23 February 2016

The MASN Case: Will The Case Go Back To The RSDC?

In the beginning of November, MASN was victorious in court. Justice Marks ruled that the RSDC proceeding objectively demonstrated an utter lack of concern for fairness that is “so inconsistent with the basic principles of justice” that the award must be vacated.  Ever since, the Court, MASN, MLB and the Nationals have attempted to negotiate next steps.

MASN has insisted that the case be reheard in front of a neutral, unbiased panel such as the American Arbitration Association. When neither the Nationals nor MLB would accede to this request, MASN filed a limited appeal of the court’s decision, insisting that the court should have ruled that the case be heard by a different panel.

Meanwhile the Nationals agreed to use different counsel and insisted that the case be reheard by the RSDC. When MASN refused, the Nationals filed a motion to compel MASN to submit to an arbitration before the RSDC.

The Nationals claim that their motion should be granted because a delay causes them harm. Until a decision is accepted by all parties, the Nationals will only receive rights fees that MASN unilaterally determines and this has significant financial implications for their operations and competitiveness. The Nationals also argued that there is an absence of a reasonable likelihood that the Orioles will prevail on the central question presented in their appeals – whether this court should have rewritten the agreement by directing arbitration to a panel other than the RSDC.  The Nationals made these arguments because these are legal points that a judge will consider when choosing to grant their motion or not.

On January 5th, Judge Marks’ principal law clerk set a schedule for the Nationals’ current motion. The Nationals’ were to file their notion by January 22nd. MASN was given a chance to respond by February 16th but apparently waived that right. The Nationals were given a chance to respond to any of MASNs' statements by the 23rd and the Court will hear the case on the 24th. The ruling will determine whether MASN will be forced to submit to a new arbitration before the RSDC regardless of the status of their appeal.

There is a legal maxim called “justice delayed is justice denied”. If some legal decisions are or aren’t implemented immediately, then it can cause irreparable damage to a given party. For example, if the delay of a decision causes a company to go bankrupt, then even a favorable decision after the fact can’t repair the damage inflicted by this delay. MASN successfully made this argument in 2014, when they requested that the court put a stay on the RSDCs previous decision. Allowing the Nationals to sell their media rights to a different broadcaster would have forced MASN to renegotiate its contracts with all of its providers at a significant reduction in value and therefore caused irreparable damage.

The Nationals’ argument that a delay would cause them substantial harm wasn’t persuasive the first two times that they used it, and they are hoping that the third time is the charm. It is certainly the case that the Nationals could use any extra cash to improve their operations. However, typically parties to a lawsuit can use any extra cash they may win as a result of a decision. The minimal cash at stake will not force the Nationals to shut down operations and certainly at this point will have no impact on their free agent spending. As such, while being forced to wait for a decision is inconvenient and unfortunate, a delay will not cause any irreparable or even substantial damages.

In addition, it is implausible that the Nationals would receive any cash from a favorable RSDC decision, presuming that it is favorable, until after the court came to a decision about MASNs appeal. Therefore, even if the Court did agree that MASN should be compelled to return to the RSDC panel, it would have no impact on the Nationals bottom line. If so, it is hard to see how sending this case back to the RSDC panel would have any effect on the Nationals money woes.

The other argument that the Nationals noted, whether the court can rewrite the contract, is considerably stronger. If the court doesn’t have the authority to rule that this case should be heard by a different panel, then MASNs appeal is meritless and taken primarily for the purpose of delay. If that’s the case, then the Court should reject MASNs appeal and issue an order compelling MASN to arbitrate before the RSDC.

MASN argues that the Court does have the authority to rule that this case should be heard by a different panel. The New York Civil Practice Law and Rules (§ 7511(d)) states that:

(d) Rehearing.  Upon vacating an award, the court may order a rehearing and determination of all or any of the issues either before the same arbitrator or before a new arbitrator appointed in accordance with this article.  Time in any provision limiting the time for a hearing or award shall be measured from the date of such order or rehearing, whichever is appropriate, or a time may be specified by the court. 

Likewise, the Federal Arbitration Act (9 U.S.C. § 10(b)) states that:

(b) If an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators.  

It seems from MASNs perspective that the court has the right, even if not necessarily the obligation, to decide that the case should be heard by a different panel. Justice Marks quoted Hooters of America, Inc. v. Phillips in his decision, a case in which a court decided to void a previously existing contract. It appears Justice Marks was well aware that he could send the case to a different panel if he chose to do so, even if he couldn’t necessarily re-write the contract.

