FITZGERALD v. MOUNTAIN LAUREL RACING, INC

OPINION OF THE COURT

ROSENN, Circuit Judge.

We are required in this appeal to plunge once again into the murky waters of the state action doctrine underlying a civil rights action brought under 42 U.S.C. § 1983. Specifically, we are asked to determine whether the act of a heavily state regulated private harness racing association in expelling a licensed trainer and driver from its track without a hearing, on the ground that the driver has violated a state harness racing commission rule, is state action for purposes of a section 1983 suit. The district court concluded that state action was present and granted a preliminary injunction enjoining the association from denying the driver access to its racetrack. Fitzgerald v. Mountain Laurel Racing, Inc., 464 F. Supp. 263 (W.D.Pa. 1979). We agree and affirm the order of the district court granting the preliminary injunction.

42 U.S.C. § 1983 provides: "Every person who, under color of any . . . regulation . . . of any State . . ., subjects, or causes to be subjected, any citizen of the United States . . . to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress."

I.

Appellant Mountain Laurel Racing Inc., ("Mountain Laurel") is a private Pennsylvania corporation operated for a profit and licensed by the Pennsylvania State Harness Racing Commission ("Racing Commission") to conduct harness racing in the Common-wealth. Mountain Laurel, in order to conduct harness races, leases The Meadows Race Track, a privately owned facility near Washington, Pennsylvania.

Harness racing, as it is in most states, is a stringently regulated business in Pennsylvania. A private racing association engaged in pari-mutuel wagering, like Mountain Laurel, must be licensed by the State before it may conduct harness races. The officers, and even the stockholders of a private racing association are subject to Commission approval. The State derives substantial tax revenues from harness racing, collecting a percentage of the track's wagering income.

We were informed at oral argument that the State also participates financially by providing funds for the track's "breakage," i. e., the State and the private track split the difference between the computer set odds and the actual mathematical pay-off to the bettors. The State also provides funds for the Pennsylvania Sire Stakes races conducted at various racetracks.

Further, all of the individuals directly engaged in harness racing are state licensed. Drivers, trainers, grooms and owners of horses must be licensed by the Racing Commission before they may pursue harness racing. Racing associations like Mountain Laurel privately employ officials licensed by the State to enforce Racing Commission Rules at the private racetracks. Most notably, the racing associations defray the salaries of racing judges who oversee the conduct of the races and a racing secretary who performs certain administrative duties, specifically fixed by the Racing Commission, including the establishing of standards for horses. Pennsylvania State Harness Racing Commission, Rules and Regulations, Rule 6, § 23 (1977). The presiding judge is charged by the Racing Commission with the task of enforcing the rules and regulations of the Commission, supervising all other licensed race officials, and with rendering daily records to the Commission of the activities and conduct of the race meetings. Id., Rule 6, § 10.

Although the private racing association pays the salaries of the racing judges, they are not employees of the association in an ordinary sense because they apparently perform duties only for the State Harness Racing Commission. The racing secretary, however, appears to perform some functions for both the Racing Commission and the private track.

Appellee William Fitzgerald is a licensed harness racing trainer and driver. At the beginning of the 1978 racing season, Fitzgerald had nine horses under his care to train and drive at the Meadows. Mountain Laurel has a policy by which it privately contracts to provide free stall space at the track to trainers and drivers as long as the horses are run in races and are managed according to the terms of the contract. This "stall agreement" must be first approved by the Racing Commission before it may be used by a racing association. The key provision in the stall agreement is a clause by which Mountain Laurel reserves the unrestricted right to revoke the agreement upon giving the owner or trainer a 72 hour notice to vacate the premises. The stall agreement also contains clauses reserving Mountain Laurel's rights to reject entry or eject from the Meadows individuals considered undesirable by it.

The stall agreement provides in relevant part:

¶ 7 [Mountain Laurel] reserves the unrestricted right to deny any stall space, to revoke this permit, and/or to have any owner or trainer using any stall space or any other facilities at the Meadows vacate the same and to remove all horses, equipment and/or personnel from the premises of the Meadows, or from one assigned barn to another, at any time and for any reason, at the discretion of [Mountain Laurel], within 72 hours after receiving notice to vacate from [Mountain Laurel]. . . .

The stall agreement provides:

¶ 21 [Mountain Laurel] reserves the right to reject any entry.

¶ 22 [Mountain Laurel] may refuse admittance or to eject from the Meadows anyone considered undesirable by it.

Fitzgerald and Mountain Laurel entered into a stall agreement for the 1978 racing season. In March of 1978, Fitzgerald was suspended by the racing judges for "inconsistent driving," an offense under Rule 18, § 5 of the Racing Commission Rules Regulations. The gist of the offense is that the driver is not giving the best performance possible, which detracts from the quality of the race.

Pennsylvania State Harness Racing Commission, Rules and Regulations (1977), Rule 18, § 5 Fraudulent or Unsatisfactory Driving:

(c) In the event

(1) A drive is unsatisfactory due to carelessness or indifference, or

(2) is being raced in an inconsistent manner compared to an established pattern of prior performances, and the judges believe that there is no fraud, they may forthwith impose a penalty.

In August of 1978, Mountain Laurel suspected Fitzgerald of again engaging in inconsistent driving. On August 19, 1978, Mountain Laurel's management met with the racing secretary and the presiding racing judge. The racing officials confirmed management's impression that Fitzgerald was indeed engaging in inconsistent driving. Mountain Laurel decided to exercise its 72-hour option to vacate in the stall agreement and notified Fitzgerald to remove his horses from the track. The decision to exercise the option was conveyed to Fitzgerald later in the day in the presence of the racing judges by Kenneth Marshall, the racing secretary.

