HHP: MASN/Nats/Orioles case (Inside the Courtroom)

[Frobby]

I tend to agree. The story that had been told about the contract mandating one specific methodology for calculating the fees and the arbitration panel using another method seems at best misleading and at worse entirely wrong.

Yeah, the public statements from Alan Rifkin (MASN's attorney) had a lot of spin in them. But that shouldn't come as a big surprise. The Nats' statements/press leaks also were full of spin the other way. That's why it's nice that some of the key documents are now out in the open where you can read them and decide for yourself.

If these arbitrators were disinterested, I'd say there would be absolutely zero chance that a court would overturn or alter their award. The award reads as a very reasonable decision. It's only the fact that the arbitrators have some motivation to shade the award in favor of high rights fees that calls potential bias into question. But the Orioles/MASN knew (or should have known) about that potential for bias when they signed the MASN agreement, so I don't really have a lot of sympathy for the bias argument.

[schittenden]

Yeah, the public statements from Alan Rifkin (MASN's attorney) had a lot of spin in them. But that shouldn't come as a big surprise. The Nats' statements/press leaks also were full of spin the other way. That's why it's nice that some of the key documents are now out in the open where you can read them and decide for yourself.

If these arbitrators were disinterested, I'd say there would be absolutely zero chance that a court would overturn or alter their award. The award reads as a very reasonable decision. It's only the fact that the arbitrators have some motivation to shade the award in favor of high rights fees that calls potential bias into question. But the Orioles/MASN knew (or should have known) about that potential for bias when they signed the MASN agreement, so I don't really have a lot of sympathy for the bias argument.

Agree fully. MASN's profit margins should rise as their broadcast agreements are coming up for renewal during the next five years and both clubs have had improved on-field performance. That might help in the long term.

[weams]

I have reason to believe that the specific language as to the reset methodology is in the original contract. Any award outside of that would indeed be indicative of bias and may certainly lead to an overturn in a court setting and not a arbitration setting. The original language is not altered by a different interpretation.

[Frobby]

I have reason to believe that the specific language as to the reset methodology is in the original contract. Any award outside of that would indeed be indicative of bias and may certainly lead to an overturn in a court setting and not a arbitration setting. The original language is not altered by a different interpretation.

What "reason to believe" is that? Have you read the award? It quotes exactly what the contract says:

[T]he fair market value of the Rights shall be determined by the Revenue Sharing Definitions Committee ("RSDC") using the RSDC's established methodology for evaluating all other related party telecast agreements in the industry. The fair market value of the rights established pursuant to this Subsection for the relevant five year period, or such shorter time as may be agreed to by the parties, shall be final and binding on the Nationals and [MASN], and the Nationals and [MASN] may seek to vacate or modify such fair market valuation as established by the RSDC only on the grounds of corruption, fraud or miscalculation of figures. Beginning in 2007, the Orioles and the Nationals shall be paid the same rights fees by [MASN].

That's the only language there is. If the Orioles/MASN had wanted some specific formula in the contract, they should have insisted it be in there. It's up to the RSDC to decide what is meant by "the RSDC's established methodology."

[hoosiers]

That's the only language there is. If the Orioles/MASN had wanted some specific formula in the contract, they should have insisted it be in there. It's up to the RSDC to decide what is meant by "the RSDC's established methodology."

So why did MASN trot out the Bortz guys after the RSDC decision to say that the calculation was not done properly?

I think the Bortz calculation takes a much slower route to FMV apparently similar to that used by the NYY, BoSox and perhaps the Mets to help shield delay some $ going to TV rights fees and shared with MLB while keeping the profit in the RSN.

In some respects, it is a win for the Os that the RSDC appears to have based their decision on the acceptable profit margin at the RSN level and the RSDC respected the equal TV rights fees clause in the contract between the Os and Nats. This implies the Nats will receive less than their true FMV while the Os receive more.

[weams]

What "reason to believe" is that? Have you read the award? It quotes exactly what the contract says:

That's the only language there is. If the Orioles/MASN had wanted some specific formula in the contract, they should have insisted it be in there. It's up to the RSDC to decide what is meant by "the RSDC's established methodology."

No sir. I was told that the process was there by someone who should know. Obviously you have shown me that is not the case.

[hoosiers]

No sir. I was told that the process was there by someone who should know. Obviously you have shown me that is not the case.

It is hard to believe the MASN contact would not provide a specific calculation for the TV rights fees as well as a specific example.

[Frobby]

So why did MASN trot out the Bortz guys after the RSDC decision to say that the calculation was not done properly?

I think the Bortz calculation takes a much slower route to FMV apparently similar to that used by the NYY, BoSox and perhaps the Mets to help shield delay some $ going to TV rights fees and shared with MLB while keeping the profit in the RSN.

In some respects, it is a win for the Os that the RSDC appears to have based their decision on the acceptable profit margin at the RSN level and the RSDC respected the equal TV rights fees clause in the contract between the Os and Nats. This implies the Nats will receive less than their true FMV while the Os receive more.

