12 July 2016

Justice Marks Opts Not To Send The Case Back To The RSDC

Since November 2015, after Justice Marks vacated the RSDCs previous decision, the Nationals have attempted to compel MASN to return to arbitration before the RSDC. The Nationals claimed that a footnote in the Justice’ decision meant that MASN needed to submit to arbitration if the Nationals just changed their lawyers. On the other hand, MASN felt that the sides should agree to submit this case before a different arbitral body and thereby avoid the appeals process. Failing this, MASN wanted its appeal to be heard before a second arbitration case would be heard before the RSDC.

After more than half a year, Justice Marks ruled on Monday that MASN shouldn't be forced to submit to a second arbitration before the RSDC until appeals have been completed. Justice Marks clarified his original decision by stating that his footnote didn’t compel MASN to return to arbitration before the RSDC just because the Nationals changed their lawyers. He further noted that he was unwilling to re-write the parties contract to force its process to move faster than plain language requires.

It’s pretty simple when it comes down to it. As the decision states, it is inefficient for a court to have motions and appeals regarding confirmation and vacature of different arbitration awards, at the same time, all stemming from the same dispute.  In this case, there have been multiple motions and therefore Justice Marks decided it was best to ensure simplicity in order to conserve court resources. In addition, this would have the potential of wasting significant amounts of the parties’ time. Depending on the result of the appeal, a decision made in a second arbitration could easily become moot. And it was highly unlikely that a decision tendered in a second arbitration would be put into effect before appeals were heard for both the first and second arbitration.

As stated previously, the impact of this decision is negligible. This merely delays a future RSDC arbitration until after the appellate court rules on each parties appeal. If the appellate court doesn’t rule in MASNs favor, then it seems likely that this case will eventually go back to the RSDC. Likewise, if the appellate court does rule in MASNs favor, then the results of a second arbitration would be meaningless. This was nothing more than a skirmish.

And yet, it does have some interesting implications. The Nationals have claimed that they’ve receiving unreasonably low rights fees for the past three years. They were hoping to compel MASN to go to arbitration in order to rectify the solution. On Monday, they discovered that they wasted half a year on this motion and have nothing to show for it. Even worse for the Nationals, the current five year contract ends after 2016. It doesn’t appear that the sides will come to a decision by 2017 and therefore this dispute could impact the next contract. This was a costly waste of half a year.

Justice Marks noted that neither party has perfected its appeal as of today. Rachel Thorn, an attorney for MASN, noted previously that for the appeal to have been scheduled for the June term, the perfection date was March 21, 2016. MASN didn’t perfect its appeal by that date because the parties were in the midst of mediation and MLB hadn’t responded to Mr. Hall’s February 5, 2016 letter. It seems that she implied that if the Nationals’ didn’t waste everyone’s time by trying to compel MASN to participate in a premature arbitration, then MASN may have perfected its appeal in March and the case could have been heard in June. Instead, MASN needed to use its resources to respond to the Nationals attempt to compel arbitration. If so, it’s questionable whether even a Nationals victory would have sped up the process.

Mrs. Thorn further noted that the next available terms for the appeal to be scheduled are September 2016 and October 2016, which would require perfection by July 11, 2016 and August 8, 2016 respectively. Given that Monday was the 11th, it seems unlikely that the parties will be ready to submit their appeals by that date. It seems that the earliest this case might be heard is in October, but it’s very possible that this case won’t be heard by the appellate court until 2017. Even after the case is heard, it will still take a few months for them to come to a decision.

Furthermore, it isn’t clear what the Nationals were hoping to achieve by bringing this motion. Even if they were successful, it was unlikely that the RSDCs decision would be implemented before MASN had a chance to appeal Justice’ Marks decision about the first arbitration as well as the RSDCs second arbitration. It isn’t time efficient to attempt to compel MASN to return to arbitration if it meant a delay in the appeals’ process.

Also, suppose the Nationals were victorious on Monday. If MASN was successful in the RSDCs second arbitration, then the Nationals would be in the uncomfortable position of needing a victory when appealing the RSDCs first arbitration. If MASN wasn’t successful in a second arbitration, they could use the results of the second arbitration to strengthen their appeal of the Judge’s ruling of the first arbitration. It seems like the Nationals placed MASN in a win-win situation with this motion while placing themselves in a situation where they couldn’t win.