Fitzgerald instituted a lawsuit under 42 U.S.C. § 1983 on August 24, 1978, against Mountain Laurel, Kenneth Marshall, the track racing secretary, and John Knight, the track presiding judge, alleging that the defendants had denied him due process of law in violation of the fourteenth amendment. Fitzgerald sought immediate as well as permanent injunctive relief to restrain the defendants from denying him access to the Meadows. The court treated the complaint as a request for a temporary restraining order under Fed.R.Civ.P. 65(b) and a preliminary injunction under Fed.R.Civ.P. 65(a). The court denied issuance of a temporary restraining order on August 24, 1978. On August 28, 1978, a hearing was held on the motion for a preliminary injunction at which time Mountain Laurel moved to dismiss the complaint on the ground, inter alia, that the state action prerequisite to the maintenance of a section 1983 action was lacking.

Mountain Laurel contended that its decision to exercise the 72-hour order to vacate in the stall agreement was a purely private act devoid of state involvement. The district judge disagreed, finding a sufficient connection between the State's involvement in harness racing and the challenged conduct to warrant a finding of state action under Jackson v. Metropolitan Edison Company, 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974). The district court granted Fitzgerald's motion for a preliminary injunction on August 31, 1978, enjoining Mountain Laurel from denying Fitzgerald "the right to stall horses, drive horses, train horses, and make other use of the facilities." Mountain Laurel thereafter filed a motion to invoke disciplinary procedures under the Rules and Regulations of the Racing Commission, proposing to afford Fitzgerald a hearing thereunder. The district court denied this motion on September 7, 1978. Mountain Laurel appeals from both the issuance of the preliminary injunction and the denial of its motion to invoke Racing Commission procedures.

This Court has jurisdiction over the appeal from the order granting the preliminary injunction by virtue of 28 U.S.C. § 1292(a)(1). Jurisdiction over the denial of the motion to invoke Racing Commission procedures is proper under 28 U.S.C. § 1292(a)(1) because the motion sought modification of the preliminary injunction.

II.

At the outset, we are presented with the possibility that this controversy is now moot. Fitzgerald did return to the Meadows after the grant of the injunction and he continued to train and race horses there until the close of the racing season in November 1978. At that time, Fitzgerald voluntarily left the track and there is no indication that he has returned.

We believe that the dispute between the parties is still alive. The preliminary injunction issued by the district court was not limited to the duration of the 1978 season. Under the protective aegis of the injunction, Fitzgerald could return to the Meadows at any time and demand that Mountain Laurel permit him to train and race horses there. It is an accepted legal principle that a controversy is not moot when it is "capable of repetition, yet evading review." Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 514-15, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911); Moreland v. W. P. I. A. L., 572 F.2d 121, 123 n.1 (3d Cir. 1978). In the present case, were we to dismiss this appeal as moot and should Fitzgerald return to the Meadows to train and race horses, the controversy would be revived and Mountain Laurel would have to seek review de novo. We believe, therefore, that this case fits the "capable of repetition, yet evading review" exception to the mootness doctrine. Accordingly, we proceed to the merits of this appeal.

III.

The core of this lawsuit is whether or not Mountain Laurel's eviction of Fitzgerald from the Meadows constituted state action sufficient to establish a jurisdictional basis for a section 1983 suit. The answer to this question turns on the precise nature of the State's relationship to Mountain Laurel in the factual context of this case.

Our starting point for an analysis of state action is Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). There, the Court found state action present in a racial discrimination case brought against a privately owned restaurant operated in a publicly owned and state subsidized parking garage. The test announced in Burton was simply that when the State has not clearly directed the private act of discrimination but where the private enterprise has a "symbiotic" relationship with the State, state action is present. The Court held:

The State has so far insinuated itself into a position of interdependence with [the restaurant] that it must be recognized as a joint participant in the challenged activity, which, on that account, cannot be considered to have been so "purely private" as to fall without the scope of the Fourteenth Amendment.

Id. at 725, 81 S.Ct. at 862. The Court, however, cautioned that "[o]nly by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Id. at 722, 81 S.Ct. at 860.

The limits of the Burton symbiotic relationship test were subsequently explored in Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S.Ct. 1965, 32 L.Ed.2d 627 (1972), in which the Court found no state action present in racial discrimination by a private club regulated by the Pennsylvania Liquor Control Board. The Court noted that the symbiotic relationship between state and private enterprise found in Burton was lacking in this case inasmuch as the Moose Lodge was a private social club operating in a private building. Id. at 175, 92 S.Ct. 1965. Despite the pervasive nature of the regulations of private clubs by the State Liquor Control Board, the Court held that "[h]owever detailed this type of regulation may be in some particulars, it cannot be said to in any way foster or encourage racial discrimination. Nor can it be said to make the State in any realistic sense a partner or even a joint venturer in the club's enterprise." Id. at 176-77, 92 S.Ct. at 1973. The Moose Lodge case therefore stands for the basic principle that heavy state regulation of a private entity does not necessarily give rise to a Burton symbiotic relationship so as to warrant a finding of state action "within the ambit of the Equal Protection Clause of the Fourteenth Amendment." Id. at 177, 92 S.Ct. at 1973.

