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MASN dispute update

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Minor victory for MASN last week, in a separate dispute about whether MASN was required to pay a dividend last year:

“Four judges ruled unanimously Tuesday to allow the American Arbitration Association to hear arguments over whether MASN, which has the exclusive broadcast rights to the Nationals and Baltimore Orioles but is controlled by the Orioles, must pay out a dividend to the Nationals of between $5 million and $10 million, according to people familiar with the case.”

https://www.google.com/amp/s/www.washingtonpost.com/sports/2019/11/19/court-sides-with-masn-profit-distribution-dispute-with-nationals/%3foutputType=amp

This is not the big dispute over the amount of rights fees that are owed.    This is about whether MASN is obliged to pay dividends.  

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7 hours ago, Frobby said:

Minor victory for MASN last week, in a separate dispute about whether MASN was required to pay a dividend last year:

“Four judges ruled unanimously Tuesday to allow the American Arbitration Association to hear arguments over whether MASN, which has the exclusive broadcast rights to the Nationals and Baltimore Orioles but is controlled by the Orioles, must pay out a dividend to the Nationals of between $5 million and $10 million, according to people familiar with the case.”

https://www.google.com/amp/s/www.washingtonpost.com/sports/2019/11/19/court-sides-with-masn-profit-distribution-dispute-with-nationals/%3foutputType=amp

This is not the big dispute over the amount of rights fees that are owed.    This is about whether MASN is obliged to pay dividends.  

I don't see how the Nationals will win that arbitration.

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7 minutes ago, atomic said:

I don't see how the Nationals will win that arbitration.

I’d be shocked if they did, unless they can show that MASN was acting in bad faith, which is a very heavy lift.  

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5 hours ago, dmvsports410 said:

They certainly won the world series, and no matter the outcome will spend money to win. 

The first full year the Lerners owned the team (2007), they lowered the payroll from $63 mm to $36 mm.   They never spent more on payroll than the Orioles until 2012.    In other words, they waited until the time was right to spend.    

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52 minutes ago, dmvsports410 said:

It's not 2007, it's 2019. The Nationals have done a better job in the international market, drafting, and willingness to spend period. At the end of the day they are better ran the Orioles, and have a winning product. What under Mike Rizzo he has what 6 or 8 winning seaon's under Mike Rizzo. Who cares because he got them a world series. I give props where props it do. I'm 32 not this

Nothing you said detracts from my point.    The Lerners went cheap when the team was bad, spent when the team was ready to be good.    Which is what I expect the Orioles to do.     I agree they’ve been much better run over the Orioles since the Lerners bought the team.    Mike Rizzo is an excellent GM and I’m hoping Mike Elias will prove that he is, too, but it’s too soon to know.    

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On 11/27/2019 at 6:52 PM, atomic said:

I don't see how the Nationals will win that arbitration.

You don’t see how the AAA will hand down a decision requiring MASN to disburse profits to ownership per the alleged terms of the settlement agreement?  I think you don’t have a clue as to what’s under consideration here.  I didn’t read the decision, but I’m pretty confident the judges didn’t buy into MASN’s ridiculous argument that MLB has a financial stake in the Nationals because of the $25M loan — which has already been paid back.

The network profits distribution is a different animal than determining the fair market value for the TV fees.  Specifically spelled out in the settlement agreement is that the RSDC makes the FMV decision in case of a dispute.  The O’s pulled this same COI stunt then and got shot down.  And while they are going to throw good money after bad appealing the decision again, they’re going to lose again.  After they exhaust their appeals the Nats should file a derivative lawsuit seeking compensation from the Os to pay for the legal fees incurred at their own expense.  As a minority owner of MASN, the Nationals essentially bankrolled the legal fees that came out of MASN’s bottom line.

