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Justices asked to accept judicial review case

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A national business group and several state associations want the Indiana Supreme Court to take a case that could impact judicial review of state administrative agency rules, particularly those that may be outside an agency's authority to address.

Seeking to overturn rulings from two lower courts, the four organizations representing thousands of Hoosier businesses and the City of Indianapolis have teamed up on an appeal they say extends beyond this particular case and threatens businesses that are subject to Indiana administrative law and state agency regulation.

Justices are being asked to consider LHT Capital LLC v. Indiana Horse Racing Commission, et al., No. 49A02-0712-CV-1149, which the Court of Appeals decided in an Aug. 7 opinion and addressed again in an October rehearing denial. Those published decisions affirmed Marion Superior Judge Gerald Zore's dismissal of the complaint in favor of the state commission on grounds that LHT didn't exhaust all its administrative remedies when it challenged the commission's rules and regulations.

The case stems from an emergency rule that led to a $9 million fee as part of a deal to sell off a minority interest in Indiana Downs horse racing track in Shelbyville. After lawmakers allowed slot machines at the horse racing casinos, the Indiana Horse Racing Commission, which reviews slot machine licensing, adopted an emergency rule allowing it to impose ownership transfer fees. The commission imposed a $9 million fee on LHT, and the company paid the fee in order to move ahead with the minority ownership transfer before a Nov. 1, 2007, deadline to pay a license fee to add slot machines. But the company objected to the validity of the emergency rule and subsequent fee, which it claimed wasn't authorized by legislators.

Judge Zore and the appellate court both decided that LHT hadn't exhausted its required administrative remedies. But LHT argues that it shouldn't have to exhaust those remedies because the agency can't address constitutional issues, and raising it before those officials would be futile since the regulation is void on its face and beyond the agency's granted powers to address.

The appellate court disagreed, noting that LHT should have raised that issue before the Indiana Horse Racing Commission instead of negotiating a settlement to move the process forward, and that the company could have filed a declaratory judgment action that may have resulted in a different outcome.

A handful of associations and entities - the City of Indianapolis, Indiana Bankers Association, Indiana Health Care Association, Indiana Beverage Alliance, and National Federation of Independent Business Small Business Legal Center - have joined together as amici curiae parties asking the justices to take the case and overturn the trial court's dismissal judgment.

The group isn't suggesting that parties can skip the administrative process and proceed directly to court whenever there may be constitutional issues on the existence or scope of agency authority, the amici brief says. But it wants to ensure judicial review exists for businesses going before those agencies.

In its petition to transfer, LHT's attorney, James Bopp of Terre Haute, argues that the Court of Appeals decision goes against precedent from the state's Supreme Court and that the decision could hurt Hoosier businesses if allowed to stand.

"To uphold the dismissal of this case is to tell Indiana businesses that they better play the State's game of paying whatever 'bribes' are required by unlawful agency rules, or lose their licenses to do business here," the petition states. "Hearings on petitions for licenses or changes in ownership of licenses won't be set until businesses acquiesce to agency demands, and no judicial review is permitted under the rule adopted by the Court of Appeals."

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