Orioles wins the TV rights court case battle against the Nats and MLB

[Frobby]

I

For they Orioles, delay is a win. Anyone who wishes to lessen this decision is not understanding.

The Orioles had already lost.

And the last play of the game was been determine to need to be replayed. Several years afterwards.

That's a victory. No matter the final results.

Not sure I agree. They really haven't been able to spend the money, knowing that MASN had to keep it in reserve in case they lost. Any interest earned on the money is probably dwarfed by the legal fees that have been spent on this. And uncertainty is never a great thing in business.

One interesting issue is whether the reconvened RSDC gets to look at what MASN's profits have been the last four years. Remember, their decision was based on projections that were supposed to be conservative. So if MASN's profits have turned out to be higher than was expected in 2012 when the RSDC made its decision, the RSDC may award the Nats higher rights fees in the renewed proceedings. You have to know the temptation will be there to spank the Orioles for having challenged the award.

[weams]

I

Not sure I agree. They really haven't been able to spend the money, knowing that MASN had to keep it in reserve in case they lost. Any interest earned on the money is probably dwarfed by the legal fees that have been spent on this. And uncertainty is never a great thing in business.

One interesting issue is whether the reconvened RSDC gets to look at what MASN's profits have been the last four years. Remember, their decision was based on projections that were supposed to be conservative. So if MASN's profits have turned out to be higher than was expected in 2012 when the RSDC made its decision, the RSDC may award the Nats higher rights fees in the renewed proceedings. You have to know the temptation will be there to spank the Orioles for having challenged the award.

We'll see. It was a loss before. I'm not much one to go quietly into the night.

[Rich Mac]

A totally Pyrrhic victory

"A Pyrrhic victory is a victory that inflicts such a devastating toll on the victor that it is tantamount to defeat. Someone who wins a Pyrrhic victory has been victorious in some way. However, the heavy toll negates any sense of achievement or profit (another term for this would be "hollow victory")."

That is my opinion of the Orioles' "victory" this week. I think two parts of Justice Marks' decision are paramount:

1. The opinion totally rejected MASN's argument that the RSDC's decision had "exceeded their powers" or that they "stray[ed] from the interpretation or application of the agreement and effectively dispense[d] [their] own brand of justice." To the contrary, Justice Marks found that the arbitrators "set forth an extensive explanation of their determination of the appropriate methodology to apply," and that explanation was "reasonable on its face...and therefore must be upheld even if this Court were to conclude that the RSDC's interpretation of its own established methodology was legally and factually incorrect." See pages 12-15 of the opinion.

2. The opinion makes clear that its will not re-write the parties' agreement and require that the remanded arbitration take place before a body other than the RSDC. He essentially said all that needs to happen is that the Nationals need to hire new counsel who don't concurrently represent MLB. See opinion at p. 28, fn. 21.

In other words, this is a wholly technical victory for MASN and the Orioles. Justice Marks has issued at open invitation for RSDC to render an updated decision that makes the exact same findings as before about the interpretation of the parties' agreement. If I were the Nats, I would not appeal this "loss." I'd rush back to the RSDC, change my counsel, and let them present the exact same case that was presented before. And the end result of the remanded arbitration will be virtually the same as before, and now MASN and the Orioles will be stuck with it.

It will be interesting to see what MASN and the Orioles do here. If they are the ones who decide to take an appeal from this decision, that will tell you who really "won."

For convenience, here's another link to the decision. I'd recommend reading all of it, but especially pages 12-15 and footnote 21 on page 28. They create huge problems for MASN and the Orioles, IMO. https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=zA51e0IRuIQwKn5t4IqWhw==&system=prod

I agree. There really isn't much more to add to your statement.

However, in reading the decision, I found two lines that were particularly damning of the Orioles. First (page 22), "MASN, and the Orioles as its majority owner, clearly agreed to an "inside baseball" arbritration, where the parties and arbitrators would all be industry insiders who knew each other and inevitably had many connections." Second (page 14), "Indeed, the parties made no effort to define the RSDC's established methodology in the Agreement, or even to offer the slightest hint that a specific operating margin might be required."

My understanding is that this is all occurring because the RSDC is using a different methodology than the Orioles to determine the fair value owed to the Nationals by MASN. The Agreement was established because MLB was infringing on the Orioles market and the Orioles were attempting to protect themselves financially. So, why would they agree (in the event of dispute) to send the matter to an MLB entity with no established accounting methodology to make the determination? MLB doesn't exactly have carte blanche to make up any number they want, but they sure can pick a methodology that favors their interests and there is nothing we can do about it.

