AGO Opinion 97001
Qualification of Horsemen's Benevolent and Protective Association to Conduct Licensed Horseracing in Nebraska
DATE: January 6, 1997
SUBJECT: Qualification of Horsemen's Benevolent and
Protective Association to Conduct Licensed
Horseracing in Nebraska.
REQUESTED BY: Senator Stan Schellpeper
Nebraska State Legislature
WRITTEN BY: Don Stenberg, Attorney General
L. Jay Bartel, Assistant Attorney General
You have requested our opinion on several questions concerning
the qualification of the Horsemen's Benevolent and Protective
Association ["HBPA"] to conduct licensed horseracing in Nebraska.
You state that the Nebraska State Racing Commission ["Commission"]
is to consider an application by the HBPA for a license to conduct
a live thoroughbred horse race meeting at Fonner Park in 1997.
Your questions concern whether the granting of such a license to
the HPBA is consistent with various existing statutes governing the
conduct of race meetings. If we conclude that it is not, you
indicate that you may consider amendatory legislation to address
the questions presented.
Initially, you direct our attention to Neb. Rev. Stat. § 2-
1204 (1991), which sets forth the requirements for applicants
seeking a license to conduct horseracing in Nebraska. Section 2-
1204 provides, in part:
The State Board of Agriculture, or any county society for
the improvement of agriculture organized under section 2-
201 or 2-221, or any corporation or association of
persons organized and carried on for civic purposes, or
which conducts a livestock exposition for the promotion
of the livestock or horse-breeding industries of the
state, and which does not permit its members to derive
personal profit from its activities by way of dividends
or otherwise, may apply to the State Racing Commission
for a license to conduct horseracing at a designated
place within the state. (emphasis added).
Your question is, assuming the HBPA is organized as a
nonprofit entity, "does the fact that its members win purses which
are generated through its activities violate the provision of this
statute which forbids permitting the members of the organization
from deriving personal profit from its activities?"
A fundamental principle of statutory construction is to
attempt to ascertain legislative intent and to give effect to that
intent. County of Lancaster v. Maser, 224 Neb. 566, 400 N.W.2d 238
(1987). A statute should be interpreted in such a manner as to
give effect to the purpose and intent of the legislature as
ascertained from the entire language of the statute in its plain
and ordinary sense. NC+ Hybrids v. Growers Seed Ass'n, 219 Neb.
296, 363 N.W.2d 362 (1985).
An examination of the language of § 2-1204 reveals that the
Legislature intended to limit the type of entities which could
obtain licenses to conduct horseracing to the following: (1) The
State Board of Agriculture; (2) A county society for the
improvement of agriculture organized under § 2-201 (county
agricultural society) or § 2-221 (county fair); (3) A corporation
or organization organized and carried on for civic purposes; or
(4) a corporation or association which conducts a livestock
exposition for the promotion of the livestock and horse-breeding
industries in the state. With respect to these last two classes of
entities (corporations or associations organized and carried on for
civic purposes, or corporations or associations which conduct
livestock or horse-breeding expositions), the Legislature added a
further requirement. An entity of this type may be licensed to
conduct horseracing only if its members are not permitted "to
derive personal profit from its activities by way of dividends or
otherwise,. . . ."
The prohibition against an entity of this nature obtaining a
license if its members derive "personal profit" from its activities
"by way or dividends or otherwise" appears to be intended to ensure
that only entities which are "non-profit" in nature are licensed by
the Commission to conduct horseracing. The term "dividend", in its
usual and ordinary sense, refers to a distribution of earnings or
profits to shareholders out of or attributable to a corporation's
earnings or profits. Cohen v. Dept. of Revenue, 197 Colo. 385, 593
P.2d 957, 960 (1979); see also Wright v. United States, 482 F.2d
600, 604 (8th Cir. 1973) (Dividend is "a pro rata distribution out
of corporate earnings and profits."). The payment of dividends is,
of course, associated with "for-profit" corporations; "non-profit"
corporations, by definition, are corporations "no part of the
income of which is distributable to its members, directors, or
officers." Black's Law Dictionary 953 (5th ed. 1979).
Section 2-1204 not only prohibits personal profit by members
through the receipt of "dividends", but expands on the prohibition
by precluding personal profit "by way of dividends or otherwise. "
(emphasis added). While this language is susceptible of a broad
interpretation, it appears that, in the context used, it is meant
to prohibit direct monetary gain to members of corporations or
associations seeking a license to conduct horseracing. This
construction is consistent with the common understanding of a non-
profit corporation as one which hinges on "whether the corporation
is being exploited for direct monetary gain." People ex rel.
Meiresonne v. Arnold, 37 Colo. App. 414, 553 P.2d 79, 81 (1976).
Moreover, it seems to comport with the Legislature's intent to
prohibit members from receiving direct financial gain amounting to
"personal profit." Cf. In re Donald Sheldon & Co., Inc., 186 B.R.
364, 369 (S.D.N.Y. 1995) (Holding that, under New York law,
"personal profit or advantage" under illegal personal gain
exclusion in officers' and directors' liability policy required
existence of "direct benefit" to officers.).
In light of the foregoing, we cannot say that the HBPA, as a
non-profit entity, is definitely precluded from obtaining a license
under § 2-1204 because its members may benefit from purses awarded
at licensed horserace meetings. The potential for members to
receive such purse monies constitutes an indirect, contingent
financial benefit which does not appear to fall within the
prohibition against direct financial gain to members in § 2-1204.
As there is, however, some uncertainty concerning the HBPA's
qualification for a license under § 2-1204, you may wish to propose
amendatory legislation addressing this issue.
