they 10 shall get another license. 11 MR. WEINBERG: Uh-huh. 12 CHAIRMAN BURNETT: They still have 13 no substantive right to that license? 14 MR. WEINBERG: There are cases 15 that say where a license can only be revoked for cause 16 or not renewed for cause, that that right is greater 17 than when an agency has a substantive right. I would 18 say, even if you take that position, that substantive 19 right does not trump the issue of police powers, the 20 legislative intent here, and the bounds of the 21 Commission's authority to apply the Racing Act. 22 By renewing it now, you are 23 extending into a period a structure that has no 24 further legislative support; that has been expressly 25 repealed. And, so even if it were such an instance CRANE-SNEAD & ASSOCIATES, INC. 31 1 where the right accrues but for cause, our argument 2 would be the -- is the same. 3 CHAIRMAN BURNETT: Then that leads 4 me to my next question, which is this balancing of a 5 right that does or doesn't accrue by statute, on the 6 one hand, which I've heard your response on, but that 7 argument of the police power and an absent structure 8 to support the rate setting and license that 9 TwinSpires seeks doesn't apply when there's an 10 existing contract. So if there is a private contract, 11 that vesting survives the police power interest of the 12 state where a statutory right, assuming for the moment 13 that it is a right that accrues, does not. And that 14 seems to me fundamentally unfair somehow, and I was 15 just wondering if you'd comment on it. 16 MR. WEINBERG: I'm not sure we 17 have ever commented that an existence of a contract 18 would change our argument today. Is that what you're 19 suggesting? 20 CHAIRMAN BURNETT: No-no. You're 21 saying that the police power doesn't intrude on an 22 existing contract, such as the ones you have with 23 other ADW providers and that your police power 24 argument doesn't go to private contracts, but it does 25 go to the statutory rights. CRANE-SNEAD & ASSOCIATES, INC. 32 1 MR. WEINBERG: I'm sorry. I'm not 2 making that argument at all. 3 CHAIRMAN BURNETT: Okay. All 4 right. 5 MR. WEINBERG: At all. I want to 6 be clear, the police power trumps. And we can debate, 7 which is not the case, not the facts in this instance, 8 whether a contract affects the extent of the police 9 power exercise. 10 CHAIRMAN BURNETT: But, the 11 problem still -- 12 MR. WEINBERG: I am not here to 13 talk about that. 14 CHAIRMAN BURNETT: Understood. 15 It's not before us. 16 MR. WEINBERG: I only mentioned 17 that in the line of cases that Commissioner Miller 18 referred to, he asked, wouldn't the existence of a 19 contractual right create some substantive right. 20 That's not even before us today because there is no 21 contract. That is different, apart and separate from 22 the police power argument. I just want to be clear on 23 that. 24 CHAIRMAN BURNETT: I hear you. 25 Okay. CRANE-SNEAD & ASSOCIATES, INC. 33 1 Any other questions, gentlemen? 2 3 NOTE: (No response.) 4 5 CHAIRMAN BURNETT: Mr. Blackwell, 6 response? 7 MR. PETRAMALO: Do any other 8 lawyers want to talk at this point on behalf of their 9 clients? 10 CHAIRMAN BURNETT: I thought what 11 I would do is let the parties go through both sides of 12 their argument, and then seek comments from the public 13 and other lawyers. If the parties are agreeable to 14 having -- Are you speaking on behalf of the group of 15 lawyers? 16 MR. WEINBERG: I just want to be 17 clear and I apologize. I said I was speaking on 18 behalf of Colonial Downs. I should have said and not 19 on behalf of the Horsemen. 20 CHAIRMAN BURNETT: Oh. All right. 21 MR. WEINBERG: I know our briefs 22 were joint, but I did not want to intrude on 23 Mr. Petramalo or Mr. Canaan's time. 24 CHAIRMAN BURNETT: We'll see you 25 as multiple parties and each with counsel. Go ahead. CRANE-SNEAD & ASSOCIATES, INC. 34 1 MR. PETRAMALO: Our president says 2 I will not get paid unless I get up and talk. 3 Let me step back a minute and take 4 you through the history of the legislation here. In 5 2003, the legislature gave the Racing Commission the 6 authority to regulate account wagering, and it made a 7 number of requirements in the statute, including 8 setting forth the requirement that an applicant have a 9 contract with the track and the Horsemen sharing the 10 revenue that was derived from account wagering. For 11 shorthand purposes, we call that the rate or the 12 source market fee or whatever. 13 That's how the statute stood until 14 2007, because -- in my opinion -- because there were 15 problems with ADWs negotiating contracts, and I'm 16 thinking specifically of AmeriTab. The legislature 17 set up a mechanism in the 2007 amendment to deal with 18 the problems of the parties being unable to reach 19 agreement or a contract on a rate. What it set up 20 there was a situation whereby a temporary license 21 could be issued, in the discretion of the Commission, 22 if the ADW company certified that there was an impasse 23 and they couldn't reach agreement. That then brought 24 into play the authority of the Racing Commission. 25 The Racing Commission then was CRANE-SNEAD & ASSOCIATES, INC. 35 1 authorized to appoint a mediator, and if mediation 2 failed, the statute authorized the Commission to set 3 the rate. But it circumscribed the Commission's 4 authority by saying, you can set the rate, but the 5 rate has to be the last best offer of the Horsemen and 6 the track or the ADW company. 7 Now, the temporary license, the 8 whole purpose of the temporary license was to permit a 9 period of time during which mediation could occur. 10 So, we have the six-month temporary license, which is 11 subject -- may be renewed, if necessary. In other 12 words, if discussions and mediation is still going on 13 at the end of six months, you have the authority to 14 extend that. 15 But, what's being proposed -- 16 Well, let me finish that. And then if there is a 17 failure of mediation, then you resort back to your 18 final authority to set the rate with the last best 19 offer. But, what TwinSpires is asking you to do today 20 turns the whole statute on its head, because the whole 21 purpose of a temporary license is to permit mediation 22 to go forward. And everybody here today admits that 23 mediation has failed, and it will never succeed. 