However, Justice Marks made a number of interesting remarks during the May Court Hearing, which possibly give insight into his thought process. He made the following comments:
"If Proskauer is taken out of the case, do we have a problem with the arbitrators? In fact, I think it's -- I think I read the Committee membership has changed anyway."
"But the Commissioner is not one of the arbitrators."
“If there is a round two, wouldn't it be different? Isn't round two more of a magnifying glass than round one, given all that's happened here?”
“What if it went back to the same entity and they were directed to apply the Bortz methodology? And I'm not saying that I would do that, or I don't know that I even have the authority to do that, but would that make you happy?"
“What else would they do if they were given that instruction to be that precise, there would be nothing left for them to do”. 
It's worth noting that the Orioles also agreed that the members on the RSDC had changed.

Justice Marks’ remarks potentially explain why he declined to send this decision to a different arbitration body. He rejected all of MASNs arguments except for the one stating that the verdict should be vacated due to evident partiality caused by Proskauer Rose’s involvement. This conflict no longer exists now that the Nationals have new legal representation. If there were new teams on the RSDC then it would be implausible that Proskauer’s previous involvement would have any effect.

Justice Marks also stated that the Commissioner isn’t one of the arbitrators and therefore feels that the members of the RSDC will be able to be impartial and fair regardless of MLB’s wishes. Arbitrators, especially in a situation like this one, are expected to be able to withstand outside pressure. This is unfortunate for MASN, but if Justice Marks feels this way, then it certainly seems logical that he wouldn't send this case to a different forum.

The only problem is that the Nationals and MLB are seemingly hell-bent on proving each of Justice Marks’ assumptions false and that sending this case back to the RSDC would do nothing more than create a mockery of justice. Justice Marks made the reasonable presumption that the Nationals and MLB would proceed more carefully in a second arbitration in order to avoid further non-confirmable decisions. So, it probably came as a surprise that the Nationals requested on November 25th, 2015, that the RSDC hearing be scheduled for late-January 2016.

MASN reasonably argued that this schedule would only give MASN two months to determine whether there are any illicit relationships between Quinn Emmanuel and any of the three MLB teams on the RSDC. Mr. Hall noted that such a schedule would ignore the lessons that should have been learned over the past year and a half such as that the parties should take as much time as necessary to ensure that everything is proper for Round 2.

Determining whether there are any illicit relationships between Quinn Emmanuel and members of the RSDC is a considerable challenge in and of itself. It becomes even more challenging when one notes that there are currently only two teams on the RSDC. MASN would be forced to look into whether any of the teams in baseball have a relationship with Quinn Emmanuel or they would have even an extremely limited period to determine whether the third team, as of yet unknown, has an illicit relationship with Quinn Emmanuel.

Even worse, MASN couldn’t rely on the team in question to state accurately whether or not it had a relationship with Quinn Emmanuel. The Pirates President and one of the members of the previous RSDC panel, Francis Connelly, stated that he had “failed to recall” certain dealings the Pirates had with Proskauer. If a member of the RSDC had “failed to recall” its dealings with law firms in the past, then there is no reason why it couldn’t happen in the future. The fact that the Nationals want an expedited schedule illustrates how they failed to learn lessons from the past year and a half and how they clearly don’t feel like they’re under a magnifying glass.

Justice Marks stated that he doesn’t believe that the Commissioner will be able to bias the members of the RSDC panel. That’s fair enough, but it’s still worth outlining Manfred’s remarks about this case. Manfred stated in May 2015 that "I think the agreement's clear in MASN.  I think the RSDC was empowered to set rights fees. That's what they did, and I think sooner or later MASN is going to be required to pay those rights fees." Manfred stated in November, after the decision was vacated that, “We are intent on making sure that the agreement that gets the Nationals a fair market value for their TV rights is enforced, and we’ll do whatever is necessary to get that.” In addition, it’s impossible to forget that MLB will receive an extra $25 million if the RSDC issues a similar ruling to the previous one. The court may question whether MLB is able to bias the RSDC panel, but there can be no question that Manfred will do so if he is able.

The next assumption that MLB has disproved is about the makeup of the RSDC panel. In 2012, the three clubs on the Panel were the Pirates, Rays and Mets. In October 2014, the three clubs on the panel were the Rays, Cubs and Blue Jays. These teams appear to have been the three clubs on the panel in May 2015, when Justice Marks and the Orioles both agreed that the teams on the RSDC have changed. Therefore, it was reasonable to presume that the teams on the RSDC would be different for a future second round.