In regard to MASN’s required distribution to the owners, I assume the Nats were either tweaking Peter’s nose by trying to get MLB (not the RSDC) to enforce the distribution.  If you think the AAA is going to look at the distribution requirements and see something different than what MLB would see, you’ve got another think coming.  The AAA team isn’t going to feel sorry for the Os or MASN because they lost on the RSDC FMV decision. They won’t even look at it, as they aren’t tasked to look at decisions previously made.  When this is finally put to bed, including the current rights fee period, I hope the Os are prepared to face what is surely coming their way for their bringing the courts into this.

Sanctions are coming. 

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3 hours ago, Beetlejuice said:

You don’t see how the AAA will hand down a decision requiring MASN to disburse profits to ownership per the alleged terms of the settlement agreement?  I think you don’t have a clue as to what’s under consideration here.  I didn’t read the decision, but I’m pretty confident the judges didn’t buy into MASN’s ridiculous argument that MLB has a financial stake in the Nationals because of the $25M loan — which has already been paid back.

The network profits distribution is a different animal than determining the fair market value for the TV fees.  Specifically spelled out in the settlement agreement is that the RSDC makes the FMV decision in case of a dispute.  The O’s pulled this same COI stunt then and got shot down.  And while they are going to throw good money after bad appealing the decision again, they’re going to lose again.  After they exhaust their appeals the Nats should file a derivative lawsuit seeking compensation from the Os to pay for the legal fees incurred at their own expense.  As a minority owner of MASN, the Nationals essentially bankrolled the legal fees that came out of MASN’s bottom line.

In regard to MASN’s required distribution to the owners, I assume the Nats were either tweaking Peter’s nose by trying to get MLB (not the RSDC) to enforce the distribution.  If you think the AAA is going to look at the distribution requirements and see something different than what MLB would see, you’ve got another think coming.  The AAA team isn’t going to feel sorry for the Os or MASN because they lost on the RSDC FMV decision. They won’t even look at it, as they aren’t tasked to look at decisions previously made.  When this is finally put to bed, including the current rights fee period, I hope the Os are prepared to face what is surely coming their way for their bringing the courts into this.

Sanctions are coming. 

This about distribution of dividends to the owners of MASN. The Nationals are minority owners of MASN.  I own part of Google. They don’t give out dividends.  Do you think I would have any luck going to court and demanding they give me dividends?  

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49 minutes ago, atomic said:

This about distribution of dividends to the owners of MASN. The Nationals are minority owners of MASN.  I own part of Google. They don’t give out dividends.  Do you think I would have any luck going to court and demanding they give me dividends?  

The difference is GOOG is a publicly traded company and MASN is not.  And GOOG isn’t constrained by previously defined contractual obligations while MASN most definitely is.
 

The Settlement Agreement, which is still in force determines if and how MASN’s profits are to be disbursed, not Angelos or MASN.  And since MASN has been distributing profits since its inception they don’t have a leg to stand on to deny they are contractually obligated to make these payments.  The best they can do is to recalculate the profits taking into account the RSDC’s FMV determination which the Os and MASN lost on in court.   But they still have to make them.  And  “profit” is an easy term to define (revenue minus operating expenses).  Unfortunately for MASN, who will  try and dick around as much as possible to remain solvent, an independent arbitrator is not going to let them weasel out of their obligations any more than MLB would.

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22 minutes ago, Beetlejuice said:

The difference is GOOG is a publicly traded company and MASN is not.  And GOOG isn’t constrained by previously defined contractual obligations while MASN most definitely is.
 

The Settlement Agreement, which is still in force determines if and how MASN’s profits are to be disbursed, not Angelos or MASN.  And since MASN has been distributing profits since its inception they don’t have a leg to stand on to deny they are contractually obligated to make these payments.  The best they can do is to recalculate the profits taking into account the RSDC’s FMV determination which the Os and MASN lost on in court.   But they still have to make them.  And  “profit” is an easy term to define (revenue minus operating expenses).  Unfortunately for MASN, who will  try and dick around as much as possible to remain solvent, an independent arbitrator is not going to let them weasel out of their obligations any more than MLB would.

