NEWS
Court decision leaves NYC OTB settlement issues unresolved
Posted: Tuesday, January 25, 2011 4:44 PM
by Frank Angst
Another bankruptcy in the racing industry has brought another round of settlement issues.
The U.S. Bankruptcy Court for the Southern District of New York ended the bankruptcy case of New York City Off-Track Betting on January 25 without resolving settlement issues involving pari-mutuel wagers at out-of-state tracks.
Churchill Downs Inc. said New York City OTB owes $835,751 in host fees for wagering on its tracks that include Calder Race Course, Churchill Downs, and Fair Grounds. Churchill acknowledged it possesses $477,402 that properly belongs to winning pari-mutuel bettors at New York City OTB outlets. Churchill said the retention of these funds violates state and federal laws but it was not able to return the money because New York City OTB ceased operations on December 10.
Churchill hoped the bankruptcy case would be extended to allow time to file an adversary proceeding regarding these settlement issues.
In recent years, bankruptcy courts have helped resolve settlement issues following bankruptcies at New York Racing Association and Magna Entertainment Corp.
Critics believe these issues only come up in bankruptcies because of the delays between tracks and simulcast partners squaring their books. While winning players typically are paid immediately by their pari-mutuel outlets, the tracks and betting outlets involved typically wait several weeks, or longer, to balance their books. Without the federal bankruptcy court taking action, Churchill will have to pursue the case in state court.
In his 11-page decision, U.S. Bankruptcy Court Judge Martin Glenn ruled all bankruptcy proceedings ended with the December 10 closure of the corporation. The corporation’s reorganization plan ended when the New York Senate failed to approve the plan.
Churchill officials declined further comment on the court’s decision or whether they would continue to pursue litigation through state courts.
The bankruptcy court’s decision also ended a local Teamster Union’s efforts to appoint a trustee to pursue, “hundreds of millions of dollars” for its pension plan and health benefits from New York City OTB. The union, Local 2021, represents 1,027 of the former corporation’s 1,200 employees and hoped to assign a trustee to pursue money it says is owed to its health and pension plans.
The court ruled it could not assign a trustee as that would “resuscitate an essentially ‘dead’ debtor.”
The union argued that in paying state racetracks money during the bankruptcy, New York City OTB also should have been paying the union’s health and pension plans. While the court was sympathetic to the union’s plight, it ruled New York track payments were required by state law but the union was a creditor. Now that the corporation is closed, it has terminated all ties to creditors, like the union.
While the bankruptcy court acknowledged payments to state tracks were required under state law, the court did not make a similar determination that tracks outside the state would have to be paid. Churchill officials believe state and federal laws require out-of-state tracks to be paid.
In December, a New York State Supreme Court judge issued a restraining order requiring New York City, the corporation’s owner, to continue health insurance payments. But this month that court dismissed the restraining order and denied a preliminary motion for relief.
Frank Angst is senior writer for Thoroughbred Times
,751 from New York City OTB and is holding $477,402 owed to that entity’s winning players, is unsure how to proceed because the bankruptcy court halted action on the issue.
In his 11-page decision on two matters involving New York City OTB released on Tuesday, Judge Martin Glenn ruled that all bankruptcy proceedings ended with the December 10 closure of the corporation. He said tracks with settlement issues like Churchill Downs could pursue their cases in state court.
Churchill officials declined to comment further upon the court’s decision or whether they would continue to pursue litigation.
Meanwhile, the court’s decision also ended a local union’s efforts to appoint a trustee to pursue, “hundreds of millions of dollars” for its pension plan and health benefits from New York City Off-Track Betting Corp.
The union, Local 2021 which represents 1,027 of the former corporation’s 1,200 employees, had hoped to assign a trustee to pursue money it says is owed to its health and pension plans. The court ruled it could not assign a trustee as that would “resuscitate an essentially ‘dead’ debtor.”
In December 2009, New York City OTB filed for Chapter 9 relief and, in November 2010, it filed a debt adjustment plan. The New York Senate failed to approve that plan and on December 10, New York City OTB ceased operations. On December 22, the union had asked that a trustee be appointed “to recover hundreds of millions of dollars in payments made by NYC OTB at the direction of the State of New York to the New York tracks.”
The union argued that in paying state racetracks money during the bankruptcy, New York City OTB also should have been paying the union’s health and pension plans. While the court was sympathetic to the union’s plight, the payments made to tracks were required by state law but the union was a creditor. Now that the corporation is closed, it has terminated all ties to creditors, like the union.
While the bankruptcy court acknowledged payments to state tracks were required under state law, the court did not make a similar determination that tracks outside the state would have to be paid. Churchill officials believe that state and federal laws also require out-of-state tracks to be paid.
Frank Angst is senior writer for Thoroughbred Times