The Supreme Court, however, continued to explore the relationship between extensively state regulated private enterprises and the commission of allegedly unconstitutional acts by them in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 447 (1974). That case involved a heavily regulated but privately owned utility company, which discontinued service to a customer without a hearing after she failed to pay her utility bills. The termination of service without a hearing did not constitute state action in violation of the fourteenth amendment. The Court held that "the inquiry must be whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself." Id. at 351, 95 S.Ct. at 453. The Court further held that:

Approval by a state utility commission of such a [termination] request from a regulated utility, where the commission has not put its own weight on the side of the proposed practice by ordering it, does not transmute a practice initiated by the utility and approved by the commission into "state action."

Id. at 357, 95 S.Ct. at 456. The "close nexus" test of Jackson posits that the State must be intimately involved in the challenged private conduct before that conduct becomes attributable to the State for purposes of a section 1983 action alleging a violation of the Due Process Clause of the fourteenth amendment.

There was some question after Jackson whether the "close nexus" test of that decision totally superseded the "symbiotic relationship" test of Burton. This Circuit concluded that Burton is still viable. Judge Adams in Braden v. University of Pittsburgh (Braden II), 552 F.2d 948, 958 (1977) (footnote omitted) explained:

The Supreme Court in Jackson, supra, 419 U.S. at 357, 95 S.Ct. 449, 42 L.Ed.2d 447, also discussed "the symbiotic relationship presented in Burton v. Wilmington Parking Authority, 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961)" and seemingly left it intact.

It may be that only in the absence of an inextricably-linked relationship between the state and a private entity does the "close nexus" test of Jackson come into play. Where a private enterprise stands, in its operations, as a veritable partner with the state, then it seems proper to hold such enterprise subject to the same constitutional requirements to which the state is accountable. But the situation may be otherwise where no pervasive state-private relationship exists. For without such an arrangement, there would be no basis for holding a private entity to constitutional strictures, unless the state is closely involved in the very activity challenged by a litigant.

Thus, it is possible that a symbiotic relationship between state and private enterprise could give rise to state action, or in the absence of such a relationship, state action still might be found if "the state is closely involved in the very activity challenged." Id.

IV.

The key facts of this case involve the narrow circumstances under which Mountain Laurel exercised its right to expel Fitzgerald under the terms of the stall agreement. The impetus for Fitzgerald's expulsion came from Mountain Laurel's renewed suspicion that Fitzgerald was engaging in "inconsistent driving," a violation of Racing Commission Rules for which he had been recently disciplined by the Commission. It is undisputed that prior to exercising its rights under the stall agreement, Mountain Laurel's management met with the presiding racing judge and racing secretary who confirmed the allegations of inconsistent driving against Fitzgerald. Plainly, the racing judges possessed delegated authority from the Commonwealth of Pennsylvania to discipline Fitzgerald for inconsistent driving following a hearing under the Racing Commission Rules. Yet no decision to suspend Fitzgerald was made at Mountain Laurel's meeting with the racing officials. Rather, from that meeting emanated Mountain Laurel's decision to evict Fitzgerald under the option to vacate in the stall agreement. The decision to evict Fitzgerald was communicated to him by the racing secretary, allegedly acting solely in his capacity as a representative of management, in the presence of the racing judges. These crucial facts provide the predicate to which we must apply the Supreme Court's pronouncements on state action to determine if state action is present.

Fitzgerald vigorously asserts that the very interrelationship of the State with private racing associations constitutes a "symbiotic relationship" like that involved in Burton and affords him the protective embrace of the fourteenth amendment. Although Mountain Laurel is a private corporation, Fitzgerald points to Pennsylvania's extensive regulation of racing operations requiring that track management and racing participants be licensed. Furthermore, Pennsylvania through its Racing Commission delegates significant authority to racing officials who, although privately employed by the racing association, nevertheless have broad authorization from the State to enforce Racing Commission Rules. Pennsylvania also has a substantial financial interest in harness racing inasmuch as it collects tax revenues from the racing associations. Fitzgerald accordingly concludes that harness racing is essentially a joint venture between state and private enterprise in Pennsylvania and that a Burton symbiotic relationship is present.

Mountain Laurel responds by analogizing the harness racing business to the heavily regulated businesses in Moose Lodge and Jackson in which no state action was found. Like Moose Lodge No. 107, Mountain Laurel is a privately owned entity operating on private property. Heavy regulation by the Racing Commission, like the Liquor Control Board in Moose Lodge and the Public Utility Commission in Jackson, is insufficient to establish a symbiotic relationship between the State and Mountain Laurel under Burton unless the regulation is so pervasive as to make Mountain Laurel's activities a joint venture with the State.

Mountain Laurel depends strongly on a Fifth Circuit case, Fulton v. Hecht, 545 F.2d 540 (5th Cir.), cert. denied, 430 U.S. 984, 97 S.Ct. 1682, 52 L.Ed.2d 379 (1977) for the proposition that no symbiotic relationship exists between the State and a private racing association. That case rejected the contention that a symbiotic relationship existed between the State of Florida and a private dog racing club despite extensive state regulation, sharing of dog racing revenues and state auditing of the racetrack books. The kennel club in Fulton was, like Mountain Laurel, a private corporation. The club refused to renew a booking contract of a dog racer, who then sued under section 1983 to enjoin that act. The Fifth Circuit held:

We think the dog racing industry can be analogized to the public utility situation. Because of the very nature of the industry, it must be regulated to protect the public. Even though the regulation might be extensive, it cannot, in any realistic sense, make the State a partner in the endeavors of the Kennel Club.

Id. at 542 (emphasis in original).

The Fifth Circuit emphasized that the kennel club was not a lessee of public property and that the financial benefits accruing to the State did not automatically convert private acts into state action. Id. at 542-43.