Respectfully, I think you are way off base here.    The settlement agreement does not require MASN to pay dividends.    It merely determines the percentage of ownership of MASN owned by the Nats and Orioles.    Any limited partnership has discretion whether to retain its profits or pay some or all of the profits out as dividends.   The fact that they’ve paid a dividend 10 years in a row doesn’t preclude them from retaining the profits in the 11th year.     It’s all a matter of whether the decision was made by MASN’s management in its good faith business judgment, and the standard for proving that it wasn’t is very high.    There are lots of legitimate reasons to retain profits rather than pay dividends.    And remember, the O’s still own 75-80 of MASN, so a decision not to pay a dividend this year deprived the Orioles of a dividend that is 3-4 times larger than the dividend that would have been paid to the Nats.   In that circumstance, proving this was a bad faith decision will be very difficult, in my opinion.  

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30 minutes ago, Frobby said:

still in force determines if and how MASN’s profits are to be disbursed

emphasis added.

The SA can certainly spell out a provision like this.  And considering the “partner” on the other end of this agreement I would not be shocked to see MLB insist this were in there.  Besides, Angelos is incentivized to max out distributions, at least until the ownership percentages stabilize.  For every year that goes by withholding a dividend, that’s 1% less he keeps in his pocket.

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39 minutes ago, Frobby said:

proving this was a bad faith decision will be very difficult, in my opinion.  

Do you think the Nats will ask for discovery, even just for the lolz?  I would expect to see the response mention “overly broad and burdensome”.  Can a binding arbitration order discovery?

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1 hour ago, Beetlejuice said:

Do you think the Nats will ask for discovery, even just for the lolz?  I would expect to see the response mention “overly broad and burdensome”.  Can a binding arbitration order discovery?

It depends on two things: (1) what the agreement that provides for arbitration says about discovery, if anything, and (2) the written rules of the body administering the arbitration (here, the American Arbitration Association).    The AAA rules do provide for discovery but allow the arbitrators great discretion in how much or how little to permit.     I’ve read the MASN settlement agreement, but not recently.    I don’t remember it saying anything about discovery, but like I said, it’s been a while since I read it so my memory could be off.   

There’s little doubt the Nats will ask for discovery if it’s permitted.   
 

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7 hours ago, Beetlejuice said:

The difference is GOOG is a publicly traded company and MASN is not.  And GOOG isn’t constrained by previously defined contractual obligations while MASN most definitely is.
 

The Settlement Agreement, which is still in force determines if and how MASN’s profits are to be disbursed, not Angelos or MASN.  And since MASN has been distributing profits since its inception they don’t have a leg to stand on to deny they are contractually obligated to make these payments.  The best they can do is to recalculate the profits taking into account the RSDC’s FMV determination which the Os and MASN lost on in court.   But they still have to make them.  And  “profit” is an easy term to define (revenue minus operating expenses).  Unfortunately for MASN, who will  try and dick around as much as possible to remain solvent, an independent arbitrator is not going to let them weasel out of their obligations any more than MLB would.

Companies stop paying dividends all the time when profits go down. I have experienced this from companies before unfortunately.  

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9 hours ago, Frobby said:

Respectfully, I think you are way off base here.    The settlement agreement does not require MASN to pay dividends.    It merely determines the percentage of ownership of MASN owned by the Nats and Orioles.    Any limited partnership has discretion whether to retain its profits or pay some or all of the profits out as dividends.   The fact that they’ve paid a dividend 10 years in a row doesn’t preclude them from retaining the profits in the 11th year.     It’s all a matter of whether the decision was made by MASN’s management in its good faith business judgment, and the standard for proving that it wasn’t is very high.    There are lots of legitimate reasons to retain profits rather than pay dividends.    And remember, the O’s still own 75-80 of MASN, so a decision not to pay a dividend this year deprived the Orioles of a dividend that is 3-4 times larger than the dividend that would have been paid to the Nats.   In that circumstance, proving this was a bad faith decision will be very difficult, in my opinion.  

Particularly when there is significant dispute over what the rights fees to be paid out off the top are, something the Nats would be party to.

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