Maryland Officials Act Like They Own the Preakness

Many Kentuckians watching Saturday's fabled run for the roses at Churchill Downs in Louisville probably feel they "own" the great race, the way some New Yorkers feel they "own" Macy's Thanksgiving Day Parade in New York or Indianapolis residents claim the "500."

Of course, these are matters of the heart and culture, not expressions of private property rights. Fans don't own these privately sponsored events no matter how much they are attached to them.

The same is true of the Preakness Stakes two weeks from now. It was named by a Maryland governor, has always been run at Pimlico, and is one of the state's largest public events, even though it is marred by massive drunkenness, lewdness and occasional violence.

Yet in April the legislature passed and the governor signed emergency legislation that will purportedly give the state the power to acquire through eminent domain the Preakness from the Maryland Jockey Club and its bankrupt corporate owner, Magna Entertainment.

The state understandably wants to keep the race, a guaranteed source of both gambling and tourism revenues, and favorable national publicity every year. In fact, according to the company and state analysts, without the Preakness the horse racing industry would be dead in Maryland. On that single day, the owners make up for the losses on the rest of the racing days at both its tracks.

It would be like the city of New York taking over the Thanksgiving Parade and Macy's holiday revenues as well.

Lawyers disagree as to whether the state has any legal right to pre-empt the U.S. bankruptcy court in Delaware overseeing Magna's Chapter 11 filings involving assets across the country. Maryland has already asked that judge to enforce an earlier law saying Maryland has the right of first refusal on any sale of the Preakness. I'm no lawyer, but "the right of first refusal" is generally viewed as a "contractual" right voluntarily agreed to by two parties, not an obligation imposed by the state.

Some believe the bankruptcy judge will take the same view, and hence the need for a bigger club to keep the Preakness in Maryland. In addition to the Preakness itself, the state said its sovereign powers allowed it to seize all of Magna's real estate or personal property, plus any "intangible private property, including any contractual interests or intellectual property," such as copyrights, trademarks and logos.

A power once intended to allow the state to take land from a recalcitrant owner to build a highway or a school has been transformed into a gun to take over what the legislation calls "a sporting event of historical and cultural importance to the State of Maryland that … has significant, positive economic development impact" for the state and the horse racing industry, "preserving the state's stature and quality of life."

Thank you, Magna and Maryland Jockey Club, for hosting such a nice event that produces a lot of money and prestige, but you can't take it away. It's too important for us.

Many people who opposed these broad confiscation powers raised the specter of the Supreme Court's Kelo v. City of New London decision four years ago. Unfortunately, those issues were decided by Maryland's highest court took Kelo's approach sanctioning broad eminent domain authority decades ago.

The Maryland Constitution says the "General Assembly shall enact no law authorizing private property to be taken for public use without just compensation." But "public use" has been broadly interpreted by Maryland judges to include the vaguer "public benefit" or "public purpose." And a 1975 Court of Appeals case specifically found that a county could take a property solely for "enhancing economic growth."

That may be Maryland case law, now sanctioned by the U.S. Supreme Court. But how does that extend to an event that state has regulated and supervised but never owned or operated? And then extend the "taking" beyond the event to all the intangible and intellectual property associated with it? And what might be "just compensation" for a piece of private property with its market value undermined by the state's threat to confiscate it?

There are enough legal issues to have lawyers all over this case like flies. But the state's intervention into the market for these scarce goods under the an "emergency measure … necessary for the immediate preservation of the public health and safety" doesn't give much reassurance to other holders of valuable private property to which the public has grown fondly attached. What if the Baltimore Orioles or Ravens attempted to leave the city, much as the Redskins flew off to nearby Maryland?

Let's try to keep the Preakness and horse racing alive in Maryland, but lets do the same for private property rights.