The court should grant defendants’ motion to dismiss for failure to state a claim under FRCP 12(b)(6) and dismiss the Negligence claim against Baffert and the Breach of Contract claim against Churchill Downs with prejudice.
A motion to dismiss for failure to state a claim tests the legal or factual sufficiency of a pleading stating a claim for relief. A court can dismiss with prejudice (with leave to replead) or without prejudice (with leave to replead).
A pleading asserting tort and contract claims must comport with FRCP 8(a)(2), requiring a “short and plain statement of the claim showing that the pleader is entitled to relief.” A complaint must provide the defendant with “fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Twombly; Conley. Under Twombly, as affirmed in Iqbal, a complaint must contain sufficient nonconclusory factual matter to raise a right to relief that is “plausible on its face.” It must plead sufficient non-conclusory facts, taken as true, to plausibly suggest an entitlement to relief. Iqbal. The plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal. The allegations must show that relief is more than possible (that the defendant could have engaged in wrongdoing) although it need not be probable (more likely than not the defendant engaged in wrongdoing). Twombly. Labels, “bald” legal conclusions, and formulaic or threadbare recitations of the elements of a claim are not entitled to a presumption of truth. Iqbal. Non-conclusory allegations accepted as true must identify a real-world transaction or occurrence, describing specific action by specific individuals.
The court examines well-pleaded, non-conclusory facts, taken as true, and
whether they state a plausible claim for relief, given the elements of the
substantive law. Iqbal. This “context-specific task” requires the
“reviewing court to draw on its judicial experience and common sense” to decide
whether the plaintiff has plausibly alleged an entitlement to recovery. Iqbal;
Twombly. A plaintiff sufficiently pleads through direct factual
allegations and through factual allegations permitting reasonable inferences,
drawn in favor of the plaintiff, showing liability. NRA; Iqbal.
A pleading lacks plausibility due to legal insufficiency where the substantive law does not recognize the legal right asserted on the stated facts. A pleading lacks plausibility due to factual insufficient where the plaintiff fails to plead sufficient nonconclusory facts or fails to plead facts going to all elements of the claim.
Defendants show legally deficient claims as to harm and damages.
Breach of Contact Claim v. Churchill Downs
Plaintiffs in a breach of contract action must allege and prove recoverable and compensable harm, meaning the loss of something to which they were entitled under a contract, and compensable damages resulting from that harm. Crestwood Farm Bloodstock v. Everest Stables, Inc. (Ky. 2009).
Plaintiffs claim damages from Churchill Downs failure to pay their wagers based on the new official order of finish. Each plaintiff lost his wager based on the original official order of finish with Medina Spirit, in which Mandaloun finished second and Hot Rod Charlie third. (¶¶ 2, 3, 19, 21, 22, 28, 29). Each plaintiff would have won his wager based on the revised official order of finish, in which Mandaloun won and Hot Rod Charlie finished second. (¶¶ 2, 3, 24, 28, 29). But Churchill Downs failed to pay their wagers on the revised order of finish. (¶¶ 27-29). They request relief of “[d]amages in the form of unpaid winning wagers made by plaintiffs based on the new official order of finish in the 2021 Kentucky Derby following the disqualification of Medina Spirit.”
Regulations governing pari-mutuel wagering on horse racing in Kentucky do not recognize this claim. The first posted official order of finish is final for wagering purposes and no subsequent changes or affects the order of finish for wagering purposes. (§4.040(17)-(18)). Although subsequent changes affect the record books and prize money (§ 4.040(19)-(20)), they do not affect pay-outs on wages. Plaintiffs therefore have not suffered compensable harm—the loss of something they were entitled to under the contract (Crestwood)—and cannot recover the damages they seek from the court.
This claim is legally insufficient—substantive law does not recognize their harm or damages. The court should dismiss with prejudice; the law does not allow them to recover wagers based on the revised order of finish and no new or additional facts can correct that defect.
Negligence Claim v. Baffert
To state a claim for negligence under Kentucky law, plaintiff must prove: 1) the defendants owed the plaintiffs a duty of care; (2) the defendants breached that duty; (3) causation; and (4) damages, i.e., that the plaintiffs suffered an actual and compensable injury or harm. Gonzalez v. Johnson (Ky. 2019).
Plaintiffs’ negligence claim fails for the same reason as their breach of contract claim. They clam an injury from not winning their wagers based on the results of a race without Medina Spirit—had Baffert not negligently entered Medina Spirit, the original official order of finish (on which they wagered) would have reflected the revised official order (on which they would have won). (¶¶ 30-31).
But their damages remain the same as in the Churchill Downs claim—the amount of their wagers under the revised official order of finish, which state law prohibits. The first official order of finish remains official regardless of subsequent changes or disqualification. §4.040(17)-(20). Plaintiffs cannot recover damages on a revised order.
This claim is legally insufficient for the same reason--substantive law does not recognize their injury or measure of damages. The court should dismiss with prejudice; the law does not allow them to recover wagers based on the revised order of finish and no new or additional facts changes that.