Am I really reading all of that correctly? Or am I just misunderstanding the situation? Both are very real possibilities.

[Frobby]

I agree. There really isn't much more to add to your statement.

However, in reading the decision, I found two lines that were particularly damning of the Orioles. First (page 22), "MASN, and the Orioles as its majority owner, clearly agreed to an "inside baseball" arbritration, where the parties and arbitrators would all be industry insiders who knew each other and inevitably had many connections." Second (page 14), "Indeed, the parties made no effort to define the RSDC's established methodology in the Agreement, or even to offer the slightest hint that a specific operating margin might be required."

My understanding is that this is all occurring because the RSDC is using a different methodology than the Orioles to determine the fair value owed to the Nationals by MASN. The Agreement was established because MLB was infringing on the Orioles market and the Orioles were attempting to protect themselves financially. So, why would they agree (in the event of dispute) to send the matter to an MLB entity with no established accounting methodology to make the determination? MLB doesn't exactly have carte blanche to make up any number they want, but they sure can pick a methodology that favors their interests and there is nothing we can do about it.

Am I really reading all of that correctly? Or am I just misunderstanding the situation? Both are very real possibilities.

The Orioles made their own bed here. I said from day one that if they had expected MLB to apply some rigid formula at a 20% profit, then they should have insisted that the contract say that expressly. If they wanted to avoid having a possibly self-interested body decide any disputes, then they should have insisted that the contact provide for disputes to be decided by a body other than the RSDC. They didn't, and now they're going to live with the consequences.

[weams]

Another viewpoint worth considering. http://camdendepot.blogspot.com/2015/11/judge-rules-in-favor-of-masn.html

[weams]

Another viewpoint worth considering. http://camdendepot.blogspot.com/2015/11/judge-rules-in-favor-of-masn.html

Nationals fans seem to think that this means that the Bortz Methodology is dead and doesn't need to be considered. I disagree with this interpretation because the judge made it clear that he wasn't passing judgement on whether the RSDC's interpretation is necessarily correct, but rather that he felt it wasn’t in the courts’ jurisdiction. He further stated that the RSDC explanation "must be upheld even if this court were to conclude that the RSDC's interpretation of its own established methodology was legally and factually incorrect." The RSDC decision doesn't need to be right to be upheld but rather merely reasonable.

However, Justice Marks did agree that while MASN accepted an “inside baseball” arbitration, MASN didn’t accept a situation where their arbitration opponent was represented in the arbitration by the same law firm that was concurrently representing MLB and the arbitrator clubs in other matters. He argued that MASN and the Orioles made many well-documented protests about this, but MLB and the Nationals took no actions in response. He felt that this gave the Nationals an unfair advantage and therefore allowed him to vacate the decision.

This doesn’t mean that the Bortz Methodology will be implemented and that the Nationals will receive what MASN offers. Nor does it necessarily mean that this case will be forced to go to a neutral arbitrator. What it does mean is that the RSDC decision no longer exists. MASN will be allowed to pay its proposed rights fees for the near future and the parties involved will need to agree on next steps. The two solutions that Justice Marks suggested were that the parties either go to a neutral arbitrator, such as the American Arbitration Association or that the Nationals use different counsel to retry this case in the RSDC. Alternatively, MLB can try appealing this decision to a higher court or try to come to a settlement now that the RSDC opinion has been vacated and each of the parties has more flexibility.

He has had some good ongoing articles on this subject. I am uncertain of his sanding in the legal community.

[Frobby]

He has had some good ongoing articles on this subject. I am uncertain of his sanding in the legal community.

His interpretation is academically correct. The reconvened RSDC isn't bound by the prior RSDC decision. But they also know that if they come out in basically the same place, the Court is highly unlikely to overturn them. So what do you expect to happen?

[weams]

His interpretation is academically correct. The reconvened RSDC isn't bound by the prior RSDC decision. But they also know that if they come out in basically the same place, the Court is highly unlikely to overturn them. So what do you expect to happen?

A settlement. Negotiated. Without the sledgehammer.

[Frobby]

A settlement. Negotiated. Without the sledgehammer.

A settlement would be good. I don't think it will differ much h from what the RSDC said before. What might make sense is to negotiate a profit margin for MASN and apply it each year on a retroactive basis, rather than trying to guess how profitable MASN will be over a five-year future period. Then just lock it in rather than re-setting in 2017.

