03 March 2015

A Closer Look at the Nationals' Letter

Earlier in February, the Nationals sent a letter to the court requesting that MASN pay them the difference between the RSDC decision and MASN's proposal for 2014 as well as the first payments of 2015. The Nationals argue that a ruling for this case was supposed to be issued in December 2014 but won’t be issued until May 2015 at the earliest. This is a considerably longer period than initially envisioned and therefore the Nationals feel that they should receive the amount of money specified in the RSDC decision for 2014 as well as any right payments owed in 2015 before a decision is tendered.

What I found interesting about their letter was the following paragraph:
While MASN and the Orioles have insinuated that there was something nefarious about the $25 million payment that MLB made to the Nationals in August 2013, the new documents show the Orioles knew of this payment all along – and that it was part of the plan to avoid any release of the RSDC’s Award. The payment was meant to get the Nationals to the negotiating table as the Orioles wanted.
See Bishop Aff. Ex. 5 (Doc. No. 549), at -004.
Bishop Aff. Ex. 5 (Doc. No. 549) at -004 consists of two e-mails sent on March 30, 2014. One of these e-mails is from Rob Manfred sent to Alan Rifkin, which in part discusses the $25 million dollar payment. The second e-mail is from Alan Rifkin (MASN lawyer) sent to Rob Manfred that also in part discusses this payment. The Nationals argue that this is proof that the Orioles knew of this payment “all along.”

Alan Rifkin argues on behalf of MASN in these two affidavits that he didn’t know important facts about the loan until many months after MLB and the Nationals entered into a written agreement. These facts include the actual amount, that MLB and the Nationals agreed that MLB would recoup its payment via MASN, and that if MASN was sold MLB wouldn't approve a sale unless MASN agreed to pay MLB $25 million.

I believe that by building a timeline with all of the relevant e-mails it is possible to determine the validity of each sides’ claims.

July 2, 2013: Ted Lerner sent Bud Selig a letter stating that it had been nearly 15 months since this matter was originally addressed by the RSDC without a resolution demanding a final decision by  July 17, 2013. If the Nationals weren’t going to receive the $590 million in media rights fees from 2012-2016 that they requested, then they wanted the larger media rights fees proposed by the RSDC.

July 26, 2013: Rob Manfred sent Alan Rifkin an e-mail stating that MLB determined the Nationals deserved roughly an extra $7.5 million in distributions for 2012. A few hours later that day, Alan Rifkin sent Rob Manfred an e-mail stating that Peter Angelos rejected MLB's settlement proposal for a 2012 recalculation. Angelos felt that MASN paid everything that they owed and was unwilling to pay anything more.

MLB was trying to convince MASN to pay the Nationals an extra distribution for 2012 in order to show the Nationals that progress was being made and that the Nationals should be patient for longer while MLB and MASN tried to find a long-term solution. MLB felt that the Nationals deserved something at this point.

August 25, 2013: It became clear that MASN was not going to pay the Nationals any extra distributions. Rob Manfred conceded this fact in an e-mail to Alan Rifkin where he stated that he will not ask Peter Angelos for the $7.5 million previously discussed. Instead, Manfred stated that he found another way to resolve 2012 and 2013 to allow them to move forward. Manfred did request that MASN would pay the Nationals the equity distribution amount for 2013 based on MASN's proposal no later than March 15, 2014. MASN agreed to this request later that day. 

August 26, 2013: MLB sent the Washington Nationals a letter stating that the Commissioner’s office will send the Nationals roughly $25 million to make up the difference between the RSDC proposed decision and the actual amount paid by MASN. In return for this, the Nationals would have to agree to repay this amount from any extra money received from MASN for 2012 and 2013. Alternatively, the Nationals would understand that MLB would not approve a deal where MASN was sold to Comcast unless either MASN or Comcast agreed to repay the $24.5 million. 

If the Nationals did not receive any extra money for 2012 or 2013 then this document makes it clear that the Nationals will not have to repay this $24.5 million. If MASN wins this court case and Bortz is established as the acceptable methodology, then the Nationals will not have to give MLB any money and MLB will be forced to eat the loss.

These e-mails explain why Alan Rifkin was confused about the entire amount. MLB told Rifkin that they wouldn’t ask MASN for $7.5 million while agreeing to pay the Nationals $25 million. Likewise, there is no documentation proving that Manfred told Rifkin that MLB would expect to be repaid via either a sale of MASN or extra payments from MASN to the Nationals for either 2012 or 2013.

Late 2013: Rifkin claims that he learned at this time that MLB paid the Nationals $25 million rather than $7.5 million. Needless to say, at this point MLB and the Nationals had already come to an agreement and there was nothing he could do about it.

Late March 2014: Rifkin claims that Manfred told him that MLB didn’t give the Nationals the money but had in fact borrowed it from a third-party lender that wanted their money back. Rifkin wasn’t happy. He didn’t feel that the Nationals deserved any extra money and therefore didn’t think that MLB should make extra payments. It is one thing to give someone some money and quite another thing to borrow in order to give someone money.

March 30, 2014: Manfred sends Rifkin an e-mail stating that MLB has paid $25 million up till this point to keep the Nationals happy and therefore wants MASN to pay $10.6 million for 2014. MLB felt that if MASN wanted more time to reach a deal and therefore prevent the issuance of the RSDC opinion that they would need to cover the excess between the RSDC opinion and Bortz for 2014.