We agree with the Fifth Circuit that the State's relationship to the heavily regulated racing industry is not sufficient to establish a symbiotic relationship under Burton. Although we agree with the district court in this case that the State's relationship with Mountain Laurel is "decidedly more symbiotic" than the State's relationship with the public utility in Jackson, we do not think the relationship is one which makes the State a joint venturer with Mountain Laurel. We cannot say that every act of Mountain Laurel is an act of the State. We therefore reject Fitzgerald's claim of state action under Burton.

This does not end our inquiry, however, because as Judge Adams stated in Braden II, there may be a close nexus between the State and the challenged private action sufficient to warrant a finding of state action under Jackson, even if a Burton symbiotic relationship is absent. We must therefore turn our analysis toward the nature and extent of the State's involvement in the expulsion of Fitzgerald under the stall agreement.

To establish the presence of state action under Jackson, Fitzgerald must show a sufficiently close nexus between the State's participation in harness racing and Mountain Laurel's act of expelling him so that Mountain Laurel's act "may be fairly treated as that of the State itself." Jackson, supra, 419 U.S. at 351, 95 S.Ct. at 453. The key issue under Jackson is whether the State participated in the challenged conduct itself by "putting its weight" behind the challenged activity. Without such intimate involvement by the State in the private act, there is an insufficient nexus between state and private activity to warrant a finding of state action.

Mountain Laurel vigorously asserts that its act of expelling Fitzgerald derived solely from its common law property rights as a lessor to expel Fitzgerald under the terms of the stall agreement. Fitzgerald had been suspected of violating Racing Commission Rules prohibiting inconsistent driving. Management's confirmation of this suspicion at a meeting with State racing officials before expelling Fitzgerald does not, it asserts, transmute a private act into state action because it had the independent authority to expel Fitzgerald for any reason under the terms of the stall agreement. Mountain Laurel in essence posits two independent, concurrent spheres of disciplinary authority over individuals like Fitzgerald. On the one hand, the State delegates powers to racing officials to impose sanctions on drivers who do not comport with Commission Rules; on the other hand, a private racing association possesses common law property rights to exclude or expel any individual it considers undesirable. The key difference is that the State must provide a hearing comporting with the strictures of the Due Process Clause of the fourteenth amendment; a private association is under no such compulsion.

There can be little doubt that a private racing association like Mountain Laurel does possess private property rights. Martin v. Monmouth Park Jockey Club, 145 F. Supp. 439 (D.N.J. 1956), aff'd, 242 F.2d 344 (3d Cir. 1957) (track may exclude a licensed jockey from racing at the track). Mountain Laurel's position is that its private property rights are broad enough to sanction exclusion of Fitzgerald even though it was the violation of Racing Commission Rules that triggered the exercise of those rights. Such an interpretation of the facts, however, ignores the pervasive presence and authority of the State in participating in Fitzgerald's summary expulsion.

In fact, Pennsylvania's legislation regulating parimutuel thoroughbred horse racing activities in the State and the corporations engaged therein, specifically provides that any association licensed by the Commission "may refuse admission to and eject from the enclosure of the race track . . . any person" except for racial or other discriminatory reasons. Pa.Stat. Ann. tit. 15 § 2662.1(b) (Purdon Supp. 1978-79). Relying on statutory language empowering the State Horse Racing Commission or a racing association to deny or eject any person whose presence "in the sole judgment of the State Horse Racing Commission" is deemed detrimental to the best interests of racing, Pennsylvania's Commonwealth Court has held that the common law right of a race track to expel a patron without cause and without a hearing is abolished. Rockwell v. Pennsylvania state Horse Racing Commission, 15 Pa.Cmwlth. 348, 327 A.2d 211, 213 (1974). Asserting that the language of the thoroughbred horse racing statute is similar to the Harness Racing Act cited by the district court in this case, Pa.Stat.Ann. tit. 15 § 2610.1 (Purdon Supp. 1978-79), Fitzgerald argues that common law property rights of harness racing associations to evict persons have been eroded by the decision in Rockwell. Rockwell is helpful to Fitzgerald only to the extent that both statutes restrict private property rights by requiring a hearing in the event of an eviction of a licensed employee for conduct detrimental to the best interests of racing. Pa.Stat.Ann. tit. 15 §§ 2662.1(c); 2610.1 (Purdon Supp. 1978-79).

The district court specifically found:

[P]laintiff was suspended and evicted for allegedly violating a rule of the Pennsylvania State Harness Commission, an agency of the Commonwealth of Pennsylvania, that the defendants were specifically authorized by the state to enforce this rule, and that the asserted concurrent basis of private authority neither attenuates nor mitigates these facts.

464 F. Supp. at 268.

The district court further noted that the rental of stall space was not a prerequisite to driving and training horses at the Meadows. Nonetheless, Mountain Laurel's act of expelling Fitzgerald from the stall space had the extreme effect of barring him from any activity at the track. Thus, the district court found that Fitzgerald's eviction "went far beyond a simple eviction from rented space." Id. Indeed, the gravamen of Fitzgerald's complaint centers not on the denial of stall space but on the effect of the expulsion which prevents him from training and driving horses at the Meadows. Complaint ¶ 21. Mountain Laurel argues that there is neither an allegation nor an indication of any evidence that the State participated directly or indirectly in the demand that plaintiff leave the racetrack premises. We disagree.

Drivers could race horses at the track without entering into any stall agreement. The district court observed that "[t]he parties agreed . . . that rental of stall space was not a prerequisite to driving and training horses at the Meadows and that many active drivers and trainers there keep their horses at stalls not controlled by Mountain Laurel." 464 F. Supp. at 268 (original emphasis). We find nothing in the record, however, to support this observation as to trainers.