This didn't happen. The teams on the RSDC panel as of January 2016 are the Cubs and Pirates with the third seat vacant. My understanding is that the Blue Jays were being represented on the RSDC by their president Paul Beeston. When he retired at the end of October 2015 this created an opening on the RSDC. This suggests that the Rays were replaced by the Pirates, one of the teams on the RSDC panel that originally ruled on the MASN dispute in 2012.

The Pirates President, Mr. Connelly, was a member of the RSDC panel from 2008- November 2013. In addition, from 1998 to 2007, he also served as the General Counsel-Labor for the Office of the Commissioner of Baseball. He further stated that during his tenure working with MLB, he also served as a legal attorney providing support to the RSDC panel.  Mr. Connelly would be a poor choice to be a judge on this new panel because he has already been biased by the proceedings that occurred during the previous panel.

Mr. Connelly felt it necessary to write an affidavit to the court responding to MASNs claims that the RSDC panel was biased due to Proskauer’s involvement and therefore decided to involve themselves in the previous court case. Although this isn’t a typical situation, it is usually expected for arbitrators to not act on behalf of one side or the other in future proceedings.

In addition, Mr. Connelly is likely to be the member of the RSDC with the most experience in these regards and therefore be the most influential member. Given the number of potential candidates, it is certainly the case that the Pirates would be a poor choice to be on this panel and their inclusion would be worrisome.

The Cubs are the second team on the panel. In theory, Mr. Ricketts would be a reasonable choice for this panel as he had no connection with the previous proceedings. In practice, he’s a poor choice. The Sports Business Daily wrote that “Mr. Ricketts is also a close ally of Rob Manfred, which has elevated his role in league circles.” In addition, ESPN wrote that “behind the scenes, Manfred has made some personnel changes at MLB's central office in New York and given prime committee assignments to Tampa Bay's Stu Sternberg, Tom Ricketts of the Chicago Cubs, Hal Steinbrenner of the New York Yankees and other owners who weren't necessarily part of the game's "old boy'' network.” Mr. Manfred has spent capital elevating Mr. Ricketts role in the league by placing him in important positions. Given that relationship, it seems unreasonable to expect Ricketts to be completely impartial to the Commissioner’s wishes. Ricketts gains considerable prestige due to his relationship with the Commissioner and may not be willing to jeopardize that for MASN and the Orioles.

Finally, my understanding is that the third team on the RSDC panel will be determined by Manfred. It clearly isn’t fair to allow the Commissioner the ability to select the third panel member when he has already stated his preferred outcome.

Manfred has further shown that he has the ability and desire to stack committees the way that he sees fit and thus reward owners that agree with him while punishing owners that work against him. When Manfred was first appointed, he stated that he wasn’t going to take into account which owners voted against him. Those owners that voted against him appeared to be the Arizona Diamondbacks, Boston Red Sox, Chicago White Sox, Cincinnati Reds, Los Angeles Angels, Oakland Athletics and Toronto Blue Jays. So, it was surprising when Mr. Manfred decided in January 2015 to completely change the membership of MLB’s executive council. Manfred replaced seven of the eight owners on the executive council with the only owner remaining coincidentally Manfred’s strongest supporter during the confirmation process. Mets360 argued that, “it’s hard to argue that there wasn’t some shred of cronyism in his decision, as the Wilpon appointment was part of an almost-total retooling of baseball’s executive council.” They also argued that “So at least we have a theory as to Manfred’s motivation – he wants baseball’s hierarchy to consist of those who helped elect him commissioner.” The blog further argued that the owners on the executive council that supported Manfred were giving plum positions, even though they were removed while the owners that didn’t support Manfred were not and therefore were punished.

This indicates that the Court shouldn’t underestimate Manfred’s ability to bias the proceedings. If Manfred was able to pack the Executive Council with his supporters and punish his detractors, then there is no reason why he wouldn’t do this to members of the RSDC. The RSDC is far more vulnerable to the Commissioner than it may have appeared at first glance.

Finally, there has been considerable conjecture that the MASN lawsuit is why the Orioles weren’t selected to host the 2018 All-Star Game. I wrote about this situation in April. Without repeating myself, it is worth noting that a number of publications, such as the Washington Post, Baltimore Sun, Fox Sports, and NBC Sports all wrote articles speculating that Baltimore didn’t receive the all-star game due to this conflict. It seems at minimum plausible that Manfred didn’t award the 2018 All-Star Game to punish the Orioles for this conflict. If so, other teams have likely learned that Manfred will punish them if they cross him and issue a decision that he doesn’t favor.