March 31, 2014: Manfred told Rifkin that the terms of the deal with the Nationals stated that there were two routes to recover their $25 million. The first was via a sale of MASN and the second was from payment out of additional MASN payments due to the issuance of an RSDC opinion. If the current RSDC opinion was published then MLB would get its money back but otherwise it wouldn't.

These e-mails sent on March 30 and 31, 2014, are what the Nationals quote in their letter as an attempt to prove that MASN knew about the conditions of the $25 million dollar payment “all along.” Rifkin argues that he didn’t learn the full details about the $25 million dollar payment until March 30 and 31, 2014, despite the fact that MLB sent the Nationals a letter on August 26, 2013. This is more than half a year after the deal was made and easily too late to make any protests. I would argue that knowing “all along” about the conditions of the payment would mean learning about them in either July or August 2013 when MASN could take some action or at least protest. 

I do believe that both MASN's reaction as well as MLB's decision do make sense. Certainly, it makes sense for MASN to be unhappy that MLB took out a loan to pay the Nationals money with the condition that MASN ultimately is responsible to pay MLB back without MASN's consent or knowledge.

However, it also seems likely that MLB's only other option was to issue the RSDC decision. If MLB did issue this decision then MASN would be responsible to pay the $25 million for 2012 and 2013 as well as the extra amounts for 2014-2016. MASN would also suffer from an adverse precedent and would be in a weaker bargaining position in the future. One could quite credibly argue that MLB thought it was doing MASN a favor even if it was done in a bizarre way. It also seems clear that MLB didn't believe that the RSDC's established methodology was Bortz despite MASN's claims to the contrary. The RSDC was unwilling to use Bortz unless MASN would make enough concessions to satisfy the Nationals. In hindsight, that probably wasn't possible.

In response to the Nationals' letter, MASN requested that they be allowed to write a reply letter responding to each of the Nationals' points in detail. The Nationals asked the court to refuse this request. Part of their reasoning was doubtless due to the fact that they want the court to make a quick decision and allowing detailed reply letters would simply make things take longer. But part of the reasoning could be that the Nationals were afraid of what MASN could write in a reply letter discussing each of their points. Suppose MASN was able to respond and they could write a document like this putting this claim in context. 

How do you think the judge would respond?


Anonymous said...

You're in way over your head.

The latest squabbling is largely a tempest in a teapot.

It is because payments to the Nats are coming due April 1 but the court pushed off oral arguments until May.

The court likely will have Angelos bond the money until the end of HIS litigation

Steve said...

Anonymous, it would be great if your voice contributed more to this conversation as opposed to coming off as message board antagonism without much explanation. I come here because readers typically are thoughtful and respectful. You may have worthwhile thoughts, but you do not express them. You certainly are not respectful at all. I guess if you find enjoyment raging for 15 seconds in a comment useful, maybe it means one less road rage accident in the world, but it makes the comments section pretty worthless.

Erik said...

Let me explain Anonymous' comment for non-lawyers.

I don't know this litigation, so I am filling in blanks a little bit. Judges ordinarily receive arguments in writing from the disputing parties in what is called "briefing." Sometimes they are in "briefs," but sometimes judges accept what are "letter briefs" instead.

There is an ordinary course for an opening by one party, a response by the opponent, and a reply by the party in support of its request that is limited to addressing the response but not arguing new points. Sometimes parties ask for further opportunities if they feel that new issues were raised when they should not have been. Judges have a couple of options there. First, they could ignore the new issues or even strike the non-compliant brief in its entirety. Second, they could accept a "sur-response" to address new issues raised in a "reply."

As you can imagine, a party that has raised a "new" issue too late opposes the other guy getting a word in.

Bonding is a whole different thing. In the criminal arena, the whole point of a bond is for the defendant to show up for trial. It is different in civil (non-criminal) litigation. Civil litigation is disputes between private people about money (usually). So bonding is used when the judge rules in favor of one party temporarily but is afraid he might be wrong. In order to be sure to make the temporarily losing party whole should that turn out to be true, the judge has the temporarily winning party post a bond that goes to the temporarily losing party if after fuller consideration the judge changes his mind, or he is reversed on appeal, or events turn out differently than the judge guessed (such as a different litigation).

That way, the temporarily losing party knows that it is ok in the long run.

Matt Perez said...

@Erik - I think Anonymous is right about what will happen. That's why I wrote very little about the letter itself and the possible legal action. As he said, it's a "tempest in a teapot".

What I found interesting was their claim that MASN knew about the debt "all along". While "all along" is a very imprecise language, I thought it was worth building a timeline discussing what MASN knew at the time.

That's why I focused most of this post precisely on that claim. In other words, I simply wanted to focus on the validity of that single claim and less about the implications of the letter itself.

The good folks at Federal Baseball are lawyers and do a pretty good job discussing the legal aspects of the MASN case. For the most part, I'm happy to leave that to them.

@Steve - Your feedback is helpful. Anonymous is a Nationals fan that isn't happy to learn that certain things he thought were true are in fact incorrect. Therefore, he doesn't really care whether the message board on an Orioles blog is respectful. But if people are being upset by his behavior then that's something helpful to know.