13 May 2016

Pandemonium In The Court

The newest chapter in the dispute between MASN and the Nationals was written this weekend, as MASN replied to the Nationals request that this case be sent back to the RSDC for a new arbitration decision.  As a quick recap, back in 2014, the RSDC determined that the Nationals rights fees were worth roughly $300 million from 2012-2016. MASN was unhappy with this decision and took the matter to court. Last November, MASN was victorious and the decision was overturned. Ever since, the parties have attempted to determine future steps.

These attempts have resulted in nothing more than a mess. MASN and the Orioles have appealed the Judge’s decision because they feel the RSDC is no longer an appropriate forum for this case. Likewise, MLB and the Nationals have appealed the Judge’s decision because they feel that the RSDC’s prior award shouldn’t have been vacated. In addition, the Nationals are attempting to compel MASN to go to a new arbitration hearing in front of the RSDC, prior to the resolution of these two cases. In response, MASN informed the Court that it is likely to both oppose the Nationals’ motion to compel and seek a formal stay of that arbitration. In addition, MASN and the Nationals are arguing about the relevant timelines for just about each motion. The Court attempted to coordinate with each side to determine an appropriate process, and the Nationals responded by demanding that all conferences with the Justices’ primary law clerk be transcribed. It is nothing less than complete pandemonium that has quickly devolved into arguments over insignificant matters.

In response to this pandemonium, the Court “suggested” that it was “considering” sending this matter to mediation to reach a consensus on the next steps and an acceptable timeline. Mediation took place on April 12-13, 2016 and was seemingly unsuccessful causing the original Court mandated timeline to be imposed on the two parties. MASN was required to respond to the Nationals request to compel arbitration by May 6, 2016. The Nationals were given until May 27, 2016 to reply to MASN's response while MASN was given until May 27th to make a motion for a stay. The deadline for the Nationals to respond to MASN's response is June 17th and the parties are expected to meet in court on June 20th.

The Nationals argue that a delay causes them harm because they are receiving rights fees that are unilaterally determined by MASN. Since the Nationals agreed to use different counsel, they see no reason why this case can’t go back in front of the RSDC immediately.

The new documents show how MASN's argument can be summed up in three points. First, the Nationals’ motion will not accelerate the resolution of this dispute, but rather only waste judicial resources and time. If either side wins on appeal then the results of a new arbitration would be moot. Second, it is fundamentally unfair to compel MASN to arbitrate before a tribunal controlled by MLB when MLB is attempting to reinstate the prior tribunal’s decision.

Third and in my opinion, most important, the Court did not order the parties to arbitrate before the RSDC nor has the RSDC summoned MASN to another arbitration hearing. Indeed, MLB wrote a letter to the parties stating that MLB will not make any determinations about a reconvened process until the Nationals’ motion to compel is addressed by the Court.  It is clear that the MLB Commissioner, not MASN, has the ability to convene the RSDC and has so far declined to do so. It’s unreasonable to hold MASN responsible for MLBs actions in this regard.

MASN further argues that the Nationals aren’t suffering substantial financial harm from this delay since the Nationals are still receiving millions of dollars in the interim, and that they can’t contend they are “at a competitive disadvantage to other MLB Clubs”, since their team value, revenue and payroll have increased significantly since 2012 and is in the top tier of all MLB clubs. In addition, they note that this situation can be resolved quickly if the Nationals agree to arbitration at a neutral forum such as the AAA.

I’m sympathetic to the argument that the Court should attempt to expedite the process as much as possible because this conflict has lasted for over four years. MASN appears to be sympathetic to this argument as they state they would be willing to re-arbitrate this dispute immediately in front of a neutral form independent of MLB. I would question whether allowing a new hearing would in fact be productive and whether MASN can be compelled to return to arbitration when the RSDC hasn’t asked them to do so.  Furthermore, it certainly would be ironic if arbitration, traditionally a method used to relieve congested dockets in the courts, would simply cause this docket to be even more clogged.

The implications of a decision either way would seem to be minimal. If the Nationals lose, then they would need to wait until after the Appellate Court has ruled before requesting that the case return to the RSDC. If still necessary, it would take several months to determine that the RSDC is the proper venue, and to give each side enough time to perform its due diligence and create their arguments. If the Nationals win, then the aforementioned steps will presumably be completed concurrently to the appeals and thus reduce the time waiting for a new decision. Ultimately, the most important factor isn’t when the bodies make their judgement, but how the Appellate Court and if necessary the RSDC will rule.


James Jones said...

Your updates on this increasingly bizarre story are, as always, definitive. Thanks for staying on top of it and for not infusing your cogent analysis with needless fan baiting biases.

I would add a few points

1) Any new arbitration would presumably be required to base the award on the state of the market at the time when arbitration was originally requested, not 2016.

2) The Nationals probably wish to avoid outside arbitration as doing so might involve use of a different methodology, i.e. Bortz, but the bigger issue is probably that such a determination was not provided for in the MASN Agreement. If MASN desires to renegotiate the Agreement, I'm sure that the Nationals will expect some consideration in return.

3) MASN will soon be required to notify the Nationals of their rights fee determination for 2017 – 2021. It will be interesting to see if this number is higher or lower than that awarded by the RSDC in 2014.

Matt Perez said...

Glad you enjoyed.

1) Yes. But to go even farther (and this is the first time I've thought about this), I wonder whether the RSDC or AAA would take into account anything that's happened after roughly April 2012. They set a cutoff for the RSDC the first time this case went to arbitration, so why not the second? This would be a mixed bag; for example the Nationals wouldn't be allowed to discuss the Dodgers contract while the Orioles wouldn't be able to bring up the fact that they couldn't get carriage from Time Warner in North Carolina.

But I think practically the impact would be that it would be easier to get the RSDC to come up with a similar verdict as the previous panel. That would make MLB happy.

2) The Nationals definitely have good reasons to want to stick with the RSDC. The best is that they don't want MLB angry with them. If they want a quick decision though, they'll need to go with the AAA.

But the Nationals argued they weren't happy with the RSDC decision because it doesn't focus on Fair Market Value but rather what MASN can pay. What if the AAA agrees with them? In that case, they receive huge rights fees and a quick result.

They have to get more in order to risk MLBs wrath. But it's not like it would be a disaster scenario for them.

3) MASN renegotiates its contracts with its major providers in 2018. How does that impact things? MASN likely has an incentive to delay things until that's complete in order to present the RSDC with a fait accompli. Can't say they'll get a 100% increase in rates if they only actually got 25%.

James Jones said...

"I wonder whether the RSDC or AAA would take into account anything that's happened after roughly April 2012."

They should not be allowed to do so, otherwise it would be an award for 'what your rights would have been worth' rather than 'what they will be worth'. A speculative number, i.e. paying for future rights, places all the risk on the network. By contrast, a retroactive award places all the risk on the Nationals.