24 That's what Brad said in his opening, we'll never 25 reach an agreement. CRANE-SNEAD & ASSOCIATES, INC. 36 1 If that's the case, there is 2 certainly no reason in the world, under the statute, 3 to grant another temporary license for six months. 4 What would the purpose be? Mediation has failed. 5 Your only authority, assuming you have some, is, at 6 this point, to say, okay, we will now employ our 7 rate-setting authority which is accept the last best 8 offer of either one of the parties. 9 That's where we are today. This 10 whole notion that somehow or other TwinSpires has got 11 a vested right to a renewal for another six months of 12 a discretionary, temporary license makes absolutely no 13 sense whatsoever -- not at all. But, more 14 importantly -- 15 CHAIRMAN BURNETT: While you're on 16 that point, please address how that integrates with 17 the duration of this one-year term rate. Assuming 18 what you're saying -- 19 MR. PETRAMALO: Yes. 20 CHAIRMAN BURNETT: -- where does 21 that one year begin and end? 22 MR. PETRAMALO: I think -- I think 23 it's, with all due respect to the legislative Staff, 24 it's a bit of sloppy draftsmanship. They should 25 have -- it should have really -- it should have really CRANE-SNEAD & ASSOCIATES, INC. 37 1 read temporary licenses. It should have been plural, 2 because you could have it for the first six months and 3 the second six months. But, in order to get around 4 that, they said the one-year temporary license. 5 To me, it's clear what the 6 statute, what the legislature was intending; that is, 7 this six-month respite to allow mediation to go 8 forward. But, I don't think by using that term, the 9 one-year term of the temporary license, it meant to 10 suggest that the six-month temporary one was 11 automatically renewable for another six months, 12 because it would make no sense. What purpose would be 13 served by renewing a temporary license that was in 14 place, in the first place, to allow mediation which 15 everybody agrees has failed? It makes no sense. 16 CHAIRMAN BURNETT: But it says it 17 shall be effective for one year. You can -- 18 MR. PETRAMALO: Shall be one-- 19 CHAIRMAN BURNETT: For one year it 20 says it will be effective, and then it goes on to the 21 "from" and all the rest. 22 So, when it says it's going to be 23 effective for one year, what does it mean by that? As 24 specified by the Commission shall be effective for one 25 year and then it goes on to "from the," and I hear you CRANE-SNEAD & ASSOCIATES, INC. 38 1 with the sloppiness for sure. 2 MR. PETRAMALO: But, I think -- I 3 think that's a different percentage. The percentage 4 that you're referring to, and I'm looking in A -- 5 CHAIRMAN BURNETT: Okay. That's 6 right. 7 MR. PETRAMALO: -- the last 8 sentence, which says the percentage specified by the 9 Commission shall be effective for one year. That 10 percentage is the baseball percentage. 11 CHAIRMAN BURNETT: That's right. 12 MR. PETRAMALO: Right. 13 CHAIRMAN BURNETT: When does it 14 start? 15 MR. PETRAMALO: At the end of the 16 temporary license. And, in this case, assuming you 17 have the authority to do that, and I'll get to that in 18 a minute, if you were to employ that, the one-year 19 period would start July 1 and go through June 30 of 20 2010. That would be the one-year period; that's the 21 way I would read the statute. 22 CHAIRMAN BURNETT: All right. 23 MR. WEINBERG: And we may disagree 24 slightly on that, because I don't see any foundation 25 for extending this -- I'm sorry. CRANE-SNEAD & ASSOCIATES, INC. 39 1 MR. PETRAMALO: No, I don't think 2 we're -- Let me finish. I don't think we're 3 disagreeing. 4 CHAIRMAN BURNETT: If I 5 understand, to be clear, the way I'm hearing it, this 6 is all hypothetical, because we don't have the 7 authority to issue it anyway, is what I think we're 8 about to hear. 9 MR. PETRAMALO: Exactly. Exactly. 10 CHAIRMAN BURNETT: Thank you. 11 MR. PETRAMALO: Exactly. 12 CHAIRMAN BURNETT: All right. 13 MR. WEINBERG: Although I would 14 offer one alternative reading of that language. 15 Because I don't see anything in the statutory scheme 16 that says a temporary license, if it could be 17 extended, would last for more than a one-year period. 18 And, so, one way to read that sentence, which I agree 19 with Mr. Petramalo is a mystery, would be that the 20 rate, the baseball rate set by the Commission, is 21 retroactive to the beginning of the temporary license; 22 hence the word "from." So, it is in effect for that 23 one-year period of the entire six months, six months, 24 not till another year and beyond. 25 CHAIRMAN BURNETT: But, if I CRANE-SNEAD & ASSOCIATES, INC. 40 1 understand you both, we don't need to get to that, 2 because -- 3 MR. WEINBERG: You don't. You 4 don't. But I just want to be clear that there is no 5 circumstances where a temporary license should extend 6 beyond the end of 2009, even if you don't accept our 7 argument that you don't have authority to extend it 8 beyond June 30th, 2009. 9 CHAIRMAN BURNETT: Understood. 10 MR. PETRAMALO: And the lawyer is 11 saying an interesting point. 12 But, let's get back to your 13 authority. What you're being asked to do is to put in 14 effect some sort of a license that's going to be 15 effective on July 1 of 2009. And what I think you are 16 prohibited from doing is going forward with the old 17 regime that allowed you, the Commission, to take a 18 role in the rate-setting process. As of July 1, the 19 Commission, the legislature has put you out of 20 business as far as rate setting is concerned. 21 What the legislature has said is, 22 going forward it's a statutory rate. There is no more 23 requirement that the parties negotiate a contract. 24 There is no more requirement of mediation. There is 25 no more requirement for the Racing Commission, CRANE-SNEAD & ASSOCIATES, INC. 41 1 ultimately, to set the rate if all else fails. You're 2 out of the business. 