In the meantime, Manfred has continued to make outrageously biased comments in favor of the Nationals. The Commissioner stated that “It is important to bear in mind the fundamentals. The fundamentals are that the Orioles agreed the RSDC would set the rights fees for MASN and the Orioles every five years. The Orioles have engaged in a pattern of conduct designed to avoid that agreement being effectuated.” Manfred has further argued 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.” Yet, Manfred refused to acknowledge that the agreement was also vacated due to evident partiality and therefore that the panel was biased towards the Nationals. It is obviously unreasonable to claim that MASN is at fault for fighting against a decision found to be unfairly biased against them. As this case continues to progress, Manfred is further demonstrating his anti-MASN bias and thereby ruining his credibility. The appellate court will have to wonder if the RSDC is independent enough from the Commissioner to make a fair ruling. The longer MASN is able to delay a final decision, the higher the likelihood that Manfred will make a significant error which proves that the RSDC is an unsuitable arbitrator for this dispute.

All in all, the practical implications of this victory are minimal. But the fact that the Nationals just wasted months on this motion and have yet to win a single victory in this entire case is probably a bad sign for them. Why did they decide to waste several months on a motion which had little importance and a minimal chance of success if they want a decision as soon as possible? One has to question whether the disqualification of Proskauer Rose has had significant implications.


Anonymous said...

"Yet, Manfred refused to acknowledge that the agreement was also vacated due to evident partiality and therefore that the panel was biased towards the Nationals."

I don't know if that statement is factual and how you can say the panel was biased for the Nationals.

Matt Perez said...

Well, certainly there's no question that the agreement was vacated due to evident partiality. As Justice Marks' decision states (Page 18 PDF, 17 written), the reasonable person standard for evident partiality is:

"Evident partiality will be found where a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration. The Second Circuit reasoned that evident partiality was a stringent standard that could not be satisfied by a mere appearance of bias, but also recognized that proof of actual bias is rarely adduced."

The Court stated that there was an unquestionable "appearance of bias" despite there being no proof of actual bias. It would be more accurate for me to have written that the Court argued that the panel was partial towards the Nationals.

If this was a legal blog, I'd consider making a correction. For a sports blog, I don't think the difference between partial and biased is a big deal especially given that I wasn't using "bias" in the legal sense.

Anonymous said...

Justice delayed is justice denied. It seems likely that MASN used this 2ARB issue as an excuse to further delay the appeal hearing (or can MASN only afford one lawyer)?

Also, your interpretation of Manfred's comments are themselves a bit biased. Simply expressing his opinion on the case is not bias. Most informed analyses that I've read of this case suggest that the Nationals have by far the stronger case, having won every point in the original argument except that of the appearance of bias on the part of their choice of legal representation.

Anonymous said...

"...the fact that the Nationals just wasted months on this motion..."

Not at all. They were in a holding pattern awaiting the appeal, so why not try a hail mary? In the long run, the attempt cost them nothing but time, if that. There's no reason to believe that MASN would have met the deadline for an August hearing regardless.

..." and have yet to win a single victory in this entire case..."

Did you forget the original Marks opinion, in which the Nationals WON ON EVERY POINT except their representation?

Matt Perez said...

Look, you need two things to perfect an appeal. You need to write a brief and you need to file a record. You generally get six months at most to do it. As of July (7 months), the four parties (Orioles, MASN, Nationals and MLB) have still been unable to finalize this record. Obviously, this means that the First Department granted the parties more time to finalize this appeal (otherwise Justice Marks wouldn't have said the case should be decided in an appellate court).

Obviously, MASN needed to convince the First Department to give it an extension. Why do you think they did it? MASN can't delay the hearing on their own. And yet, it's delayed. What do you think that means? I think the two of you are strongly misunderstanding cause and effect.

As the Commissioner of Baseball, Manfred has significant power over the RSDC. The RSDC is supposed to be an impartial body to judge disputes between owners. He shouldn't be saying anything.

Look. If Manfred's remarks make the RSDC sound biased, then the appellate court will move the case to a different arbitral forum. So, do you want him to speak about how the Orioles are being ridiculous or do you want him to shut up? Do you really want to take the chance that he'll do damage to your case just for a sound bite? It's absurdly irresponsible. I'd be livid if I was a Nationals fan.

"Did you forget the original Marks opinion, in which the Nationals WON ON EVERY POINT except their representation?"

Who cares? The decision was vacated. That's the only thing that matters.

"Most informed analyses that I've read of this case suggest that the Nationals have by far the stronger case, having won every point in the original argument except that of the appearance of bias on the part of their choice of legal representation."

Shrug. I also wrote an analysis, written before the decision was tendered. You'll note that I also predicted that MASN would lose on every single account except for possibly evident partiality, where I thought MASN had a legitimate chance.

The Nationals clearly HAD a significantly stronger position. And they still ended up losing in round one. They still don't have a clear win. Congrats. You had a position where you win 90% of the time and managed to lose. Do you really want to argue that's a good sign? You really want to talk about moral victories? Or do you maybe want to look for a new lawyer? I'm just saying.

The Nationals are still in a better position, but the odds have gone from 10-1 Nationals, to maybe 3-2 Nationals. And the Nationals are still looking for their first win. I'd be worried right about now.