The cross-examination of Kenneth Marshall, the racing secretary, supports the finding of the district court that Fitzgerald was expelled for the violation of a Racing Commission rule:

Q. So that you were not expelling him for the reason that he was a person who was undesirable under that statute or rule but only for management's reasons of wanting him off the track?

A. No. I think while we were at the meeting that day in the morning that certainly these rules and regulations were discussed in that meeting, and these rules and regulations had the basis of our action, yes.

Q. So that in essence what you are saying is that because of powers conferred upon you or for violations of the rules, you were expelling him?

A. Yes, sir.

MR. HERSHEY: Your Honor, I don't think that last question accurately reflects the witness' testimony.

THE COURT: But his answer did.

Record at 109.

The findings of the district court manifest a close nexus between Pennsylvania's interest in regulating harness racing and Mountain Laurel's act of evicting Fitzgerald under the delegated authority to Racing Commission officials sufficient to establish the presence of state action under Jackson. Mountain Laurel may indeed possess common law property rights to evict for any reason whatsoever an individual from its track, but in this case, whatever private rights were exerted were specifically linked to the enforcement of Racing Commission Rules. Moreover, the district court found that Fitzgerald was suspended because "defendants felt that he had violated Commission Rule 18 § 5(c)(2) dealing with inconsistent driving." 464 F. Supp. at 268. The sequence of events is crucial. Mountain Laurel's eviction of Fitzgerald came only after a meeting with the racing officials who confirmed the renewed allegations of inconsistent driving. Although the racing officials' salaries are paid by Mountain Laurel, it is undisputed that in rendering their opinion of Fitzgerald's conduct, they were acting pursuant to their delegated authority from the State to oversee the conduct of the races. Thus, Mountain Laurel's argument that two independent concurrent spheres of authority exist and that it acted solely in its private capacity, breaks down in light of the realities of the expulsion. As the district court noted, the defendants although claiming to have acted under a contractual right to evict from the rented stall, cited a Commission Rule violation when they acted and "went far beyond a simple eviction from rented space." Id. The racing association was not empowered by the rule or statute to enforce the Commission Rules.

Mountain Laurel protests that the State had no authority to enforce the terms of the stall agreement and that the State did not "put its weight" behind the eviction. Mountain Laurel's argument misses the critical features of this case: the presiding racing judge and racing secretary, acting in their official capacities, participated in the decision to expel Fitzgerald. In so doing, the racing officials "put their weight" behind the challenged expulsion by telling Mountain Laurel that Fitzgerald was violating Commission Rules and by approving the ensuing expulsion.

The dissent characterizes the judge's and secretary's activities as "consultations." We believe this conduct amounted to considerably more than mere consultations. See n. 11 supra. Furthermore, Kenneth Marshall, the racing secretary, admitted on direct examination that he told Fitzgerald that:

Mr. Knight [the presiding judge] and myself and management had met earlier in the day and that based upon three incidents one being a penalty that happened earlier in the year and secondly, two cases in which, in our opinion, racing officials and judges, seemed to be a reoccurrence of inconsistent racing that management had expressed a concern and felt that it was detrimental to their business; and therefore, had requested that I pass the information along to Mr. Fitzgerald and that they were going to invoke their prerogative as in Paragraph 7 of the stall contract.

Record at 121-22 (emphasis supplied).

In Jackson, the Public Utility Commission's role in the termination of electrical service to the plaintiff was simply that it had approved a general practice authorizing termination under Metropolitan Edison's general tariff. 419 U.S. at 348, 95 S.Ct. 449. There was no other evidence of Commission participation in the termination of the plaintiff's electrical service. The Supreme Court appropriately concluded that the relationship of the Commission to the challenged act was too remote to transmute the private act into state action. In the present case, however, the State did more than merely adopt a regulation prohibiting inconsistent driving. Officials of the Racing Commission personally and actively participated in the specific conduct challenged by Fitzgerald. Their opinion as "racing officials and judges" of Fitzgerald's conduct precipitated the ensuing summary expulsion. This is hardly the remote action presented by Jackson. After carefully "sifting facts and weighing circumstances," Burton, supra, 365 U.S. at 722, 81 S.Ct. 856, we conclude that the totality of the circumstances demonstrate that Mountain Laurel's eviction of Fitzgerald must be fairly considered as the disciplinary act of the State.

We do not perceive the Fifth Circuit's holding in Fulton to be inconsistent with a finding of a close nexus in this case. In Fulton, the court declined to find a close nexus in the kennel club's refusal to renew the dog racer's booking contract because the State in no way regulates booking contracts and because the racer failed to show "that the state either directly or indirectly participated in the decision not to renew his contract." 545 F.2d at 543. By contrast, in this case, Pennsylvania must approve the stall agreement before it may be utilized, and Fitzgerald has shown that the racing officials participated in management's decision to expel him. Thus, Fitzgerald has made out a convincing case of state participation in the challenged activity.