3 The statute now has a 10 percent 4 rate that goes forward. So, even with that in mind, 5 even if we give TwinSpires the benefit of all doubt 6 and say, okay, the Commission today has the authority 7 to the baseball arbitration, to put in effect, a 8 permanent license for however long, based on the last 9 best offer. I don't think that you have the 10 discretion to do anything other than to set that rate 11 at the statutory rate. 12 Practically speaking, let me tell 13 you what would happen, at least from the Horsemens' 14 standpoint. If today you were to ask us for our last 15 best offer, guess what? Our last best offer would be 16 the 10 percent that's in the statute. And, TwinSpires 17 might come up with 7.9 or 8 percent. I don't think 18 you would be free to do anything other than to select 19 our last best offer, which is the statutory rate. 20 Where in the world would you get the discretion to 21 say, well, the legislature may have said it should be 22 10 percent going forward from July 1st, but we 23 disagree. You've been divested from whatever 24 discretion that you have. 25 So, I think what we should do is CRANE-SNEAD & ASSOCIATES, INC. 42 1 just look at this practically. The legal arguments 2 are all very interesting. But, practically speaking, 3 the legislature has spoken -- ten percent going 4 forward, that's the rule. 5 COMMISSIONER MILLER: Mr. Chairman? 6 CHAIRMAN BURNETT: Yes, please, 7 Mr. Miller? 8 COMMISSIONER MILLER: Just a quick 9 question. 10 Are you suggesting that if we were 11 in a position to select the last best offer today, we 12 would have to select your last best offer and not the 13 ADW's last best offer? 14 MR. PETRAMALO: Yes, for the 15 following reasons. Let me clarify that. I was being 16 a little -- a little glib. But, my assumption, my 17 hypothetical was that our last best offer would be the 18 statutory rate -- 10 percent. In other words, if you 19 ask -- 20 COMMISSIONER MILLER: But, not to 21 interrupt you -- but, to interrupt you. That's not 22 the legislative, not today, that's not the legislative 23 rate today. There is no legislative statutory rate 24 today. 25 MR. PETRAMALO: That's correct. CRANE-SNEAD & ASSOCIATES, INC. 43 1 COMMISSIONER MILLER: So, when we 2 select today, we choose between your last best offer 3 and yours may be predicated upon a future statutory 4 rate, but we could still chose the ADW's last best 5 offer; could we not? 6 MR. PETRAMALO: I would say no, 7 for the following reason. I think you would be 8 hard-pressed to justify it as a legitimate exercise of 9 your discretion to reject what the legislature says 10 should go into affect on July 1, because that's the 11 period that the license that you would issue starts 12 on -- July 1. If you were to issue a license now, it 13 would be as of July 1 going forward. And what I'm 14 suggesting is you don't have the discretion to say, 15 well, the statute may say 10 percent on July 1 going 16 forward, but we decided to go with 7.9 as proposed by 17 TwinSpires, as opposed to 10 percent proposed by the 18 Horsemen. 19 COMMISSIONER MILLER: We would be 20 in the position of Sir Thomas Moore and King Henry 21 where we have to make a decision based on what we, our 22 best principles would be, despite what might be in the 23 good book down the road. In other words, -- 24 MR. PETRAMALO: I've been watching 25 the Tudors on Showtime, but we didn't get to this yet. CRANE-SNEAD & ASSOCIATES, INC. 44 1 COMMISSIONER MILLER: No, what I'm 2 suggesting today is, in reality, what the legislature 3 did is of no note today, unless we take the position 4 that what the legislature has proposed for July 1, 5 2009, forward, is all wise, all encompassing, and 6 cannot possibly be challenged by a better scenario. 7 In other words, we would have to 8 acquiesce to a future law that has no effect today. 9 We would have to say the legislature has spoken for 10 July 1, 2009, forward; therefore, although it's 11 getting close, on May 21st of 2009 we have to, even 12 though the legislature didn't put an emergency clause 13 on the bill, make it effective now. We would have to 14 say, well, the law is effective now. 15 MR. PETRAMALO: Commissioner 16 Miller, I don't agree with that. Remember, what we're 17 talking about is your doing something today that goes 18 into effect on July 1. And, given that, I don't think 19 you can ignore the statutory change that takes place 20 on July 1; that's the difference. 21 COMMISSIONER MILLER: As far as 22 the rate is concerned? 23 MR. PETRAMALO: That's correct. 24 COMMISSIONER MILLER: Well, no, 25 I'm not saying your argument isn't well put. I'm just CRANE-SNEAD & ASSOCIATES, INC. 45 1 trying to look at this from all angles. 2 We've been put in a -- in a 3 position that we shouldn't have been put in. But, 4 that's neither here nor there. That's all. 5 MR. PETRAMALO: It's -- it's -- 6 it's interesting, but I think, on analysis, it's not 7 difficult. I think, respectfully, that the position 8 that we've asserted; namely, that there is certainly 9 no right to renewal of a temporary license for six 10 months, has to be correct. The whole purpose of a 11 temporary license is to permit mediation. And where 12 everybody admits mediation has failed, there is 13 absolutely no reason to renew it for another six 14 months. So, at best, what you're faced with is a 15 situation of the second portion of TwinSpires request; 16 that is, that you employ the baseball arbitration -- 17 select the last best offer. 18 COMMISSIONER MILLER: Well, one 19 other question while they're talking. Another, as a 20 general proposition, and getting back to the baseball 21 analogy, if the first mediation fails in the field 22 of -- I don't know that much about mediation, but, I 23 know I've seen instances where when if one mediation 24 fails, for whatever reason, I don't know what reason 25 they can hang their that on, but I've seen a new set CRANE-SNEAD & ASSOCIATES, INC. 46 1 of mediators. You know, the first mediation fails -- 2 Why? And, for some reason, I don't know what it was, 3 but they decided to go with a second set of mediators. 4 I mean, is that, wouldn't that be a possibility in 5 this scenario of the temporary license here and the 6 failure of mediation that -- could the Commission have 7 turned around and said, because of A, B, C, and D, 8 maybe the mediation failed, not because of the parties 9 involved, but the mediator, and I'm not suggesting 10 this, I'm just throwing this out, the mediator showed 11 up -- will the mediator -- 12 MR. PETRAMALO: Was ineffective. 