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Rain(maker) Delay: Nationals, Orioles, MASN, MLB rights hearing delayed until May 18th

Baseball will begin before a years-old dispute between the Nationals, Orioles, Mid-Atlantic Sports Network, and Major League Baseball is resolved.

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With all the bad news about baseball starting again, Washington Nationals' players' getting to camp, and the eternal optimism of spring, your Federal Baseball legal team thought he had just the thing to get people excited: litigation delays!

In quick review, here in no particular order are principals, issues raised, and what's at stake in the current litigation: Nationals, Orioles, money, Major League Baseball, T.V. rights fees, Mid-Atlantic Sports Network, money, lawyers, guns and money (just kidding about the guns part, probably), arbitration, the new Old Man Selig, money, Bortz methodology, and money. Caught up? If not, check out some other material here and here.

When we last left the case, the parties were exchanging discovery--documents and other information related to the arbitration process, who knew what when, and other relevant information. For the Orioles and MASN, one important goal was to obtain documents showing that the arbitration panel that awarded the Nats a rights fee beyond what the Orioles proposed was biased and impartial ("evident partiality").

It's a tough thing to do, but that's one way to have a court step in and overturn an arbitral award. If successful, the Orioles want the Supreme Court of New York to remand to a "neutral arbitral body."

It would take many more blog posts and non-billable hours to chronicle all of the documentation filed and arguments made since early January, but some seemingly meaningful discovery has emerged.

Originally, the merits hearing was scheduled to go down this Monday, but the court's docket required it be postponed until May. Still, these pages don't fill themselves. So I'll highlight some of those documents and issues here, along with arguments advanced by each side.

Use of the Bortz Methodology

One of the Orioles' claims is that the arbitration panel messed up by not using an established formula, known as the Bortz Methodology, in determining the value of the Nats' rights fee. In January, they produced an affidavit from Mark C. Wyche, who created the Bortz Methodology (I'm just going to call it Bortz from here on out). Wyche let it rip against the Nats' and MLB's valuation proposals, arguing in part that contrary to the Nats/MLB's arguments, Bortz was devised to address prospective valuation circumstances -- just the circumstance the panel was determining in this case. And Bortz had been used by the MLB frequently in the past, meaning abandoning that in this case was not copacetic.

To the documentation: Specifically, here's a 2005 document from Major League Baseball, titled "Eighteenth Report of the Revenue Sharing Definitions Committee [RSDC, the arbitration panel] and Ruling of the Administrator," affirming that the arbitration panels in the past had no problem using Bortz:

Bortz MLB use

Well, that's not awesome if you're the Nats/MLB, at least on the surface. The general idea advanced by their litigation opponents is that the arbitration panel improperly disregarding the Bortz methodology, which should support a reversal.

But the Nats fired back, arguing that "under the [Federal Arbitration Act] it does not matter whether the arbitrators construed the contract correctly. Rather . . . the 'sole question' for the arbitrators is whether the arbitrators 'construed it at all.'"  Saul Goodman says: You're in a favorable legal position when you can concede (for sake of argument, of course) that a contract was applied wrongly and still win. And the Nats might well be right; this right here is one example why arbitration awards are so hard to vacate.

I'm not privy to internal discussions and strategy for either side, obviously. But considering the Orioles/MASN have led off with/emphasized this argument in several pleadings, though, they must have some confidence in the approach. I'm not as sure that this line of argument will carry the day in isolation.

MLB's $25M Payment to the Nats

If I gave your friend--call him friend Y--$25, and conditioned his repayment to me on supposedly neutral friend X's awarding him at least that amount money in a dispute you and Y had, and I had influence over friend X's decision, would that be cool with you?

The Orioles and MASN think not. And they may be on to something.

Here's a letter from MLB Commissioner Rob Manfred to Ed Cohen of the Nationals from August 2013. The Nats and O's were well into their dispute at this time, as Washington was seeking resolution of 2012 and 2013 compensation claims. Manfred writes, "we [MLB] have reluctantly come to the conclusion that we must deal with these issues in order to move forward." So MLB paid the Nats $25 million, and told them they wanted the money back if the arbitration panel ruled in D.C.'s favor:

MLB $25M to DC

Appreciating that this document might be significant, the Nats addressed the issue earlier this month, stating

While MASN and the Orioles have insinuated that there was something nefarious about the $25 million payment that MLB made to the Nationals in August 2013, the new documents show that the Orioles knew of this payment all along -- and that it was part of the plan to avoid any release of the RSDC's award.  The payment was made to get the Nationals to the negotiating table as the Orioles wanted.