The dissent focuses upon the State's approval of the stall agreement as the critical issue under the close nexus test. Dissent at 605 n. 4. The State does approve the general terms of the stall agreement before it can be used. The dissent, however, asserts that pro forma approval of the stall agreement by the Racing Commission is insufficient by itself to establish a close nexus under Jackson. We do not disagree on this point. We agree if the State's participation were limited to a pro forma approval of the stall agreement, there conceivably would be no close nexus under Jackson. However, there is considerably more here to constitute state action.
The dissent distinguishes this case from Public Utilities Commission v. Pollak, 342 U.S. 451, 72 S.Ct. 813, 96 L.Ed. 1068 (1952) in which the District of Columbia Public Utilities Commission's specific approval of the playing of radio programs on privately owned and operated streetcars and buses was held to be sufficient governmental action to allow first and fifth amendment claims to be brought. Id. at 462. But here, perhaps more than in Pollak, the Commission directly participated in the private conduct through the racing officials' meeting with management and by their activity in the decision to expel. We emphasize that it is the participation in the challenged activity which is the critical factor in establishing state action, and not the mere state approval of the stall agreement.

We wish to emphasize that not every private act of a racing association like Mountain Laurel will be considered to be state action. The dissent expresses considerable concern over potential restrictions on private management's ability to expel or fire an undesirable employee. It illustrates this concern with two examples of extensively regulated businesses, the one a commercial bank discharging an officer for misapplication of bank funds, a statutory violation, and the other a gambling casino discharging an employee for misconduct. In each instance, the employer has acted after conversations presumably with state investigators. The dissent interprets our holding as requiring that such an act be considered state action. However, the facts and the issue in the examples differ from the present case.

Mountain Laurel conceivably may have private property rights to expel an individual like Fitzgerald because it suspects a violation of Commission Rules which renders such an individual an undesirable participant in the track's races. We hold today that it is only when the state officials with delegated authority to enforce state laws or regulations participate with management in the decisional process to expel for a violation of a State Commission Rule is the requisite nexus under Jackson established. The essence of state action is supplied by the presiding judge and racing secretary's meeting with management to analyze Fitzgerald's conduct and officially participating in reaching the decision to expel. In terms of the dissent's analogies, no official possessing delegated state authority participated with management in the decisional process to discharge the employee for misconduct in violation of state law. We perceive no question of a close nexus between state and private action when the private activity, totally independent of any official state participation, results in the discharge of a person for violation of state law.

The district court also found state action present in the State's delegation of authority to hire private security guards who have power to enforce the criminal laws of the State at the private tracks. 464 F. Supp. at 268. We note that this question was expressly left open by the United States Supreme Court in its most recent pronouncement on state action, Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 163-64, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1977). Because the record does not reveal that Fitzgerald was ejected by a private security guard, and because we have already found state action to be present, we need express no opinion on the issue reserved in Flagg Bros.

The dissent is concerned that our decision produces undesirable policy results. We do not so view our holding. Our holding means that state action is implicated when state officials in an extensively regulated industry participate and "put their weight" behind the challenged private act. Had Mountain Laurel acted independently without the racing officials having participated in the expulsion, our decision conceivably might have been different. Had an official of the State Liquor Control Board in Moose Lodge officially participated in the expulsion of Irvis, the patron, for racial reasons, or had a member of the Public Utility Commission in Jackson participated in the termination of electrical service, the courts might have found the requisite close connection between state and private action. Hence, we do not perceive any dire anomalies flowing from our holding today.

V.

Once state action is present, the requirements of due process must be met notwithstanding the concurrence of private action. When the two coalesce because of the exercise of the public power and participation by the State with a private enterprise in the challenged activity, the resultant conduct must be characterized as state action requiring due process.

Even if the requisite state action is present to anchor jurisdictionally Fitzgerald's section 1983 claim for injunctive relief, we still must consider whether the district court properly granted that relief. In order to issue a preliminary injunction, the court must consider and weigh whether:

(1) The plaintiff will suffer irreparable harm if relief is not granted.

(2) The defendant will be harmed if relief is granted.

(3) The public generally will be harmed if relief is granted.

(4) The plaintiff is likely to prevail on the merits of his claim.

Delaware River Port Auth. v. Transamerican Trailer Transport, Inc., 501 F.2d 917, 919-20 (3d Cir. 1974). The district court resolved these factors in favor of the plaintiff and issued the preliminary injunction. The court found: (1) Fitzgerald will suffer irreparable harm because the nature of harness racing is such that no adequate remedy exists at law to compensate him for losses to income and reputation sustained from an unlawful suspension. (2) There is no evidence that Mountain Laurel will be adversely affected if Fitzgerald is allowed to continue racing. (3) There is no evidence that the public will be similarly adversely affected. (4) Fitzgerald established a case of deprivation of due process under the fourteenth amendment.

We agree with the district court that Fitzgerald has established the possibility of irreparable injury "to his business and reputation" from an alleged violation of a Commission Rule implying dishonest racing to warrant a preliminary injunction. The record reveals that Fitzgerald's income was in large part directly related to his ability to race at the Meadows. The eviction had the effect of denying him the right to pursue his license to drive and train horses. In Bell v. Burson, 402 U.S. 535, 539, 91 S.Ct. 1586, 1589, 29 L.Ed.2d 90 (1971), the Supreme Court stated:

Once licenses are issued, . . . their continued possession may become essential in the pursuit of a livelihood. Suspension of issued licenses . . . involves state action that adjudicates important interests of the licensees. In such cases the licenses are not to be taken away without that procedural due process required by the Fourteenth Amendment.

See Whetzler v. Krause, 411 F. Supp. 523, 527 (E.D.Pa. 1976), aff'd, 549 F.2d 797 (3d Cir. 1977). We also agree that this record reveals no evidence of grave harm to Mountain Laurel or the public resulting from Fitzgerald's continued activities at the track. The fourth factor, that of likelihood of success on the merits, is more troublesome and requires an inquiry into whether Fitzgerald properly established a case of unconstitutional deprivation of his right to procedural due process under the fourteenth amendment.