13 COMMISSIONER MILLER: Yeah, right. 14 MR. PETRAMALO: In this scenario, 15 my answer would be no. Let me quickly add that you're 16 correct in terms of mediation. 17 For example, I used to be a labor 18 lawyer. It was quite common in the airline industry 19 to reach an impasse between unions and management. 20 The National Mediation Board in Washington, D.C. would 21 then enter into the process. And mediation would go 22 in fits and starts. We might go for a month, make 23 some progress, and reach a loggerheads, and the 24 mediator would recess matters. We'd come back two 25 months later. Which is somewhat analogous to getting CRANE-SNEAD & ASSOCIATES, INC. 47 1 a new set of mediators. 2 In those cases, in the airline 3 industry, mediation could go on anywhere from 18 4 months to two years -- quite common. But, in this 5 case, that's not the situation. Because, as Brad said 6 at the outset, and we readily concur, there won't be 7 any agreement in here, no matter how much mediation. 8 We just had two divergent positions that can't be 9 bridged. 10 COMMISSIONER REYNOLDS: Is the 11 leg-- 12 CHAIRMAN BURNETT: 13 Commissioner Reynolds? 14 COMMISSIONER REYNOLDS: Does the 15 legislature specifically say the only reason to grant 16 an extension mediation, or is that your interpretation 17 of the legislature's intent? 18 MR. PETRAMALO: Well, that's the 19 way I -- it's not -- I think that's what the statute 20 says. 21 COMMISSIONER REYNOLDS: You think? 22 MR. PETRAMALO: In such event, 23 which means the parties can't reach a contract, the 24 Commission shall consider the applicant's request for 25 a temporary license as provided below and be CRANE-SNEAD & ASSOCIATES, INC. 48 1 authorized to appoint an impartial third party to 2 mediate the negotiations during -- mediate the 3 contract negotiations between the parties, during the 4 period of the license, the temporary license. I mean 5 that's the only reason for it, to give the parties the 6 opportunity with the aid of a Commission-appointed 7 mediator to work out their differences. 8 CHAIRMAN BURNETT: Mr. Petramalo, 9 if the day after this bill was signed by the Governor, 10 the A, B, C ADW Company comes in and makes application 11 for a license, and they have the -- they could not 12 reach agreement with the Horsemen and the track, what 13 would be the Commission's obligation with respect to 14 setting the rate? Would we be obligated to set the 15 rate at the statutory amount? 16 MR. PETRAMALO: Well, at that 17 point, let's assume the Governor signed the bill in 18 March and somebody came in on April 1st for a 19 license, they would have to include, within that 20 license, an agreement with the -- with the Horsemen 21 and the -- 22 CHAIRMAN BURNETT: No, my 23 hypothetical is that they came in and filed an 24 Affidavit saying they had been talking to you 25 throughout, they couldn't make it happen,-- CRANE-SNEAD & ASSOCIATES, INC. 49 1 MR. PETRAMALO: Oh, I see. 2 CHAIRMAN BURNETT: -- and now they 3 seek a temporary license and new rate. 4 MR. PETRAMALO: Well, under the 5 statute as in place at that time, it would require you 6 to set a rate that's the average being paid by the 7 other ADW Company. 8 CHAIRMAN BURNETT: For what period 9 of time? 10 MR. PETRAMALO: I would argue just 11 through June 30th. 12 CHAIRMAN BURNETT: If, as we go 13 forward, either party -- the other parties want to 14 comment on this, I'd appreciate it. I've spent some 15 time how to figure out Part A and Part C of the 16 statute and how they interrelate, and it seems clear 17 to me, and I think I've heard everyone here argue 18 today, that we have an obligation, ultimately, to set 19 a rate that's the best offer, one side or the other. 20 Just ignore the new statute for the moment. We have 21 an obligation under this statute to set a rate that's 22 one or the other best offers. Which raises the 23 question, well, what is Part C for, where you have 24 this average rate. 25 It would appear to be CRANE-SNEAD & ASSOCIATES, INC. 50 1 contradictory, and I'll suggest to all the parties 2 that the only way I can reconcile them is that that 3 average rate is a temporary rate until that best offer 4 can be put forward by both sides, and it's a way of 5 ensuring that the payments are made, and that they're 6 made in an equitable fashion, all parties taking into 7 account what the others have been paying until you get 8 to the average. 9 And, that, ultimately, when the 10 rate is set, that's the rate for the license. And 11 then adjustments are made, credits and debits, to 12 bring the accounts of the parties to what the rate the 13 Commission set is. 14 Is that how you read it, and I 15 would welcome comments from the others. 16 MR. PETRAMALO: Perhaps. Let me 17 qualify, because you've picked up on the point that 18 Jim Weinberg has made, the way he reads the rate. 19 But, I think it is absolutely clear that the rate, the 20 average rate only applies during the period of the 21 temporary license. Once we're to the situation where 22 you exercise your authority to pick the last best 23 offer, the rate then becomes your selection. The 24 question that Jim raised, and I think you referred to, 25 is whether that rate is retroactive to the start of CRANE-SNEAD & ASSOCIATES, INC. 51 1 the temporary license. 2 I, quite honestly, hadn't 3 considered that. But I think it's quite clear that 4 the temporary -- the temporary license is only -- 5 initially carries with it the average rate, which ends 6 once you select the last best offer; that becomes the 7 final rate. Now, whether or not that is retroactive 8 is another question. 9 CHAIRMAN BURNETT: And, does that 10 not carry us back to this last sentence, the 11 percentage specified by the Commissioner shall be 12 effective for one year? 13 MR. PETRAMALO: Yes. That's Jim's 14 point. 15 CHAIRMAN BURNETT: And then from, 16 and you've got to understand what that "from" means. 17 MR. PETRAMALO: Right. 18 CHAIRMAN BURNETT: All right. I 19 guess my first question is, Madam President, are you 20 going to pay for that argument? I'm just kidding. 