20 July 2017

The End Of Round One At The Appellate Court

The latest chapter in the MASN saga was written on Thursday, when the appellate court released a decision about the latest set of appeals. As a refresher, back in 2012, MASN and the Nationals attempted to agree upon fair rights fees for 2012-2016. Using the Bortz methodology, MASN proposed that fair rights fees for the 5 year period was $198 Million. The Nationals, based on models built by Chris Bevilacqua, felt that fair rights fees were $590 million over the 5 year period. The two sides were unable to come to an agreement, so they requested that the RSDC decide.

MLB decided that it was in the interests of all parties for MASN, the Nationals and the Orioles to come to an agreement instead of the RSDC mandating a solution, so they did their best to buy time until it became clear that the two sides would not come to an agreement. When MLB did decide to release the RSDCs solution in 2014, MASN felt that they didn’t receive a fair hearing from the RSDC and appealed this decision in court. Judge Marks ruled in November 2015 that the RSDC decision was indeed unfair and should be vacated but that the RSDC was a possible venue to re-arbitrate this case. Both the Orioles and the Nationals appealed this court ruling and on Thursday, the appellate court ruled on this set of appeals.

The first decision they made was a unanimous decision that the original RSDC decision should be vacated. The second decision they made is that the appropriate venue to re-arbitrate the case is the RSDC by a margin of 3-2. A party is only allowed to appeal a decision that was agreed upon by three judges, so MASN is able to appeal the decision that the RSDC is the appropriate venue to make a decision about rights fees, but the Nationals are unable to appeal the decision to vacate the RSDCs original decision.

The only permanent consequence of this latest ruling by the appellate court is that the RSDCs original decision can’t be reinstated and that the only remaining discussion is which venue will re-arbitrate the case. The Nationals and MLB want the RSDC to be that venue while MASN and the Orioles want an independent forum such as the AAA to be that venue. However, the Nationals feel that this court ruling suggests that the full appellate court will decide that the appropriate venue to hear this case is the RSDC and not an independent venue.

The concurring opinion decided that the RSDC is the appropriate venue because there is no proof that the current members of the RSDC are biased against MASN or the Orioles and that the Nationals have agreed to use different representation in this rehearing.  They further claimed that all the parties made an educated decision to use the RSDC as the arbitrating venue in the original contract, despite knowing the fact that MLB has significant influence over the RSDCs decision.

The authors were not sympathetic to MASNs claim that the $25 million that MLB paid the Nationals will bias the RSDCs decision against MASN. They believe that this $25 million payment gave the parties more time to come to a mutually agreeable decision about rights fees and MLB had good intentions when making the loan. Therefore, they felt it would not be right to punish MLB for making this loan by saying that it would give MLB a stake in the decision and motivate them to bias the new members on the RSDC to make an unfair decision against MASN.

Finally, the authors also felt that there was no guarantee that arbitrators selected by the AAA could also be free of all bias. All arbitrators would be required to have expertise in professional sports and broadcast fees. Such experts may well not be independent of MLB and therefore this could mean that even independent arbitrators wouldn’t solve the problem.

The minority dissenting opinion, issued by the Chief Justice, stated that this case should be re-arbitrated in a different forum because the RSDC will be biased due to MLBs interest in the case. Unlike the concurring opinion issued by a plurality, this opinion feels that the court has the right to change an agreed upon venue if “the forum is shown to be so corrupt or biased as to undermine the reasonable expectations of the parties to have a fundamentally fair hearing”. He believes that MASN is correct to suspect that they won’t receive a fundamentally fair hearing in part due to MLB’s apparent lack of fairness at the first hearing, MLBs direct monetary stake in the case of $25M, evidence that MLB is supporting the Nationals and actively opposing MASN, and evidence of the current Commissioner's personal involvement in the prior arbitration, including the drafting of the vacated award, and his publicly stated views about the dispute.