Because we affirm the district court's finding of state action, any jurisdictional impediments raised by Mountain Laurel to Fitzgerald's success on the merits of his section 1983 claim are now rejected.

Mountain Laurel contends that Fitzgerald can show no deprivation of procedural due process because he failed to exhaust administrative remedies available to him. The district court held that no exhaustion of administrative remedies is required in section 1983 suits. U.S. ex rel. Ricketts v. Lightcap, 567 F.2d 1226, 1229 (3d Cir. 1977). 464 F. Supp. at 268-69. Mountain Laurel relies on a footnote in Lightcap acknowledging a line of cases holding that where the plaintiff claims deprivation of property without due process of law, he must first use state processes open to him to redress the alleged deprivation. Id. at 1232 n. 5. Mountain Laurel's reliance on this footnote is misplaced for two reasons. First, the district court significantly found that it was Fitzgerald's liberty interest that was subject to constitutional deprivation. Second, Lightcap expressly declined to consider whether a qualified exhaustion rule should be adopted in this Circuit in cases of alleged deprivation of property rights without due process of law. Id. at 1231-32. When federal jurisdiction is invoked under section 1983 on the ground of fourteenth amendment violations, a plaintiff is not required to first exhaust his remedies elsewhere. Steffel v. Thompson, 415 U.S. 452, 472-73, 94 S.Ct. 1209, 39 L.Ed.2d 505 (1974); Hochman v. Board of Education of City of Newark, 534 F.2d 1094, 1097 (3d Cir. 1976).

Specifically, Mountain Laurel argues that Fitzgerald could have filed a complaint under Rule 26, § 3 of the Racing Commission Rules or filed an appeal to the Harness Racing Commission under Pa.Stat.Ann. tit. 15, § 2610.1 (Purdon Supp. 1978-79).

Even if an appeal under the Commission rules was available from the decision to evict, there is a serious question whether the remedy would have been adequate. The Supreme Court has held, although in another context, that a deprivation of due process at the magisterial level is not constitutionally acceptable because the State offers an impartial adjudication on an appeal and trial de novo in the county court. The plaintiff is "entitled to a neutral and detached judge in the first instance." Ward v. Village of Monroeville, 409 U.S. 57, 61-62, 93 S.Ct. 80, 84, 34 L.Ed.2d 267 (1972).

We must then consider whether Fitzgerald adequately demonstrated the likelihood of a procedural due process violation. The district court, as we have just noted, found that Fitzgerald had a liberty interest in his employment reputation protected by the Due Process Clause of the fourteenth amendment. In addition, Mountain Laurel had officially recognized Fitzgerald's status as a state licensed trainer and driver by allowing him to perform these activities at the track. His summary expulsion significantly altered a "status previously recognized by state law," Paul v. Davis, 424 U.S. 693, 711, 96 S.Ct. 1155, 1165, 47 L.Ed.2d 405 (1976), and denied him the opportunity of earning a livelihood. We, therefore, agree that Fitzgerald has a cognizable liberty interest under the Supreme Court's definition of liberty in Paul v. Davis, supra, and Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972).

Judge Adams expresses concern whether Fitzgerald's liberty interest is implicated in this case. He doubts whether a stigma will be attached to Fitzgerald's business reputation because Mountain Laurel's decision to expel him need not be communicated to the Racing Commission and other racetracks under Commission Rule 23 § 8. We believe, however, that the dissent misreads this Rule which states: "Whenever a person is excluded from a track by an association, the Commission shall be notified. The Commission in turn shall notify all other associations in the Commonwealth of Pennsylvania and may notify the United States Trotting Association." The dissent asserts that there is no indication that Mountain Laurel did report or intended to report Fitzgerald's expulsion to the Commission. However, Mountain Laurel was required to so report, and we believe that it was reasonable for the district court to assume that such a report would be made. For purposes of a preliminary injunction, we believe Fitzgerald has established with a reasonable likelihood an injury to his business reputation. The district court proceeded to consider whether Fitzgerald was accorded due process and concluded that he was not. It noted that due process generally requires a presuspension hearing unless some extenuating private or public interest of overriding significance exists to justify postponement. Boddie v. Connecticut, 401 U.S. 371, 377, 91 S.Ct. 780, 28 L.Ed.2d 113 (1971). The district court concluded that because Fitzgerald was neither given a pre-eviction hearing, nor afforded a post-eviction hearing, his procedural due process rights were violated. Thus, Fitzgerald showed a likelihood of success on the merits of his constitutional claim to warrant preliminary injunctive relief.

The dissent also avers that the complaint does not sufficiently allege damage to Fitzgerald's reputation. Dissent at 610. We believe that the complaint when viewed in the light most favorable to Fitzgerald adequately pleads a liberty interest. Fitzgerald's concern is that Mountain Laurel's actions deprive him of his "right to earn his livelihood." When broadly construed, it implicates his liberty interests. Complaint ¶ 27.
Finally, the dissent contends that no stigma can attach because Fitzgerald has not denied the truth of the charges leveled against him. Dissent at 610. However, there would be little reason to demand a hearing unless Fitzgerald desired to vindicate his reputation for the allegations of inconsistent driving. We believe that the denial of a hearing deprives him of the opportunity to deny the charges and that he has sufficiently shown injury to his business reputation to warrant preliminary injunctive relief.

