08 September 2016

The MASN Lawsuit: Orioles And MASN File An Appellate Brief

The next act in the MASN Lawsuit started a few weeks ago after MASN filed an appeal of the original decision by Justice Marks. As a refresher, the underlying dispute concerns the amount of telecast right fees payable to the Nationals. In 2014, MLBs Revenue Sharing Definitions Committee (RSDC) ruled that MASN would need to pay the Nationals $300 million in rights fees from 2012-2016. The RSDC is an MLB committee comprised of three MLB club owners, each of whom is appointed and at the sole discretion of the Commissioner of Baseball.

MASN argued that the RSDCs ruling was due to an unfair process and appealed their ruling in court. In 2015, Justice Marks agreed with MASN that the process was unfair and vacated the RSDCs original decision. However, Justice Marks didn’t agree to order a rehearing in front of a different arbitral court, but rather that the sides should come to a consensus about the next step. Now, MASN will argue that this case should be reheard in front of a neutral arbitral panel instead of going back to the RSDC.

MASNs argument is that the RSDC can’t rehear the case because MLB is incurably partial, irredeemably biased and financially interested in the outcome. Arbitrators are supposed to be neutral and therefore able to judge fairly. If the RSDC has been biased by MLB, then a rehearing in that forum would ultimately end up being overturned and would simply be a waste of time and judicial resources. There are three primary reasons why MASN argues that this is the case.

MASN notes that the Commissioner of Baseball has stated in a public forum that “sooner or later” MASN will be required to pay the amounts reflected in the now vacated award. The Commissioner has stated publicly how he thinks the RSDC should rule. Due to his ability to appoint owners to the RSDC at his own whim, this could potentially bias their decision. As I’ve mentioned on a number of occasions, it was extremely unwise for the Commissioner to make a number of his public pronouncements. Why give MASN ammunition to claim that MLB and the RSDC is biased?

MLB first attempted to prevent judicial review of the award threatening both the Nationals and Orioles with sanctions if they went ahead with court proceedings. After this threat failed, MLB actively litigated against MASN. This puts into question MLBs ability to be impartial. While it’s understandable that MLB would not be in favor of this, parties have the right to judicial review if they’re unhappy with the result of an arbitration. Again, one has to question the prudence of some of MLBs actions in this case. If MLB stayed on the sidelines and let MASN exercise its rights, they’d be in a much better position to demand that the case be reheard in front of the RSDC.

MLB also decided to give the Nationals $25 million in 2013 to ensure that the Nationals wouldn’t take legal action to demand the release of the award. MLB promised the Nationals that they wouldn’t be required to pay this money back to MLB. Rather, MLB would be repaid from any additional money that MASN would be forced to pay the Nationals for their 2012 and 2013 media rights. Justice Marks felt that this $25 million didn’t bias the RSDC because the award was written before MLB agreed to give the Nationals this cash. However, it seems plausible that it could bias a future RSDC decision because MLB has a current financial stake in the outcome of the case.

It is reasonable to presume that MLB had good intentions when giving the Nationals the $25 million. MLBs hope was that this payment would buy the parties enough time to come to a mutually agreeable decision to avoid a messy court battle. While it is unquestionably true that arbitral bodies like the AAA would never make a payment to a party, it is reasonable to expect different behavior from MLB due to MLBs relationship with each of its clubs. Furthermore, given that MLB made this payment with the knowledge of the RSDCs decision, it’s fair to say that this payment didn’t bias MLB. But now that the decision has been vacated, this payment makes it extremely difficult for MLB or the RSDC to judge the case fairly. While MLB had good intentions, it was irresponsible not to get buy-in from all the parties before giving the Nationals money. MLB may have an interest in ensuring that each of its clubs resolve their differences peacefully, but that doesn’t give MLB the right to make a deal that hurts another party.

MASN also discussed the relationship between MLB and the RSDC. MASN makes the claim that MLB was in charge of conducting the prehearing conference, determining which data was provided to the parties, provided data and instructions to the arbitrators, discussed the case with the arbitrators and ultimately wrote the final award. Manfred also wrote a set of e-mails to Alan Rifkin discussing scenarios where MLB would look into either not issuing the RSDCs award or giving the RSDC different instructions in the future. There is a substantial amount of evidence showing that the RSDC has very little independence from MLB and therefore can’t be trusted to give an independent decision.