Ultimately, the primary point that this case will hinge upon is the connection between the members of the RSDC and MLB. The majority of judges that decided not to send this case to a different venue did so because they aren’t convinced that the current set of members of the RSDC are biased and therefore feel that MASN can receive a fair arbitration hearing in this venue. The two judges that disagreed did so because they felt that MLB is able to bias the RSDC. MASN will need to convince the members of the court that the RSDC is vulnerable to pressure from MLB. In general, courts don’t like to change the terms in a contract unless there are extraordinary events that compel them to do so.

MASN should probably point out some inconsistencies in the concurring opinion’s argument. For example, the concurring opinion argues that MASN was well aware that the RSDC is significantly influenced by MLB. It further argues that MASN decided to waive the opportunity to mediate this dispute in front of the AAA or JAMS, electing to have this dispute heard in front of the RSDC and that the only reason why MASN has changed its mind is because they’re unhappy with the decision the RSDC made the first time.

Such an argument seems unreasonable. It is more plausible that MASN was perfectly willing to submit to the RSDC for arbitration until they and MLB went through a process in which MASNs concerns were completely ignored, and the whole arbitration hearing itself was ultimately thrown out for evident partiality. Given that few arbitration results are thrown out for evident partiality, it seems unreasonable to presume that MASN could have predicted the lengths that MLB would go to in order to receive its desired result. Certainly, this case would have been resolved by now if the first hearing was fairly run.

It is interesting that the Nationals put out a press release stating that they won a major legal victory when the court ruled that the case should be reheard in front of the RSDC instead of a different venue. Yet, the alternative to this was having the case heard in front of an independent arbitrator such as the AAA. Certainly, the AAA can’t be accused of being biased for MASN or the Orioles. If MASNs request isn’t fair, then the AAA will decide a different amount. So, if the Nationals think that they won a huge legal victory by having this case reheard by the RSDC, it perhaps suggests that they think that they’ll have an unfair advantage in this forum.

This becomes more evident when one considers that the RSDC originally determined that the fair rights fees should be closer to what MASN suggested than what the Nationals requested. If the Nationals felt that their request was credible, then they should hope to have their case heard in front of a different forum. The fact that they think that having this case heard in a forum that offered them less than what they requested is a “major legal victory” suggests that they know something about the forum that isn’t public knowledge.

One might think that this point is largely irrelevant to the overall picture. After all, the case will hinge on whether the appellate court thinks the arbitrators can judge this case fairly. However, the dissenting opinion did mention that the commissioners’ public statements were a reason why they decided that the RSDC wasn’t a proper forum for this case. It very well could be that unwise comments will convince the court to rule one way or another.

MASN and the Orioles are expected to appeal the decision by the appellate court to have this case judged by the same venue. In addition, it is possible that the Nationals and MLB will attempt to force MASN to submit to another arbitration in front of the RSDC.

Thursday’s decision had the potential to have a significant impact on the MASN dispute by determining where the second ruling will take place. A decision decisively in favor of one of the parties would have gone a long way towards bringing this dispute to its ultimate end. Instead, the appellate court was unable to come to a decisive decision and therefore this case will go for a second round at the appellate court.


James Jones said...

Is it reasonable for me to assume that, because this is an Orioles blog, your opinion on this dispute will be somewhat biased towards the birds or do you try to present an... ahem... fair and balanced opinion? I ask because I've been closely following this shotgun marriage between the Nationals and the O's since Day One and have noticed that your writings on the issues, while extensive and generally thorough, are not without a subtle bias here and there.

Fasttimes said...

The only reason the award was vacated due to evident partiality was due to the Nats representation by Proskauer AND that MASN'S concerns over this issue was ignored. Had it not been for that, then Judge Marks would not have vacated the award. Judge Marks and the majority felt there was nothing else "unfair", and the minority could only point to the $25 million advance and Manfred's public comments. The majority laughed at the $25 million advance as being unfair, as you note that it was acknowledged that was done in good faith. Nor were Manfred's comments an issue. MLB rightly felt the decision was correct based upon the merits.