21 MR. PETRAMALO: Yeah, I was going 22 to ask her whether I should continue talking or -- 23 CHAIRMAN BURNETT: Make sure you 24 got paid, right? I'm only kidding. Whatever the 25 parties' pleasure is, we'll hear from others before we CRANE-SNEAD & ASSOCIATES, INC. 52 1 go to rebuttal, or we can hear rebuttal and then hear 2 from the public and other interested members. What's 3 your preference? 4 MR. BLACKWELL: I would suggest we 5 have the opportunity to rebut since there's been a 6 number of things brought up, and before I kind of lose 7 my train of thought and potentially be further 8 distracted. 9 Let me just -- 10 MR. CANAAN: Brad, before you 11 start, let me just say for the record, on behalf of 12 the Virginia Harness Horse Association, we simply 13 adopt the arguments of Colonial Downs and the HBPA and 14 the VHHA project and they authorized me to say that, 15 and I want to put that on the record. 16 CHAIRMAN BURNETT: Excuse me. 17 Would you identify yourself, Mr. Canaan? 18 MR. CANAAN: Barry Canaan, 19 C-A-N-A-A-N. 20 CHAIRMAN BURNETT: Mr. Blackwell, 21 rebuttal, please. 22 MR. BLACKWELL: Thank you, and 23 there's a number of issues, so please bear with me, 24 and I'm glad I reserved time from my opening. But, as 25 I mentioned in my opening, this is a very simple issue CRANE-SNEAD & ASSOCIATES, INC. 53 1 at hand. And, as I mentioned, I was concerned that 2 people would try to make this more complicated than it 3 is. 4 We've heard terms like police 5 power. We've heard about a statute that is not in 6 existence right now -- a lot of things to kind of 7 divert your attention away from what the true issue is 8 at hand, and that is, it's very clear, we should be 9 all reading from this statute and figuring out exactly 10 what it means. But, instead, we're talking about 11 something that's happening July. We're talking about, 12 again, police powers. 13 And, I would be more than happy to 14 discuss the statute that takes place on July 1st, 15 because I think it has Constitutional concern, and I 16 think it clearly violates the dormant commerce clause 17 of the United States Constitution, and I put a couple 18 of Supreme Court authorities in my brief that 19 addresses that, and we could spend a full day talking 20 about that. 21 And one of those cases 22 specifically talks about police powers. And, police 23 powers are not intended to discriminate against 24 another party. It's not intended to tax or make it 25 more difficult for an out-of-state provider to CRANE-SNEAD & ASSOCIATES, INC. 54 1 operate. It's to look at, really, what's at hand. 2 Police powers, in gambling, could be problem gambling. 3 It could be underage gambling. And I think that 4 account wagering has systems in place to address those 5 concerns. And, obviously, the amount we pay, the half 6 a percent to the Commission is geared towards the 7 police powers and regulation of the activity. Police 8 powers is, again, just something that's mentioned out 9 there to divert your attention away. 10 I'll start kind of in order with 11 what were the issue I started with Mr. Weinberg. 12 First, he mentioned that we did not have a vested 13 right. One of the things -- and the other thing he 14 called up was our authority was not relevant here. In 15 the cases that I quoted today that appear in my brief 16 and what I will bring up again are Supreme Court cases 17 of either Virginia or the United States. I think 18 they're obviously relevant here. 19 And, in the Supreme Court case, 20 again, City of Norfolk versus Betty Kohler, this case 21 clearly states that substantive rights, as well as 22 vested rights, are included within those interests 23 protected from retroactive application of statute. 24 Our substantive right is clear 25 today. It is the right that's granted by statute. CRANE-SNEAD & ASSOCIATES, INC. 55 1 That's the very definition of a substantive right. 2 It's a right established by statute. And we've 3 discussed today, and I think even Mr. Petramalo has 4 agreed that we have some rights under this statute. 5 So, clearly, what we have today 6 does apply, the retroactive principles does apply so 7 that a new statute cannot take those rights away. It 8 certainly can't take them away today when they are 9 relevant and ripe and the very statute that's before 10 us. And even when that new statute comes into place, 11 then they can't even take away those rights. 12 Mr. Weinberg also brought up the 13 fact that this new statute doesn't have a grandfather 14 clause. And, as I pointed out in my brief, a 15 grandfather clause is irrelevant here. Again, the 16 rights are here right now. If this new statute were 17 in place, and we came back and said, oh, we want the 18 old rates, maybe we could talk about a grandfather 19 clause; that maybe which had a license before. But, 20 the thing is, again, it's trying to distract you away 21 from the present day. 22 Today is May 20th, 2009. We are 23 talking about the current ADW statute. If we were 24 here in August or September, then we could talk all we 25 want about this new statute, and I'm sure we will at CRANE-SNEAD & ASSOCIATES, INC. 56 1 some point. But right now the focus has to remain on 2 the issue at hand, and that is our rights and your 3 obligations under this statute. 4 Mr. Petramalo brought up that the 5 whole purpose of this temporary license process is to 6 get to mediation. And, once mediation fails, then all 7 bets are off. And, I do not see how you can have that 8 interpretation at all, and there seems to be quite a 9 bit of language here beyond mediation. And, in fact, 10 when mediation is discussed, it says: If, during the 11 term of the temporary license, the parties are unable 12 to reach agreement through mediation -- It doesn't say 13 the process stops, it's over, go home, you're no 14 longer welcome in the state. It goes on and says, 15 here's what happens. 16 And, so, obviously, this temporary 17 license process is in a place where we -- it's to 18 prevent, once again, an out-of-state provider or any 19 applicant from coming in being fully qualified to do 20 business and being deprived of the right to do 21 business in this State. And because this is a 22 situation where we have a competitor who's deciding on 23 whether we can operate in the state, it's no different 24 if a hotel comes in from out of state, and there's an 25 in-state hotel, and they say, you've got to cut a deal CRANE-SNEAD & ASSOCIATES, INC. 57 1 with them before you're even allowed to do business in 2 this State. It doesn't make any sense that they can 3 prevent you and deprive you of that right. 