MASN also notes that MLB primarily used the Bortz Methodology to determine the fair amount of rights fees for team controlled RSNs. This methodology was used at least 19 times over a decade and a half to determine fair market value. However, soon after Bortz sided with MASN in this court case, MLB decided to end its relationship with Bortz and Mr. Wyche. This just further shows how MLB will punish any party that dares disagree with their dictates.

MASN did an excellent job tying the RSDC to MLB and showing how MLB is biased against MASN. Simply put, fair arbitrators don’t argue for one side. If the appellate court ultimately does agree with MASN, then this will largely be due to some poor decisions by MLB. The Commissioner didn’t have to make public remarks suggesting that MASN would lose and indeed this made him look biased. Nor was MLB required to join the lawsuit in support of the Nationals. MLB could have ensured that all parties were willing to let MLB give the Nationals the $25 million instead of doing it behind the Orioles’ and MASN’s back. Finally, MLB could have done a better job ensuring that the arbitral body was able to make a fair and impartial decision. Due to this collection of errors, MASN has a strong stronger chance of convincing the arbitral body that the RSDC is unable to be partial and that this case needs to go in front of a different arbitral panel. If this occurs, MLB can only blame itself for the embarrassment and loss of prestige that it will suffer.

To the best of my knowledge, neither the Nationals nor MLB has written a response to this brief. It will be easier to understand these parties’ positions after they write such a response. Both the Nationals and MLB wrote a pre-argument statement when filing their appeal against Justice Marks’ decision, but failed to explain why they felt his decision should be overturned. Indeed, the Nationals have argued that Justice Marks’ decision should be overturned solely if the appellate court feels that this case should be arbitrated by a different panel. In addition, MLB and the Nationals will argue that the parties in this arbitration have chosen their method of dispute resolution, and can ask no more impartiality than inheres in the method they have chosen.

A number of things will occur before this case is heard by the appellate court. Both MLB and the Nationals will appeal Justice Marks’ decision because they don’t think the RSDCs original decision should have been vacated. If the arbitral court agrees with MLB, then the original decision will be reinstated and MASN will be largely out of legal options. In addition, the Nationals want to appeal Justice Marks’ decision that the parties shouldn’t go back in front of the RSDC a second time before the appeals are completed. Ironically, despite the Nationals’ claims that they want this matter judged expeditiously, this appeal will do nothing more than waste time. The Washington Post believes that the appellate court will hear oral arguments in December.

The next act may have started, but there will be a lot of documents written before it is complete.


James Jones said...

Thanks for your continued coverage of this case but I must ask you this: since you write for a blog devoted to all things Oriole, is it reasonable to assume that you will tend to view things from their perspective? Is it your goal to be impartial or do you see yourself as more of a fan? In your defense, you're a blogger and not a journalist so there'd certainly be nothing wrong in writing from a biased perspective. I ask because your some of your interpretations of the Marks ruling seem to lean a bit more towards the O's than any other non-O's evaluation that I've read.

Matt P said...

Camden Depot considers itself impartial in its writing. We have no problems criticizing the team and players when warranted. There are plenty of Orioles' fans that get upset at us because we're not necessarily a team-friendly blog. If Jon thought I was being biased against one side, he'd probably ask me to either stop writing about the subject or only cover the most crucial points.

I believe that my conclusions are the ones that best fit the data provided so far.

Rob said...

I think your coverage has been impartial - but I might be biased because I'm an O's fan and I think MLB and the Nationals are in the wrong on this...

James Jones said...
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James Jones said...

The Marks decision rejected every claim of bias, fraud or conspiracy proposed by MASN and the Orioles except for Proskauer's participation in the arbitration (Page 20). Let's recap MASN's claims for the audience: "MASN claimed that the RSDC Award was procured through bias, evident partiality and misconduct, corruption, fraud, undue means, and rendered beyond the scope of the arbitrator's authority and in manifest disregard of the law" but primarily five areas:

1) The $25M loan. Marks decision? Rejected.