As stated earlier, some owners have openly crossed Manfred despite being punished for it. It would be reasonable to presume that these owners would be more likely to be impartial than the owners currently on the RSDC. If so, there should be no reason why a panel consisting of three officials from the Arizona Diamondbacks, Chicago White Sox, Cincinnati Reds, Los Angeles Angels or Oakland Athletics would be a preferable option to the current RSDC. There is no reason to presume that they would biased against the Nationals but they are also the least likely to be biased by MLBs statements. Indeed, the White Sox's owner is on the record as speaking in extremely negative terms about the agreement and if anything would be biased against MASN.

I believe whether the Court thinks that Manfred can bias the RSDC may be relevant at a later date. If the Court believes that he is able to do so, then it is far more likely to look upon MASNs’ claims with favor. This is because MASN did agree to an arbitration process where some of the members may be partial. MASN could and probably should have realized that many MLB owners felt that MASN was given a generous deal at their expense.

However, MASN didn’t and couldn’t have known that MLB would actively attempt to coerce the members of the RSDC to rule against them. It seems unlikely that MASN had realized that MLB can appoint members to the RSDC solely at its whims and punish these members for a decision contrary to its wishes. Nor could they have predicted that the previous RSDC would have completely ignored and dismissed their repeated asserted concerns about fairness. Or that the previous RSDC would utterly ignore and disregard every precedent case when deciding to not use the Bortz Methodology solely for MASN.

It would appear that the Nationals arguments arguing that this case should be sent back to the RSDC before MASNs appeal is addressed are weak. On the other hand, MASN didn’t even bother to reply to the Nationals’ motion to have this case sent to the RSDC. It appears that MASNs argument is two-fold. The first point is that the RSDC is unable to rule fairly. The second is that the RSDC doesn’t even have three members at the current time and it will take months before it is ready to hear this case. How can the Nationals compel MASN to submit to arbitration in front of a panel that doesn’t currently exist?

There are advantages to having a second round of arbitration in front of the RSDC. A new RSDC decision may be able to resolve the current litigation. This dispute would come to an end if the new decision was based off of the Bortz Methodology or another slightly different methodology that was acceptable to all sides. Or it may become abundantly clear that the RSDC and MLB have no interest in fairness and therefore strengthen MASNs claims that this case should be heard in a different forum.

Meanwhile, the Court can rule that MASN should be allowed to appeal its decision and that MASN needs to submit to arbitration in front of the RSDC. The Court could decide to stay the RSDCs’ second decision until all of the appeals have taken their course. It seems that the only thing MASN would lose in such a circumstance is the time, effort and expense of preparing for an arbitration panel. Meanwhile, it is indisputable that this case has gone on for more than a year and that it is only fair to ensure that it comes to as speedy of a conclusion as possible. It would appear that the pros, however unlikely, would outweigh the possible cons.

I wouldn’t focus overly much on whether the Court decides to compel MASN to submit to arbitration in front of the RSDC or not. If MASN wins its appeal of the first Court decision, then any future RSDC decision will be meaningless. Likewise, if an appellate court decides that the first RSDC decision shouldn't be vacated, then a future RSDC decision will be meaningless. Even if MASN doesn’t win its appeal, then MASN still may have an opportunity to appeal a future RSDC decision. The main question is whether an appellate court will hear MASNs appeal and whether it will decide to send this case to a new arbitration panel.


None Listed said...

An excellent synopsis but one point. MASN may suggest the potential for bias but this is not evidence of bias, and absent such evidence no court is going to hold in their favor. Unless MASN can draw direct lines between the points you discuss, their appeal will likely fall on deaf ears.

Matt Perez said...

Thanks kindly.

Honestly, I had no intent to infer that the Court might vacate either the previous decision or a future decision due to this potential bias. I can see where you may have gotten that impression though.

I agree that this isn't evidence of bias. My understanding is that the necessary standard is an appearance of bias. I think it's possible, if highly unlikely, that a court could decide there's an appearance of bias.

I was thinking that this potential for bias could help convince an appellate court, provided it agrees with the reasoning of Justice Marks that there was evident partiality due to Proskauer (not a given), to send this case to an independent forum instead of back to the RSDC.

I don't think it will be strong enough to force an appellate courts hand, but rather might sway them a bit.

None Listed said...

Please keep us informed as to any news you hear on this. The hearing date has already passed– I think– yet nothing from any of the major media outlets.

Again, thanks for an excellent and non-biased overview.

Matt Perez said...

The hearing was rescheduled to March 9th. But MASN hasn't submitted a response and my understanding is that they should have done so yesterday. I suspect that it will be rescheduled yet again.

Feel like it will occur sooner rather then later. We'll see.

Matt Perez said...

MASN didn't oppose the motion.