4 So the temporary license process 5 is in place to prevent exactly what is happening 6 today. And, at the last meeting, Mr. Petramalo got up 7 and stated on the record for us to go somewhere else 8 and make our money. We're not welcome here by our 9 competitors. They don't want us here, and that's why 10 they're standing up today and saying, no, you 11 shouldn't do this, you shouldn't do this, because 12 they're wanting to create a disadvantage to us. 13 And today they're trying to 14 deprive us of our rights. We're talking, again, about 15 July. We're talking about -- please, we're talking 16 about all the things except for what's relevant at 17 hand. 18 The other issue that was discussed 19 is just really how does this new rate apply. And, 20 I've heard various comments, and I think that's a very 21 important question and should be the issue we're 22 focusing on today. Because, again, it's the statute 23 at hand. It's what really decides what we do here 24 today. 25 And, as we've discussed, there CRANE-SNEAD & ASSOCIATES, INC. 58 1 is -- the statute throughout talks about a temporary 2 license. It talks about a six-months temporary 3 license. It talks about the ability to extend that 4 another six months, which, obviously, the statute 5 contemplates a one-year temporary license. 6 And, so, if it was a full year, it 7 wouldn't be a temporary license. But it contemplates 8 a temporary license. And, in Part C, it talks about, 9 if a temporary license is granted, here's how we set 10 the rate. It doesn't say that this rate can change. 11 It doesn't say that this rate can be superseded by 12 something that happens later on. It says, here is how 13 the temporary license rate is handled. 14 And, I think we can all agree the 15 temporary license can run a year. There's six months 16 and six months, and so there you have a year of a 17 temporary license. And, so, what happens is, when we 18 get back to Part A and the part of the statute which, 19 you know, to me, is very clear, and others say, well, 20 this is what they should have said. Mr. Petramalo 21 says, here's what they should have said. It would be 22 clear if they said this. 23 But the fact of the matter is 24 here's the language before us. And, it's very clear 25 that the percentage specified by the Commission shall CRANE-SNEAD & ASSOCIATES, INC. 59 1 be effective for one year. So that rate exists for a 2 year. It doesn't say it replaces it. It doesn't say 3 anything. It says it's a year rate -- one year from. 4 Now, if you look at the definition of "from," it's 5 defined as and used to express removal or separation 6 as in space, time, or order. 7 If I said, I want to do something 8 30 minutes from now, it's very clear what that is. 9 So, in the absence of saying from the beginning of a 10 period or the end of the period, it says from that 11 period. So it's a separation of time. It's a 12 different part of time. So, it's effective for one 13 year. So we have a one-year rate set by the 14 Commission based on the best offer of both parties, a 15 one-year term, so we have it right here. 16 One year from, so separate, again, 17 just the basic definition of from. It's separate and 18 distinct from something else. It could be separation 19 of time or order. So both of those are separate in 20 times and order. So separate the one-year term of the 21 applicant's temporary license. 22 Any point in the statute that 23 talks about temporary license, it gives you clearly 24 what the temporary license rate should be. But this 25 one-year term that's out there is something much CRANE-SNEAD & ASSOCIATES, INC. 60 1 separate. And if we look at the intent of this 2 statute, again, clearly this is to keep someone from 3 being prevented from operating in the state who meets 4 the qualifications. 5 And, again, when we look back to 6 B, the only real reason set forth by statute as to why 7 you would not extend a temporary license seems to be 8 that you're not qualified. And, in fact, the statute 9 clearly states that if a temporary license is not 10 granted, the applicant is entitled to a hearing on the 11 issue of qualifications. So there's an actual hearing 12 to say, here's -- maybe you should have been granted a 13 temporary license, maybe you shouldn't have, but it's 14 based on, and only on, qualifications. 15 And, again, I think we clearly 16 meet the qualifications. We've met them three years 17 in a row. Nothing has changed with our company. So, 18 to me, it's very clear that we have two separate 19 things. And, logic would tell you that we've gone 20 through this process. I've spent seven or eight 21 months now trying to get an agreement in place. I've 22 gone through everything requested by the Commission. 23 It's mediation. I applied to Virginia for mediation. 24 It's another meeting. I've applied to Virginia for 25 another meeting. CRANE-SNEAD & ASSOCIATES, INC. 61 1 I've gone through everything asked 2 of our company. We have performed all of our 3 obligations under the statute. We've paid the set 4 amount by Commission. We are operating under a 5 temporary license. We've done everything possible to 6 continue to operate in Virginia. 7 We have an expectation that we 8 would continue to operate in the Commonwealth of 9 Virginia through this year and indefinitely. And I 10 would hope the Commission hopes and wants us to do 11 that. But, again, I think it gets down to what this 12 is intended to do. And clearly we've done everything 13 possible to operate in the Commonwealth of Virginia. 14 At some point, we're already back into another license 15 period. And, if we've gone through this much time and 16 effort of trying to reach an agreement, at some point, 17 the Commission probably grows tired of this. I'm 18 certainly growing tired of trying to deal with this 19 issue. And, at some point, the Commission is going to 20 say, you know what, let's take a break. Here's your 21 rate for next year. Just go and operate. 