2) MLB's role in the arbitration process; Marks decision? Rejected.

3) Adequacy of disclosures made by the arbitrators as to possible conflicts; Marks decision? Rejected.

4) Not using the Boortz methodology. Marks' decision? Rejected

5) the Nats using the Proskauer Rose law firm. This was the only claim with which Marks agreed, but only with respect to the Nat's choice of representation. From the opinion, "MASN, and the Orioles as its majority owner, clearly agreed to an "inside baseball" arbitration, where the parties and arbitrators would all be industry insiders who knew each other and inevitably had many connections. What they did not agree to, however, was a situation in which MASN's arbitration opponent, the Nationals, was represented in the arbitration by the same law firm that was concurrently representing MLB and one of more of the arbitrators and/or the arbitrator's clubs in other matters" and "the key question here is whether Proskauer's various simultaneous but unrelated representations of virtually every participant in the arbitration except for MASN and the Orioles created a situation in which a reasonable person would have to conclude that the arbitrators were partial to the Nationals."
In fact, Marks offers a roadmap to how to resolve the issue, "Common-sense approaches might well have included one or more of the following: (a) encouraging the Nationals to retain other counsel, (b) instructing Proskauer to make sure that the specific attorneys who were representing the Nationals in the arbitration were completely screened from any and all legal representations of MLB, the arbitrators and/or the arbitrators' clubs,... (c) fully advising the arbitrators of MASN's concerns and directing them to investigate and fully disclose their and their clubs' current relationships with Proskauer, or even (d) keeping the parties advised of MLB's own various continuing– and increasing– retention of Proskauer during the relevant period."

The Nationals and MLB have now solved this single conflict and are now ready to initiate arbitration. From where in any of this do you derive the court's willingness to modify the MASN Agreement to allow for outside arbitration at this stage? On which of these holdings do you base your opinion?

Again, I'm not trying to pick a fight. My interest in this case is purely from a legal perspective. But I don't see anywhere in the Marks opinion where the judge appears open to modifying the MASN Agreement itself. The violation that caused him to reject the arbitration award were just not sufficiently egregious.

Matt P said...

There is nothing in the Marks opinion where the judge appears open to sending the case to the AAA. Likewise, all evidence suggests that he is unwilling to modify the MASN agreement to allow for outside arbitration at this stage. This is not in question and I don't believe I stated or implied otherwise.

That's why MASN is appealing to an appellate court. The appellate court can decide whether to send the case to the AAA or alternatively confirm the previous decision. This is a different court than the previous court.

Likewise, I agree that the Nationals have solved this conflict with Proskauer and are ready to initiate arbitration. However, Justice Marks ruled that the appeals process needs to be completed before the parties can go to a second arbitration (unless they agree on a compromise themselves).

The case will be decided by an appellate court that may or may not see things the same way as Justice Marks. Fair?

James Jones said...
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James Jones said...

Sure. The issue was never one of fairness since all we're doing is speculating. The conflict with Proskauer was minimal and involved no graft, corruption or deception. The O's expressed their concern, MLB and the Nats ignored it and here we are. The penalty that the Nats paid for their error was having the RSDC award thrown out. Forcing them into arbitration beyond that which is allowed by the MASN Agreement against their wishes would be a further penalty which I don't believe an appeals court will require. Justice Marks' opinion specifically states that both MASN and the O's understood that MLB and its owners would constitute the RSDC when they agreed to the MASN Agreement in the first place, and he rejected all of MASN's points claiming bias on the part of MLB.

Anyway, always good to read your posts. Thanks for the coverage.

Matt P said...

In hindsight, I would change "MASN has a strong chance of winning" to "MASN has a stronger change of winning". Saying "strong" is language that portrays an inaccurate view of the situation and language that I shouldn't have used. I'll modify the post to change that tonight.

The appeals court may not decide to change the venue. I wouldn't be surprised if it overturned Justice Marks' decision outright. But MLB is making a lot of unforced errors that are making this closer then it needs to be.