[weams]

A settlement would be good. I don't think it will differ much h from what the RSDC said before. What might make sense is to negotiate a profit margin for MASN and apply it each year on a retroactive basis, rather than trying to guess how profitable MASN will be over a five-year future period. Then just lock it in rather than re-setting in 2017.

I think that would be smart. I really believe the whole point of this was meant to explode MASN, and now that appears to be a few years off if at all. Neither Ted nor Peter may live long enough to end this feud. Just end it now. And with an Orioles favoritism. The way it was intended.

[spiritof66]

I think the MASN decision and its legal consequences are pretty clear. Those consequences are that (1) the Revenue Sharing Definitions Committee's 2014 arbitration award no longer has any force or effect; (2) there would be no legal grounds for a court to interfere with an identical decision by that committee in a second arbitration, so long as the Nats change their lawyers first and neither MLB nor the Nats do something egregious enough to give MASN and the Orioles grounds for a new argument; (3) the decision, and points (1) and (2) above, remain subject to review by a five-judge appeals court panel, which will not be required to give any weight to Justice Marks' decision but probably will be swayed by it; (4) a decision on appeal could improve the position of either side; and (5) it is possible, but unlikely, that there would be a second appeal to New York's Court of Appeals (the state's highest court).

That's the relatively easy part. What we don't know is how the parties will react to the decision. Who will appeal? Even if there is an appeal, will the Nats and/or MLB press for an immediate re-do of the 2012 arbitration (after the Nats have hired new lawyers)? Will the decision provide an impetus to settle, or will the extensive litigation and decision harden the positions of the parties (all of which can claim victory for now)? Is a sale of MASN still a viable option, and if so would that provide a more mutually appealing resolution?

[weams]

Is a sale of MASN still a viable option, and if so would that provide a more mutually appealing resolution?

Only if the sale included a 30 year contract for rights at the current ownership distribution. Meaning the Orioles get 75 percent of the total sale and 30 year rights. Of both teams. I am told it is meant to extend to perpetuity as it was agreed. Obviously the documents do not totally support this position. That would be a reasonable compensation for the territory infringement. A negotiation could center over a 5% level of compensation. Maybe the Orioles settle at 70%.

[wildcard]

Seems like the O's have to appeal the part(s) of the decision that did not go their way.

For Marks to rule that the procedure of the Nats and MLB having the same lawyers as improper extends further the the rules states. The reasons why such rules are in place is to prevent unfair decisions. Mark by ruling the way he did shows the possibility of an unfair playing field existed in the legal relationship between the Nats and the MLB. Marks with his ruling established that.

For Marks to then say that there was not unfairness in the other parts of the ruling does not seem right. If the Nats and MLB had established an unfair the relationship the decisions that were made during that relationship are tainted and appealable.

Mark decision on the different item appears backward. If he had explained that the dual counsel of the Nats and MLB created a problem as the first thing he explained the rest of the decisions becomes in question.

JMO

[spiritof66]

I

Not sure I agree. They really haven't been able to spend the money, knowing that MASN had to keep it in reserve in case they lost. Any interest earned on the money is probably dwarfed by the legal fees that have been spent on this. And uncertainty is never a great thing in business.

One interesting issue is whether the reconvened RSDC gets to look at what MASN's profits have been the last four years. Remember, their decision was based on projections that were supposed to be conservative. So if MASN's profits have turned out to be higher than was expected in 2012 when the RSDC made its decision, the RSDC may award the Nats higher rights fees in the renewed proceedings. You have to know the temptation will be there to spank the Orioles for having challenged the award.

I think they probably can look at the historical profits. But why give the Orioles another argument? If they're smart they will allow the Nats to present the historical facts, use the projections to come out where the first panel did, and say that while they're not relying on the historical profits they would support even higher rights fees.

[hoosiers]

I don't see how this is a Pyrric victory. The court said that on the surface it was unable to vacate the RSDC decision because the reasoning of the RSDC decision could not be overturned, but that the process that arrived at the decision involving the use of the same law firm to represent all interested parties except MASN lacked fairness. Hopefully, with different council involved and some application of fairness, the next RSDC decision or, preferably, a decision by a different arbitration panel could yield a result more favorable to the Os and MASN.

I have said before I think the entire RSDC decision is a sham organized and supported by MLB, but uses a methodology to arrive at what would appear to be a reasonable decision when it is not. IMO, it is preposterous to look at the facts involved in the case and $ received by other teams and the profitability of other team-owned RSNs .... and conclude that the Nats deserve something like $53M in Year One of the first reset with MASN operating at a 5% margin - even if vacating the Bortz methodology.