22 But continuing to spend time and 23 time again, when a party does not want to strike an 24 agreement with you, takes us, you know, out of being 25 able to operate, and that's not the intention of the CRANE-SNEAD & ASSOCIATES, INC. 62 1 temporary license process. It's basically recognized 2 that you have gone through enough. You have gone 3 through this month after a month. You've gone through 4 mediation. You've gone through this meeting. And, at 5 some point, we're going to give you a little bit of a 6 break. You know, we're already back into the license 7 process again by the time this temporary license has 8 ran out. 9 And, so, that temporary license is 10 for this first year. It is the average rate. And 11 then we have a rate set for us the next year. So 12 we've already gone through this process and we're, at 13 least, exonerated for a year of having to go through a 14 full year of fighting with someone. 15 CHAIRMAN BURNETT: Thank you. 16 MR. BLACKWELL: Thank you. 17 CHAIRMAN BURNETT: Do we have any 18 members of the public or other interested party that 19 would be interested in commenting? We have some other 20 lawyers in the room, I see, that might be interested 21 in commenting or addressing the Commission in any way 22 on the subject? 23 24 NOTE: (No response.) 25 CRANE-SNEAD & ASSOCIATES, INC. 63 1 CHAIRMAN BURNETT: Seeing none, 2 unless there is further information that we've missed, 3 we will go into closed session. I'll read that notice 4 in a moment. 5 MR. BLACKWELL: I'm sorry. Can I 6 make one other point? 7 CHAIRMAN BURNETT: Certainly, 8 please. 9 MR. BLACKWELL: I apologize for 10 that. But, there was one point that Mr. Petramalo 11 brought up and that was in terms of determining, this 12 was the last piece, in determining that best offer 13 rate, I mean clearly he stated on the record, you're 14 not supposed to consider our rate. Just go with their 15 rate. You have no discretion. They're trying to take 16 you away from your discretion and authority and 17 obligations under the statute. And, clearly, this 18 statute is before you today. And the thing is, the 19 statute provides some guidance for the Commission. 20 When it's talking about setting 21 this rate, it says: In doing so, the Commission 22 shall, which, again, means must -- we've cited 23 authority for that -- consider, among other factors, 24 the contractual agreements that other account wagering 25 licensees have with unlimited licensee representatives CRANE-SNEAD & ASSOCIATES, INC. 64 1 of the Recognized Majority Horsemen's Group. 2 So, that's something that you have 3 to take into consideration, these contracts that other 4 providers have and that we were not allowed to get 5 ourselves. So that's something that you have to take 6 into consideration. It doesn't say you have to take 7 into consideration only one offer. It doesn't say you 8 have to take into consideration the statute that's not 9 quite in effect. It gives you guidance in terms of 10 what you're supposed to look at. 11 And, I think if we're both coming 12 to the table looking at the statute, we have some 13 obligations ourselves to keep that in mind when we're 14 presenting our best offers. 15 CHAIRMAN BURNETT: Let me be sure 16 that I'm clear factually, that I think both parties, 17 all parties, agree that neither side's best offer has 18 been put on the table? Is that -- 19 MR. BLACKWELL: That is correct. 20 CHAIRMAN BURNETT: -- is that 21 clear? Is Colonial Downs in agreement with that? 22 MR. WEINBERG: Yes. 23 CHAIRMAN BURNETT: And I heard 24 Mr. Petramalo argue that there isn't any point in best 25 offers at this point, because the -- if there were a CRANE-SNEAD & ASSOCIATES, INC. 65 1 best offer, it would be the statutory rate; is that 2 fair? 3 MR. PETRAMALO: From an investment 4 standpoint, that would be our best offer. The 5 statutory rate -- 10 percent/1 percent. 6 CHAIRMAN BURNETT: All right. 7 Anything? Any further questions, gentlemen? 8 COMMISSIONER MILLER: Just one. 9 CHAIRMAN BURNETT: Mr. Miller? 10 COMMISSIONER MILLER: I'm asking 11 Frank, Jim, are there now existent ADW licensees, for 12 the record, are there existing ADW licensees with 13 rates set that will go beyond July 1 of 2009, with a 14 rate that is contrary to the statutory rate that's in 15 the new statute? 16 MR. WEINBERG: Factually are you 17 asking for a set -- 18 COMMISSIONER MILLER: Yes. Just a 19 fact. 20 MR. WEINBERG: The duration -- 21 let's be clear, the duration of the YouBet and the TVG 22 contract is through the end of the year, and the 23 duration of the Xpress-Bet agreement is through the 24 end of 2012. 25 MR. PETRAMALO: It's a bit CRANE-SNEAD & ASSOCIATES, INC. 66 1 complicated, Commissioner Miller, because you cannot 2 pick up the contract, any one of the contracts that 3 Jim referred to, and point to a paragraph that says 4 the source market fee is "X" percent. Because, under 5 those contracts, the source market fee is a resultant 6 rate after you take into account a bunch of factors. 7 So you can't simply pick it up and say, this is a 8 10 percent contract, this is an 8 percent contract. 9 COMMISSIONER MILLER: But, in any 10 event -- 11 MR. PETRAMALO: They extend beyond 12 July 1. 13 COMMISSIONER MILLER: They extend 14 beyond July 1. 15 MR. PETRAMALO: Yes. 16 COMMISSIONER MILLER: And, they 17 are not in concert with the rates that are mandated by 18 the statute? 19 MR. PETRAMALO: Correct. That's 20 correct. 21 COMMISSIONER MILLER: I mean, the 22 new statute? 23 MR. PETRAMALO: That's correct. 24 MR. WEINBERG: That's correct. 25 But we have not -- I don't want this to create the CRANE-SNEAD & ASSOCIATES, INC. 67 1 impression that we have agreed that they need not be 2 reconciled to the statutory rate. 3 MR. PETRAMALO: That's for another 4 hearing. 5 MR. WEINBERG: Yes, that is a 6 different issue altogether. 7 CHAIRMAN BURNETT: Understood. 8 MR. WEINBERG: Okay. I just 9 wanted to be clear. 10 CHAIRMAN BURNETT: All right. 11 That's not before us today. 12 MR. WEINBERG: It is not. 13 COMMISSIONER MILLER: Just one 14 other question. 15 CHAIRMAN BURNETT: Please. 16 COMMISSIONER MILLER: Do you 17 recognize those ADW licensees with those rates that 18 are contrary to the new statute's provisions? Do you 19 recognize their rights as being substantive 20 contractual rights in existence at the time of the 21 enactment of the statute? 