You next direct our attention to Neb. Rev. Stat. § 2-1205
(1991), which provides, in part:
No license [to conduct horse racing] shall be granted to
any corporation or association except upon the express
condition that it shall not, by any lease, contract,
understanding, or arrangement of whatever kind or nature,
grant, assign, or turn over to any person, corporation,
or association the operation or management of any racing
or race meeting licensed under such sections or of the
parimutuel system of wagering described in section 2-1207
or in any manner permit any person, corporation, or
association other than the licensee to have any share,
percentage, or proportion of the money received for
admissions to the racing or race meeting or from the
operation of the parimutuel system; and any violation of
such conditions shall authorize and require the
commission immediately to revoke such license.
Your question is whether "this provision prohibit[s] granting
a license to the horsemen's organization to use the same facilities
which are owned and operated by another organization which has a
license to conduct live racing or simulcasting?"
Based on the facts presented in your request, it is our
understanding that the HBPA is contemplating seeking a license to
conduct a certain number of days of live horse racing in 1997. If
such a license is issued, the HBPA would be the licensee conducting
its own race meet. As such, it would be responsible for the
conduct and operation of the race meeting. While it will no doubt
be necessary for the HBPA to enter into some arrangement for the
lease or use of horseracing facilities to enable it to conduct a
race meeting, this would not be contrary to § 2-1205. Section 2-
1205 prohibits a licensee from assigning an interest in or turning
over the operation and management of the licensee's race meeting to
another person or entity. The lease of such facilities by another
licensee (the HBPA) to allow it to conduct a race meeting does not
amount to an arrangement whereby the licensee has turned over the
operation and management of its race meeting to the HBPA. Rather,
the HBPA will be conducting its own separate, independent, race
meeting. Thus, we do not believe § 2-1205 has any application in
You also ask if there is "a conflict between being prohibited
from permitting any person, corporation or association other than
the licensee from having any share, percentage or proportion of the
money received from the operation of the parimutuel system pursuant
to this section and receiving a share of the parimutuel wagering
for purses pursuant to sections 2-1207.01 and 2-1208.04?"
Neb. Rev. Stat. § 2-1207(2) (Cum. Supp. 1996) requires
licensees to deduct certain amounts from wagers on horse races "to
be used to promote agriculture and horse breeding in Nebraska and
for the support and preservation of horseracing pursuant to section
2-1207.01." Section 2-1207.01 provides, in part, that "[t]he
amount deducted from wagers pursuant to subsection (2) of section
2-1207 may be used to promote agriculture and horsebreeding in
Nebraska and shall be distributed as purse supplements and breeder
and stallion awards for Nebraska-bred horses,. . . ." Neb. Rev.
Stat. § 2-1208.04(1) (Cum. Supp. 1996), requires the withholding of
a portion of gross daily receipts generated from exotic wagers for
placement into the Track Distribution Fund. The Fund is
distributed to racetracks conducting parimutuel wagering on
thoroughbred horseracing "to supplement purses at the track." Neb.
Rev. Stat. § 2-1208.04(2) (Cum. Supp. 1996).
Arguably, a conflict can be seen between the prohibition in §
2-1205 against "any person, corporation, or association other than
the licensee" having "any share, percentage, or proportion of the
money received. . .from the operation of the parimutuel system. .
.", and the provisions of §§ 2-1207.01 and 2-1208.04, requiring the
withholding of receipts from certain wagers to promote agriculture
and horsebreeding through purse supplements or breeder and stallion
awards for Nebraska-bred horses. Even if these provisions were
construed to be conflicting, however, this would not invalidate §§
2-1207.01 and 2-1208.04. "It is a well-established rule that
special provisions of a statute in regard to a particular subject
will prevail over general provisions in the same or other statutes
so far as there is a conflict." Kibbon v. School Dist. of Omaha,
196 Neb. 293, 298-99, 242 N.W.2d 634, 637 (1985). Moreover,
"[w]here general and special provisions of statutes are in
conflict, the general law yields to the special, without regard to
the priority of dates in enacting the same,. . . ." Id. Thus,
even if construed to be conflicting, the special provisions of §§
2-1207.01 and 2-1208.04 requiring the use of a percentage of
certain wagers for specified purposes, would control over the
general language in § 2-1205.
Finally, you note that, pursuant to Neb. Rev. Stat. §§ 2-1243
to 2-1246 (Cum. Supp. 1996), certain rights are granted to
"horseracing industry participants." "Horseracing industry
participant" is defined to "mean an individual who currently holds
a license from the State Racing Commission and who owns, trains,
cares for, or rides horses stabled at a Nebraska-licensed racetrack
for the purposes of horseracing at the live race meeting at such
racetrack." Neb. Rev. Stat. § 2-1244 (Cum. Supp. 1996). Under §
2-1245, horseracing industry participants are entitled to certain
rights, including "reasonable treatment from those licensed to
conduct thoroughbred race meets." Neb. Rev. Stat. § 2-1245(1)
(Cum. Supp. 1996). Your question is as follows:
If the HBPA holds the license to conduct racing, is it in
the same position as any other licensee and therefore
restricted from taking any of the actions outlined in
that section with regard to its membership, or does it
have another relationship because of the fact that its
members are composed of horseracing industry
participants, and, if so, are there potential conflicts
of interest in relation to the statute because of its
position as representative of both the track and the
horseracing industry participant?
If the HBPA is acting as a licensee conducting a horse race
meeting, it is subject to the provisions of § 2-1245 in relation to
horseracing industry participants, to the same extent as any other
licensee. If, as you suggest, this may create potential conflicts
or inconsistencies by virtue of the HBPA's status as a
representative of the horseracing industry on behalf of its
members, you may wish to consider amendatory legislation dealing
with this issue.
Very truly yours,
L. Jay Bartel
Assistant Attorney General
cc: Patrick J. O'Donnell
Clerk of the Legislature
DON STENBERG, Attorney General