Fair enough, and not a bad rejoinder.

It appears from the document cited by the Nats that negotiations were taking place between the sides in early 2014 to agree on a compromise solution to the fees issue. Apparently, Baltimore owner Peter Angelos proposed accelerating the Nats' ownership interest in MASN to 33%--the highest it would ever go under the mid-2000s agreement to create MASN, and a little less than a 20% increase on their current ownership percentage.

In return, and in part, there were discussions between the Orioles and Manfred about use of the Bortz methodology in future proceedings (other details about this possible compromise are linked below). Manfred states in an email to Alan Rifkin (Orioles' counsel):

Manfred to Rifkin 25M

Rifkin basically laughs at the "adverse precedent" threat, and I can't say I blame him, having seen some of the documents in reference to the prevalence of Bortz before this all went down.

The negotiations ultimately fell apart, as they sometimes do. If you want read a bit more about what could have been--including a possible deal with Comcast--Matt Perez of Camden Depot has you covered.

In any case, considering the Court's previously-voiced concern about fairness being what concerns it most of all, I can see the points both sides are trying to make.

For Baltimore, it's the perfect motive for MLB to leverage their role in the arbitration process (primarily through the next issue, below), and the documentation is unambiguous.

But for the Nats, it's all about context: Baltimore was aware of the $25M, which MLB made to the Nats to help the Orioles facilitate an agreement with D.C. and avoid release (that is, issuance) of the arbitral award that is now the subject of litigation. If MLB doesn't already know the road to hell is paved with good intentions, they do now.

In the end, perhaps a judge could be persuaded that both sides exist, to some degree. Given the Court's prior statements, it may well lean Baltimore's way. I don't think this gets them to arbitral bias or partiality all the way though. Yet arguing this in conjunction with the next section may not be an attack that is dead on arrival.

Conflicting Legal Representation

The Orioles say that the $25M payment and conflicting legal representation between the Nationals, MLB, and the arbitral panel created motive and opportunity to effect evident partiality.

Proskauer Rose (the law firm in question), the Orioles claim, was all up in MLB's business throughout the process.

For example, "one day before MASN . . . filed [its] objections to Proskauer's involvement in the arbitration, Proskauer represented and advised Commissioner Selig on the extension of his $22 million-per-year employment contract with MLB [in January 2012]."

MASN offered up a document summarizing information about Proskauer's representation of other MLB entities in January 2012 against what MLB actually told them; in short, MLB said Proskauer represented the Dodgers, Mets, Pirates, and Rays (the latter three of which were members of the arbitration panel), but document disclosure showed that the firm was more involved than that (right side):

Proskauer representation

The Nationals counter-punched, claiming that it was Rifkin who had improper communications with MLB, and that he was well-known to the arbitration panel. But MASN pointed out earlier this month that Rifkin's communications with MLB were in the context of settlement negotiations (discussed in the second section directly above), and his relationship with the arbitration panel was because he represented the BOLP at MLB meetings. And on and on.

Regardless when the parties get before Justice Marks, the grounds for vacating the arbitration award are becoming a little more clear.  MASN/Baltimore is advancing arguments on several fronts--not all of which, again, are covered here. Still, we can see above how they may apply the facts (as viewed through the documents) to the law ("evident partiality," for one).

To me, and of the relatively small sample of materials reviewed here, the money and Proskauer's representation may draw the most attention from the Court. The methodology issue is tougher, but that could easily be folded into the argument as well (e.g., they deviated from Bortz to collect more money to pay the $25M).


Justice Marks did something that I think is pretty cool--he's recently required that the parties use no more than two pages when submitting letters (and perhaps more, it's unclear to me at current) to the Court. Of three letters filed since then, two use every bit of that length. It's a lawyer's nature, probably for worse.

The point is that these are complicated issues, and the above review isn't comprehensive. The parties have robustly cited many cases, laws, and rules in support of their positions. And that will of course make a difference.

On some level, though, the Court's page limits suggest to me that it wants simplicity; indeed, it has indicated that the merits issues could be resolved "expeditiously."

Doubtless that is subject to change. But if simple is what everyone wants, I hope the above has offered a window into how that might be executed.