While the Nationals are focused on another New York entity these next couple days, much of the team's upper tier leaders were focused on the New York Supreme Court's New York County Courthouse Monday.
There, Justice Lawrence Marks heard arguments on if the June 2014 arbitration decision awarding the Nationals roughly $60M in T.V. rights fees from MASN (each year) was legit.
We didn't get the answer. But that didn't stop the parties--the Orioles* and MASN on one side, and the Nationals and MLB on the other--from arguing the merits of their positions for several hours this morning. If you want additional background details, check out our prior coverage here, here, and here.
*The Orioles were not technically named petitioners, but it's more simple to understand this way.
Today was significant because it was basically the last opportunity for the sides to prove to Justice Marks why they were right and the other side wrong. How would they do that? Well, recall that MASN petitioned the court to vacate the arbitration award. We've talked about it before, but overturning an arbitration award is notoriously difficult. MASN had to prove one of the following grounds to succeed:
FAA § 10(a) provides four limited bases, which have been described as "grudgingly narrow" (Eljer Mfg. Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1253 (7th Cir. 1994)) for vacating an arbitral award: (1) the award was procured by corruption, fraud or undue means; (2) there was evident partiality or corruption by the arbitrators; (3) there was arbitral misconduct, such as refusal to hear material evidence; or (4) the arbitrators exceeded their powers, or so imperfectly executed their powers that they failed to render a mutual, final and definite award.
Throughout their pleadings and discovery requests, it was apparent MASN and Baltimore were hitting point (2) as hard as they could. And they did a pretty good job, earning first a temporary restraining order, then a preliminary injunction, and next were permitted to seek certain documents from MLB. None of this was surprising in my view, but the MASN/Charm City legal team was executing where they had to to defend their clients and put them in position to win come May 18.
So with that long-winded intro, the gavel dropped yesterday morning in Manhattan. We weren't in the courtroom, but the indispensable Eric Fisher, of the Sports Business Journal, was tweeting from the gallery. He's covered this thing over the long run and has some great content on yesterday, so check him out.
Here, we'll look at what info we have on arguments and questions to break down how things went.
Proskauer Rose's Role
MASN came out swinging against the role Proskauer Rose played in the arbitration. While the arbitration was going on, Proskauer represented the teams that made up the panel, MLB, and the Nats. MASN and the Orioles argued for quite a while that evident partiality existed because the firm was essentially representing the judge and their opponents, along with MLB on top of that.
MASN atty Hall now going in on the Proskauer argument, ie, they argue not proper for law firm to rep MLB, Nats, RSDC members at same time— Eric Fisher (@EricFisherSBJ) May 18, 2015
Now pushing an hour on MASN's Proskauer argument, which to my admittedly untrained legal eye strikes as the weakest of their batch.— Eric Fisher (@EricFisherSBJ) May 18, 2015
I think Mr. Fisher is generally right on his observation, but may undervalue what MASN/Baltimore had to do to win.
Remember, you've got to get to evident partiality. This argument lays that necessary groundwork for Justice Marks in showing how the panel could have been biased: one firm represented everyone in the room but MASN/Baltimore.
That this was an essential element of proof is also shown by the fact that two sophisticated legal teams took over an hour of time to pitch Justice Marks this argument.
Importantly though, Proskauer wasn't running from the arbitrators' decision room, to the Nats' war room, and over to MLB's conference room during the arbitration hearings. Nor was the firm literally making the decision--representatives from the Rays, Pirates, and Mets did that.
Justice Marks, as judges are wont to do, got right to the heart of it from the get-go:
Judge Marks asking a lot back re MASN's Proskauer arguments. "Did it just look bad or was it actually bad?"— Eric Fisher (@EricFisherSBJ) May 18, 2015
Did it just look bad or was it actually bad. That's him saying, "tell me how this rises to evident partiality and not just something that seems shady. Because they can get away with something that may seem shady."
I don't know if they argued it on Monday, but a few days before this hearing MASN offered the court a recent New York decision that actually did overturn an arbitration award. The crux of that case: arbitrators must disclose any relationship that could suggest possible bias. Pretty decent precedent on the face of it, the notion being that the arbitrators here had to tell MASN they were represented by the people who also represented MLB and the Nats.
But Washington wisely deflected that argument in briefing, claiming that MASN and the Orioles knew of Proskauer's role before the arbitration. They also made sure Justice Marks knew that at the hearing:
Nats' Neuwirth: MASN knew along this was an inside baseball arbitration. Of course everybody would know everybody— Eric Fisher (@EricFisherSBJ) May 18, 2015
This is one example of why MASN/Baltimore had to hoe an hour's worth of ground to get their arguments on this point in. It wasn't a clear cut winner, and it required much explanation. Not "clear cut" is what you want to hear if you're trying to uphold an arbitral award.
MLB's "Control" of Arb. Panel and $25M Payment to Nats
MASN and the Orioles then claimed MLB effectively controlled the arbitration panel, and had good reason to do so: MLB had loaned the Nationals $25M, which Rob Manfred put in writing would be paid back to MLB if the Nats prevailed in arbitration. Remember #3 below?
But on brief and during oral argument, the Nats and MLB again had a rejoinder. They asserted that MLB did not control or dictate the result to the arbitration panel. Although MLB had input on certain matters and drafted some documents, the award in the end was from the panel--not MLB. And to undercut the $25M payment to D.C., emphasis on the last sentence:
MLB's Buckley: "grossly inaccurate" to say $25M advance to Nats gave lg stake in MASN outcome. The outcome was already known— Eric Fisher (@EricFisherSBJ) May 18, 2015
That's exactly what the Nats said on brief, where they referenced documents produced in discovery--we hit on the importance of that process--that showed the Orioles knew about the remuneration, and that the payment was actually to benefit Baltimore by getting Washington to the negotiating table for a possible out-of-arbitration settlement. So it wasn't sincere to say this motivated MLB and the Nats to undermine the arbitral process.
Justice Marks previously indicated that the $25M payment concerned him, but discovery seems to have given a big boost to the Nats and MLB here.
Use of Bortz Methodology
Certainly the biggest practical difference between both sides is the use (or more specifically, non-use) of the Bortz methodology. But this seems to have generated little traction during the merits hearing.
Orioles atty Carter Phillips now getting to those points I expected - the claim that RSDC used Bortz methodology every time except w MASN— Eric Fisher (@EricFisherSBJ) May 18, 2015
Again, this was certainly a core difference between the parties. Yet it's also something that's just not good enough to carry the day in court. That's why this was left for last--MASN and Baltimore knew it was the weakest legal point. The goal was to use it to highlight the "end result" of a corrupted process. But supposedly incorrect "end results" by themselves aren't good enough to clear the legal fence. They don't even make it to outfield.
As Mr. Fisher reported, Justice Marks did not rule from the bench (four hours of oral argument can make one want to take a breather before making a decision. Or a drink.). In all seriousness though, today was revealing and, I believe, ultimately portends disappointment for MASN and the Orioles.
Still, this is just my view based on several dozen tweets over many hours. These parties have talented legal teams who know how to succeed. And there are certainly judges out there who will seem adverse to a party during a hearing only to rule in their favor later on. These sorts of things can always move the needle.
We don't know when Justice Marks will rule. For now, though, I'll take the easy way out and lean in favor of the home team/MLB.
Thanks again to Eric Fisher for taking us inside the courtroom.