Anonymous said...

Great analysis. On the point about whether Manfred should have stayed silent, MASN fired the first shots at him, they seem to have been provoking him and MLB in general in order to elicit a response, giving them cause to scream about bias. Sounds like a good plan but if this worked every defendant could simply insult the judge and jury and appeal their conviction based on bias.


Matt Perez said...

I mean, MASN is a party to the lawsuit and has no requirement to be impartial. Manfred is the Commissioner of Baseball and has a requirement to be impartial. He has to understand his situation.

Some time ago, MASN brought a lawsuit against Time Warner. They won the first round. Then the Judge for some reason decided to make public comments about the case. Time Warner heard about these comments and forced him to recuse himself from hearing the case. In the end, MASN lost. So, yes, public remarks can have an impact on a case. If you're in a situation where it's important that you be seen an impartial, you have to be seen as impartial.

The fact is that Manfred is being paid millions of dollars to be the Commissioner of Baseball or the CEO of a billion dollar enterprise. When you have that type of responsibility and are making that much cash, I don't care whether you're being provoked or not. You can't let yourself be provoked into making a stupid decision. Can you imagine how much damage it would do to MLB if the appellate court decided to send this case to another arbitral body due to Manfred's comments?

Pip said...

Manfred's bias is as evident as the All-Star game location.

Anonymous said...

MASN has no grounds to claim that the RSDC is biased. The RSDC and the commissioner's role in selecting its members existed prior to their entering into the MASN Agreement. Section 7 of the Agreement states the following:

Major League Baseball, the Nationals, BOLP, the Orioles and TCR represent and
warrant, each on their own behalf, and each to each other, that prior to the execution of this
Agreement, neither the terms of this Agreement, nor the execution of this Agreement by it, nor
the performance of its obligations hereunder conflicts with any contract, agreement, undertaking
or understanding to which it is a party.

Matt Perez said...

The fact that the contract clearly called for the RSDC to hear the case has no relevance about whether the RSDC is biased. Certainly, it shows that MASN didn't think the RSDC would be biased. Certainly, it strengthens the argument that the case should be heard by the RSDC if the RSDC can be impartial. But if you and a friend sign an agreement stating that I'll arbitrate a dispute. If I clearly demonstrate bias against you, then my decision will be vacated regardless of the signed agreement. I can't just do anything I want.

At the moment it's irrelevant whether the RSDC is biased. Their arbitration decision was vacated. That's not in dispute. The case isn't going back to the RSDC until the appellate court rules. It's only relevant in a second arbitration brought in front of the RSDC. But I wouldn't be surprised if the appellate court decided not to send it back to the RSDC and gave either the Nationals or MASN an outright victory.

If it goes back to the RSDC, then we can talk about why MASN has grounds to claim the RSDC is biased. Until then, it's a waste of time on multiple accounts.

Pip said...

Matt, you've done yeoman duty in this subject and I really appreciate the effort.
What's worst-case scenario for the Orioles and how likely is it?
It is obvious to me that Manfred is wildly biased and is doing his absolute best to insure his chosen outcome, so things don't look good for the home team.
What would that mean?

Matt Perez said...

Glad you like it.

The most reasonable worst-case scenario is that the appellate court decides to reinstate the original RSDC decision. I'd say there's a 20-30% chance of that happening.

If so, MASN has to pay the Nationals and Orioles the difference between their proposed fees and the RSDCs (about $100 million to each team).

James Jones said...

Please excuse this late comment but I have a question for you. If MASN end up on the hook for $100M, can they afford that?!? From Angelos' perspective, it's his money regardless of whether it goes to the O's or stays with MASN, so maybe that's a bit of a wash, but would the Nationals tab break MASN?!?

Matt Perez said...

MASN definitely doesn't have the cash on hand to pay the RSDCs suggested payments. MASN distributes the majority of its profits back to the clubs, with the Orioles taking the larger share. That way, Angelos can do what he wills with it.

On the other hand, Angelos almost certainly has enough cash or could borrow enough cash to pay the RSDCs suggested payments to both teams. The Nationals tab wouldn't necessarily break MASN because Angelos can prop them up.

The question is whether Angelos would decide that it's worth paying the extra rights fees in order to ensure MASNs survival. If he decides that his equity in MASN has minimal value if he only receives a small profit margin, then he may decide it's better for MASN to declare bankruptcy and not pay the extra fees. Especially if he thinks he can make a deal with Comcast to get equity in a new network. Or if he thinks he can create a new network where he has 100% equity that just has the Orioles' rights (but then he needs to go through another two or three years of lawsuits with Comcast).

I'd bet against bankruptcy. It's hard to bankrupt a venture backed by someone as rich as Angelos.

By the by, normally I won't see a comment written two weeks after a post is written.