22 MR. WEINBERG: As between the 23 private parties, yes. But, the set of legal issues 24 that we have discussed today, are very different from 25 the legal issues affecting those contracts. CRANE-SNEAD & ASSOCIATES, INC. 68 1 MR. PETRAMALO: I would agree that 2 they are contractual rights. I'm unwilling to state, 3 at this point, whether they are substantial rights 4 within the meaning of the legal principles that we've 5 been talking about. 6 COMMISSIONER MILLER: Okay. Thank 7 you. 8 CHAIRMAN BURNETT: Thank you. 9 Anything further, gentlemen? 10 COMMISSIONER REYNOLDS: I've got 11 one. Maybe this is not appropriate. But, do you 12 anticipate January 1st of having all of the ADWs on 13 the new rates? 14 MR. PETRAMALO: If that question 15 is directed to me, the answer is yes. 16 MR. STEWART: It's like everything 17 else, it depends. 18 MR. WEINBERG: Clearly there will 19 not be contracts for the ADW. They will have expired 20 by the end of this year. So January 1, 2010, is a 21 clean slate, clearly, with respect to those two 22 providers. 23 MR. PETRAMALO: Correct. So when 24 TVG and YouBet come before you in December looking for 25 licenses effective January 1, they will not have to CRANE-SNEAD & ASSOCIATES, INC. 69 1 tender any contractual agreement with the Horsemen's 2 and the racetrack, because that is gone from the 3 statute. They will then be bound, in my opinion, by 4 the statutory 10 percent/1 percent rate. 5 MR. STEWART: But, that being 6 said, that's not to say that when we sit down with 7 them, they might not have something that they wish to 8 offer to us that we'll be willing to compensate them 9 for. 10 MR. PETRAMALO: You're wanting 11 them to pay for ambulance now, is that -- Strike that. 12 Strike that. 13 CHAIRMAN BURNETT: Hold on. Hold 14 on a second. We'll get to that. 15 COMMISSIONER REYNOLDS: You don't 16 get paid for that comment. 17 MR. PETRAMALO: Just a bit of 18 humor. 19 CHAIRMAN BURNETT: All right. 20 It is our intention to go into 21 closed session and accept advice from our counsel, and 22 deliberate as we see fit, which we understand to be 23 permitted under the FOIA requirements. 24 In accordance with the provisions 25 of Section 2.2-37ll(A)(7) of the Code of Virginia, I CRANE-SNEAD & ASSOCIATES, INC. 70 1 move that the Commission go into closed meeting for 2 the purpose of consultation with legal counsel 3 employed or retained by the Commission regarding 4 specific legal matters requiring the provision of 5 legal advice by such counsel, regarding the 6 application for renewal of the temporary advance 7 deposit account wagering licenses of TwinSpires. 8 All in favor, indicate by saying 9 aye. 10 NOTE: (Aye.) 11 12 CHAIRMAN BURNETT: It carries 13 unanimously. We'll go into closed session. We will 14 try to be brief, folks. 15 16 NOTE: At this point, there was a 17 recess at 10:54 a.m. while the Commissioners are in 18 closed session, after which the hearing proceeded at 19 11:49 a.m., viz: 20 21 CHAIRMAN BURNETT: All right. The 22 first order of business, gentlemen, is for me to move 23 our certification. 24 I move the adoption of the 25 following resolution: CRANE-SNEAD & ASSOCIATES, INC. 71 1 Whereas, the Virginia Racing 2 Commission has convened a closed meeting on this date 3 pursuant to an affirmative recorded vote and in 4 accordance with the provisions of The Virginia Freedom 5 of Information Act; and whereas, Section 2.2-3712 of 6 the Code of Virginia requires a certification by this 7 Commission that such closed meeting was conducted in 8 conformity with Virginia law; now, therefore, be it 9 resolved, that the Virginia Racing Commission 10 certifies that, to the best of each member's 11 knowledge, (i) only public business matters lawfully 12 exempted from open meeting requirements under the 13 Virginia Freedom of Information Act and (ii) only such 14 public business matters as were identified in the 15 motion convening the closed meeting were heard, 16 discussed or considered by the Commission in the 17 closed meeting. 18 Roll call vote: Mr. Miller? 19 COMMISSIONER MILLER: Aye. 20 CHAIRMAN BURNETT: Mr. Reynolds? 21 COMMISSIONER REYNOLDS: Aye. 22 CHAIRMAN BURNETT: Mr. Brown? 23 COMMISSIONER BROWN: Aye. 24 CHAIRMAN BURNETT: Mr. Ferguson? 25 COMMISSIONER TRIP FERGUSON: Yes. CRANE-SNEAD & ASSOCIATES, INC. 72 1 CHAIRMAN BURNETT: The chair votes 2 aye. 3 All right. Ladies and gentlemen, 4 we made substantial progress in our deliberations. We 5 have asked our counsel to draft an order and opinion 6 for our review, after due inquiry into a couple of 7 matters, and we are quite hopeful that we will have 8 that order and opinion to you -- Madam Counsel, do you 9 want to predict about how long it will take you to 10 have the order and opinion? 11 MS. DILWORTH: A week. 12 CHAIRMAN BURNETT: About a week. 13 So we hope to do it as promptly as we can. And that 14 will conclude the formal fact-finding hearing. 15 Are there any other matters that 16 any of the parties want to put on the record? 17 18 NOTE: (No response.) 19 20 CHAIRMAN BURNETT: Anything the 21 Commissioners would like to put on the record? 22 23 NOTE: (No response.) 24 25 CHAIRMAN BURNETT: All right. CRANE-SNEAD & ASSOCIATES, INC. 73 1 We'll move into our regular meeting. 2 Mr. Blackwell, thank you for 3 joining us today. 4 MR. BLACKWELL: Thank you. 5 CHAIRMAN BURNETT: We hope to see 6 you again. 7 MR. BLACKWELL: Right. Thank you 8 very much. 9 COMMISSIONER MILLER: All right. 10 You're welcome to stay if you want. 11 MR. BLACKWELL: Appreciate that. 12 13 NOTE: The hearing was concluded 14 at 11:51 a.m. 15 16 17 * * * * * * * * * * * 18 HEARING CONCLUDED. 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC. 74 1 2 3 4 CERTIFICATE OF COURT REPORTER 5 6 I, PATRICIA PRICE WHITE, hereby certify that 7 I was the Court Reporter in the foregoing Formal 8 Fact-Finding Hearing as captioned on Page 1 hereof on 9 the 20th day of May, 2009. 10 I further certify that the foregoing 11 transcript is a true and accurate record of the 12 hearing herein. 13 Given under my hand this 22nd day of May, 14 2009. 15 16 17 18 PATRICIA PRICE WHITE, RPR, CCR 19 20 21 22 23 24 25 CRANE-SNEAD & ASSOCIATES, INC.