Fitzgerald was expelled from the track on August 19, 1978, without a hearing. On August 24, he applied for a temporary restraining order which was denied. The district court fixed a hearing on the application for a preliminary injunction on August 28. Although eleven days had elapsed since the expulsion, no posttermination hearing had been proffered to Fitzgerald. Only after the preliminary injunction had been granted did Mountain Laurel make an offer of some form of post-termination hearing. The district court found that offer unacceptable for reasons discussed infra.

The district court's analysis of Fitzgerald's procedural due process claim may have been accurate at the time its opinion was delivered. However, we must reevaluate that analysis in light of the United States Supreme Court's recent decision in Barry v. Barchi, ___ U.S. ___, 99 S.Ct. 2642, 61 L.Ed.2d 365 (1979). In that case, the Court held that a suspended harness racing trainer was not constitutionally entitled to a pre-suspension hearing, although a prompt post-suspension hearing was constitutionally required under the Due Process Clause of the fourteenth amendment. ___ U.S. at ___, 99 S.Ct. 2642. The question then is to what type of hearing would Fitzgerald be entitled under the Court's analysis in Barchi.

Unquestionably, Fitzgerald was given no pre-eviction hearing, but Barchi would under circumstances jeopardizing the integrity of the sport now make such a denial constitutionally permissible. Assuming arguendo that the State's interest in preserving the integrity of the sport required Fitzgerald's immediate suspension, the sole issue then is whether Fitzgerald was afforded a prompt post-eviction hearing. Barchi indicates that a post-suspension hearing must proceed without delay:

In the present posture of this case, we need not decide whether inconsistent driving in Pennsylvania poses such a serious risk to the integrity of harness racing and the public interest to justify immediate suspension without a hearing.

Once suspension has been imposed, the trainer's interest in a speedy resolution of the controversy becomes paramount. . . . We also discern little or no state interest, and the State has suggested none, in an appreciable delay in going forward with a full hearing.

Id. Fitzgerald was offered no prompt post-eviction hearing at the time of his eviction. Once the district court issued the injunction on August 31 prohibiting Fitzgerald's expulsion, Mountain Laurel filed a motion on September 1 to invoke procedures under the Harness Racing Commission Rules and Regulations. In essence, Mountain Laurel then proposed to bring the charge of inconsistent driving before the racing judges, who after notice and a hearing, would decide whether Fitzgerald had violated Racing Commission Rules.

Mountain Laurel did so in order to avoid any possible conflict with the preliminary injunction.

Fitzgerald opposed Mountain Laurel's motion on the ground that he could not get a fair hearing before the same judges who had participated in Mountain Laurel's decision to evict him. Fitzgerald proposed that Mountain Laurel instead commence proceedings under Rule 26 of the Racing Commission Rules by filing a complaint with the Commission. The Commission would then after notice and a hearing determine whether Fitzgerald had violated Commission Rules. At this hearing, Mountain Laurel's judges would only be witnesses and would not adjudicate Fitzgerald's rights. The district court agreed, denying Mountain Laurel's motion, but without prejudice to its institution of procedures under Rule 26. The district court did not reach the issue of the constitutional adequacy of the Racing Commission's post-suspension hearing procedures themselves.

Judge Diamond stated: "I feel that to follow the procedure which you [Mountain Laurel] prescribe now after all that has transpired would make a mockery of what has transpired." Record at 27. The district court was also concerned with the constitutionality of having racing judges act as prosecutor, judge, and jury, but because the constitutionality of the Racing Commission procedures was not directly attacked, it did not reach this issue.

Mountain Laurel claims that the district court's denial of the motion to invoke Racing Commission procedures before the judges was an abuse of discretion. It argues that Fitzgerald would have received due process before the judges who would now be acting solely in their capacity as state officials. Mountain Laurel complains that the district court's action gave Fitzgerald a preferred status at the track, inasmuch as Fitzgerald could not be suspended by the racing judges for the alleged violations of inconsistent driving.

We perceive no abuse of discretion in the district court's order. It is very possible that Fitzgerald could not have received an impartial hearing before Mountain Laurel's judges after their participation in the decision to evict him. On the other hand, the district court left open an untrammeled avenue for a hearing before an impartial tribunal under Rule 26. The incidental preferred status afforded Fitzgerald by the district court's order was due only to Mountain Laurel's inability to afford him an impartial hearing and would last only as long as such a hearing was denied. We therefore affirm the district court's order denying Mountain Laurel's motion without prejudice to it to initiate procedures under Rule 26.

Thus, we cannot say that Fitzgerald was afforded the prompt post-suspension hearing envisioned by Barchi. This is not to say that had Mountain Laurel offered a hearing under Rule 26, that hearing would not have satisfied the requirements of Barchi. We need not reach that issue on the record before us. We hold only that Fitzgerald has adequately shown likelihood of success on his procedural due process claim to merit the issuance of the preliminary injunction.

The dissent is under the impression that the preliminary injunction requires the issuance of a stall agreement to Fitzgerald for future racing seasons, even though rights under the stall agreement were limited to 1978; that it extends beyond a period of time necessary to preserve the status quo ante and unduly burdens Mountain Laurel by "forcing [it] to issue a permit to a person whom it otherwise has the legal right to refuse." Dissent at 611. The order granting the injunction, however, is drawn much more narrowly as to time and is limited to a period "pending the final determination of this action or until further order of this court. . . ." Until the final determination of the rights of the parties in this proceeding, the court has not adjudicated the future rights of the plaintiff to stall, and also to train or drive horses or to make other use of Mountain Laurel's facilities.

Having concluded that the requisite state action for a section 1983 suit was present, and that Fitzgerald has met the essential requirements for issuance of a preliminary injunction, the judgment of the district court is affirmed. Costs taxed against appellant.