They trotted out the Bortz guys because the RSDC historically has used calculations from Bortz as a significant factor in their FMV determinations. But the contract clearly does not say that FMV will be determined using some formula established by Bortz. It would have been very easy to write that in to the contract. If that was what the Orioles/MASN thought they were getting, then they should sue their lawyers for malpractice for drafting something so ambiguous. And by the way, when language is ambiguous, it is the arbtirators, not the courts, who get to interpret what it means. Believe me, I learned that one the hard way.

[Hallas]

OK, I have finally hit the Mother Lode, i.e., the arbitration award that MASN is challenging in court. Anyone who wants to read it can find it here: https://iapps.courts.state.ny.us/nyscef/ViewDocument?docIndex=66tyxyVbc5j3nEqlV2lvTg==

The Award is 20 pages long and award the following rights fees:

2012: $53,170,018

2013: $56,253,879

2014: $59,347,843

2015: $62,611,974

2016: $66,744,364

So, about $298 mm over the five year "reset" period. That is calculated by the RSDC (the Committee appointed by MLB) to allow MASN to operate at a 5% profit margin, after paying rights fees. MASN had asked for a 20% profit margin, while the Nats proposal would have required MASN to operate at a loss. MASN was expecting to have revenues of $163.6 mm in 2012, growing at 5.9 percent a year though 2016 to $205 mm. MASN operated at a 33% profit margin in 2011 after paying rights fees of $29 mm to each of the Nats and Orioles.

Folks, there is a treasure trove of information in this award decision, and other exhibits to MASN's filings that were made about two weeks ago. FYI, MASN filed an amended petition on Sept. 23, the Nationals and MLB are expected to file a cross-petition on October 20, there will be some reply papers filed in late November, and a hearing before the court on December 15. All the papers filed in the case so far (and there is more stuff here than I have time to read) can be found here: https://iapps.courts.state.ny.us/nyscef/DocumentList?docketId=dNr/lpqSApGEnQBah6Bo3Q==&PageNum=3&narrow=

I encourage everyone who has an interest in this issue to read the award, at a minimum. It contains answers to questions we have wondered about for years.

Imagine if the O's got broadcast rights to the Terps basketball or something. That would really tilt the potential revenues and profits in favor of the O's (and Nats.) I also think it would alleviate some of the b****ing going on by the Nats over rights fees.

I think the award is fair but it's like as tilted toward the Nationals as it could possibly be while still being fair. MASN might be hoping to squeeze an extra couple million out of the deal just to spite the Nats for negoiating in bad faith by asking for a $109 million rights fee in the first place.

[Mondo Trasho]

Imagine if the O's got broadcast rights to the Terps basketball or something. That would really tilt the potential revenues and profits in favor of the O's (and Nats.) I also think it would alleviate some of the b****ing going on by the Nats over rights fees.

I think the award is fair but it's like as tilted toward the Nationals as it could possibly be while still being fair. MASN might be hoping to squeeze an extra couple million out of the deal just to spite the Nats for negoiating in bad faith by asking for a $109 million rights fee in the first place.

My memory might be faulty, but didn't they carry CAA basketball games a few years back?

[Frobby]

I think the award is fair but it's like as tilted toward the Nationals as it could possibly be while still being fair. MASN might be hoping to squeeze an extra couple million out of the deal just to spite the Nats for negoiating in bad faith by asking for a $109 million rights fee in the first place.

Whatever money they might save by trying to upset the award is likely to be canceled out by what they must be paying their lawyers to litigate this. Knowing the law firms involved here and just seeing the level of effort that is going into these cases, I assure you the legal fees just since the arbitral award came down amount to several million dollars on each side.

[Can_of_corn]

Whatever money they might save by trying to upset the award is likely to be canceled out by what they must be paying their lawyers to litigate this. Knowing the law firms involved here and just seeing the level of effort that is going into these cases, I assure you the legal fees just since the arbitral award came down amount to several million dollars on each side.

Is MASN giving the work to the Angelos firm or did they hire experts in the field?

[hoosiers]

And by the way, when language is ambiguous, it is the arbtirators, not the courts, who get to interpret what it means. Believe me, I learned that one the hard way.

Well, precedent counts as well, does it not? I assume the Os have been using the Bortz calculation since the beginning.

[schittenden]

Well, precedent counts as well, does it not? I assume the Os have been using the Bortz calculation since the beginning.

The award actually addresses this. It says that the Bortz methodology has been a factor but not the only one.

[Frobby]

Is MASN giving the work to the Angelos firm or did they hire experts in the field?

I don't know who they use to do the grunt work behind the scenes, but on the record they are using a giant battery of high priced lawyers: Chadbourne & Parke (big NY firm) for MASN, Rifkin Weiner (high-priced Baltimore firm) for the "Baltimore Orioles Limited Partnership in its capacity as managing partner of" MASN, Sidley & Austin (big national firm) for the Baltimore Orioles Limited Partnership and the Baltimore Orioles Baseball Club. Ten different lawyers from those firms are listed, including one, Carter Phillips, who is one of the top Supreme Court advocates in the United States. And those are just the lawyers "of record," there are undoubtedly many junior lawyers behind the scenes.

The you have MLB, which is using two firms, including Brendan Sullivan of Williams & Connolly, one of the top trial lawyers in the U.S. The Nats are using Quinn Emanuel, one of the top trial firms in the country. It's quite a feeding frenzy.