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.

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.

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.

An Update of MASN's Economics

On May 6th and 7th, MASN responded to the Nationals request to send the case back to the RSDC for a second arbitration. In support of this effort, Mr. Haley, the executive Vice President and CFO of MASN wrote an affidavit. He wrote that the Nationals have received fair market value as determined by Bortz Media, a longtime MLB consultant that developed the RSDCs established methodology.  He noted that the Nationals received over $9.6 million in 2015 from profit distributions and tens of millions more via rights fees ($42M). Finally, he stated that the Nationals partnership interest has increased from an initial 10% to its current 17%. As MASN’s EBITDA has grown, so too has the Nationals’ asset value in MASN.

The Nationals have received a considerable amount of cash via profit distributions. As stated above, they received over $9.6 million in 2015, from 2014 distributions. Alan Rifkin wrote an e-mail two years ago, which showed the Nationals received $6.76 million in 2012 (based on 2011 results), $7.56 million in 2013 (based on 2012 results) and $9 million in 2014 (based on 2013 results). In addition, the Nationals' received a distribution for non-resident tax withholding payments. Mr. Wyche, the Managing Director of Bortz, developed a table in 2012 with the Nationals’ Rights Fees as proposed by MASN and the Nationals projected profit distributions from 2012-2016. It makes sense to compare the Nationals projected and actual profit distributions. Here’s a chart that puts everything together, with (P) standing for projected and (A) standing for actual/derived.

MASN has had larger distributions than expected despite the ongoing lawsuit. This makes sense because the Orioles and Nationals weren’t particularly successful from 2005-2011 but were extremely successful from 2012-2016. This resulted in higher ratings and therefore likely higher advertising revenue. It was impossible to predict that this was going to happen and therefore MASN was unable to account for it back in 2012.

MASN also appears to have distributed less cash in 2014 than in 2013. In all likelihood, this probably has little significance. For starters, MASN isn’t required to distribute all of its profits as distributions. Just because they distributed less cash doesn’t mean they earned lower profits. Also, the amount of cash in question is a few million dollars and therefore not a large sum. It’s probably worth keeping an eye on though.

Mr. Wyche also included a chart complied from the MLB Financial Information Questionnaires (FIQs) for media rights payments from 2005 through 2014 that compares the Nationals’ and Orioles’ relative media rights payments to all other MLB clubs. The CBA explains in Article XXIV that this questionnaire is completed by each of the Major League Clubs and submitted, together with audited financial statements, on an annual basis for each revenue sharing year to the Office of the Commissioner.  It appears that this chart shows the media rights payments as defined by the clubs themselves.

These rankings indicate that the Nationals were paid above average rights fees from 2005-2008, average rights fees from 2009-2012 and below average rights fees in 2014. The Nationals 2013 rights fees of $61.2 million were the third highest in baseball and are a combination of the rights fees received from MASN and a $25 million payment from MLB.

This $25 million payment corresponds to the difference between MASN’s calculated rights fees and the now-vacated RSDC Award for 2012 and 2013. MLB made this payment to the Nationals in order to buy more time to find a solution to the current dispute. This payment isn’t a loan and the Nationals are allowed to keep this $25 million regardless of the result of this case. However, the Nationals will be required to repay MLB from any extra revenue they may receive from a favorable RSDC decision. If the RSDC decision is reinstated then MLB receives $25 million from the extra MASN payments.

It’s worth noting that this methodology understates the actual amount that the Nationals received. MLB actually gave the Nationals $32.8 million, but deducted $7.8 million for revenue sharing. All other media rights revenue is determined before revenue sharing and therefore the Nationals’ accounting method understates the actual value of the money they received.

It’s worth remembering that in March 2012, the Nationals argued that fair market value for their media rights in 2013 was $113.3 million. It turns out that the $61 million they did receive trailed only the Yankees ($89 million) and another club. Unless that other club received a larger rights fee then the Yankees, it would have been the largest in the majors by roughly $25 million and at least $50 million more than the team that received the fourth largest amount. It is safe to say that the Nationals significantly overvalued the fair market value of their media rights fees.

At the same time, it’s concerning to note that the Orioles and Nationals ranked only 18th and 19th in total media rights fees for 2014. They’re probably closer to the average than it appears as the difference between 3rd and 20th in 2013 was roughly $24.6 million. It’s also worth noting that this chart doesn’t include profit distributions and that MASN will renegotiate its contracts with its major carriers in 2018.

To be clear, MASN believes that the Bortz Methodology should be used to determine fair market value and therefore what other teams receive is mostly irrelevant. Using this formula, MASN has an interest in maximizing its revenue in order to ensure the largest possible profit because it determines MASN's profit margins and therefore a reasonable rights fee for each team.

All in all, the new data provides an update on MASN's financial situation and each team’s rights fees. It suggests that MASN is distributing more money than originally projected. It suggests that the Nationals requested media rights fees in 2012 were unjustifiable. Finally, it makes it clear that MASN is paying the Nationals and Orioles rights fees lower than that of the median MLB team.

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.

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.