MASN dispute update

[spiritof66]

4 hours ago, Beetlejuice said:

Well, therein lies the rub (if I remember my Shakespeare correctly).

Industries often specify arbitration forums to conflict of interest entities precisely because they have the expertise to hear such disputes.  Inside baseball is an apt term in this case.  Who knows more about baseball RSN than do baseball ownership?  The majority opinion’s decision states this and is concerned about how this will effect other industries where contracts require disputes to be settled by industry experts.

The real question is not whether fairness can be had in such an arbitration, but whether a participant can demand a second (or in this case a third) bite at the Apple because they are unhappy with the outcome.   While Angelos has claimed that the arbitrations were unfair because of bias, he never established bias, much corruption or deceit.

I don't think that's accurate. The trial court decided, and all five judges on the appeals court agreed, that the original arbitration held before MLB owners was unfair to the Orioles and that the arbitration award should be tossed out. Quoting from the majority in the appeals court:

[W]e find that the arbitration award issued by the RSDC on June 30, 2014 was correctly vacated based on "evident partiality" .  .  .  arising out of the Nationals' counsel's unrelated representations at various times of virtually every participant in the arbitration except for MASN and the Orioles, and the failure of MLB and the RSDC, despite repeated protests, to provide MASN and the Orioles with full disclosure or to remedy the conflict before the arbitration hearing was held. 

Every one of the six judges who has looked at the question has agreed that the first MASN arbitration flunked the test for a fair, binding arbitration. The issues that split the appeals court are (1) whether, after an unfair arbitration conducted before arbitrators identified in an arbitration agreement, courts have the authority to order that the arbitration be conducted before a different arbitral forum, and (2) whether, if that authority exists, it should be bused under these circumstances. I'm pretty sure those are the issues MASN and the Orioles are pursuing before the highest court in New York, which (improperly, in my view) ducked them a few years ago.    

 

[Frobby]

4 hours ago, spiritof66 said:

I don't think that's accurate. The trial court decided, and all five judges on the appeals court agreed, that the original arbitration held before MLB owners was unfair to the Orioles and that the arbitration award should be tossed out. Quoting from the majority in the appeals court:

[W]e find that the arbitration award issued by the RSDC on June 30, 2014 was correctly vacated based on "evident partiality" .  .  .  arising out of the Nationals' counsel's unrelated representations at various times of virtually every participant in the arbitration except for MASN and the Orioles, and the failure of MLB and the RSDC, despite repeated protests, to provide MASN and the Orioles with full disclosure or to remedy the conflict before the arbitration hearing was held. 

Every one of the six judges who has looked at the question has agreed that the first MASN arbitration flunked the test for a fair, binding arbitration. The issues that split the appeals court are (1) whether, after an unfair arbitration conducted before arbitrators identified in an arbitration agreement, courts have the authority to order that the arbitration be conducted before a different arbitral forum, and (2) whether, if that authority exists, it should be bused under these circumstances. I'm pretty sure those are the issues MASN and the Orioles are pursuing before the highest court in New York, which (improperly, in my view) ducked them a few years ago.    

 

That’s one way to look at it.   But as I recall, the trial judge also said the substantive decision of the RSDC was “reasonable on its face” or something to that effect.   To me, the decision was about the potential for improper influence, not any showing of actual bias.     But it’s been a long time since I read those decisions.   
 

[NelsonCruuuuuz]

1 hour ago, Frobby said:

That’s one way to look at it.   But as I recall, the trial judge also said the substantive decision of the RSDC was “reasonable on its face” or something to that effect.   To me, the decision was about the potential for improper influence, not any showing of actual bias.     But it’s been a long time since I read those decisions.   
 

I know this likely isn’t law you practice but curious what you feel personally ends up happening here. 

[Frobby]

Just now, NelsonCruuuuuz said:

I know this likely isn’t law you practice but curious what you feel personally ends up happening here. 

I have always thought MASN would lose its challenge.  But I was wrong the first time, so I could be wrong again. 

The thing people need to realize is that the RSDC decision (both of them, and especially the second one) wasn’t that bad for the MASN and the Orioles.   It could have been WAY worse.   
 

[GuidoSarducci]

I almost feel like there's a conspiracy in the entire justice system to tease Angelos  They'll play along with the whole charade, before they pull the football away at the last second, yet again.

[Beetlejuice]

On 9/23/2021 at 5:58 PM, spiritof66 said:

Every one of the six judges who has looked at the question has agreed that the first MASN arbitration flunked the test for a fair, binding arbitration.

That was solely due to evident partiality, which is the sin of an appearance of a conflict-of-interest.  Besides that, nothing from that or the subsequent RSDC decision were cited as examples of being unfair, let alone corrupt.  If the Nationals had obtained new attorneys back when the Orioles raised the issue, the original RSDC decision would have stood.  If there was something else from the process that Angelos thinks was unfair, he’s had more than enough time to raise them by now.

[Beetlejuice]

On 9/24/2021 at 12:14 AM, GuidoSarducci said:

I almost feel like there's a conspiracy in the entire justice system to tease Angelos  They'll play along with the whole charade, before they pull the football away at the last second, yet again.

Do you believe in karma?  Poor Petey already had to see the Nats make a dog pile in Minute Maid Park.  Now you could make a fortune in selling tickets for an opportunity to play their hand at being Lucy.

[Beetlejuice]

On 9/23/2021 at 11:40 PM, Frobby said:

The thing people need to realize is that the RSDC decision (both of them, and especially the second one) wasn’t that bad for the MASN and the Orioles.   It could have been WAY worse.   

And that should be an indication that the RSDC functioned as expected.  They came up with roughly the same amounts.  Maybe people forget that the RSDC doesn’t exist primarily to be a thorn in the side of Angelos.  Their #1 function is to make sure that individual clubs don’t get taken advantage of by Comcast, FoxSports, etc. when it comes to inking their own RSN deals.  And right behind that is to make sure sophisticated clubs like the Yankees and Dodgers can’t cheat MLB out of revenue.

[spiritof66]

On 10/2/2021 at 9:23 PM, Beetlejuice said:

And that should be an indication that the RSDC functioned as expected.  They came up with roughly the same amounts.  Maybe people forget that the RSDC doesn’t exist primarily to be a thorn in the side of Angelos.  Their #1 function is to make sure that individual clubs don’t get taken advantage of by Comcast, FoxSports, etc. when it comes to inking their own RSN deals.  And right behind that is to make sure sophisticated clubs like the Yankees and Dodgers can’t cheat MLB out of revenue.

I’m not sure where you got that. I'm pretty sure the Resource Sharing Definitions Committee (and MLB generally) play no role in arm’s-length negotiations between teams and regional sports networks, and that if MLB tried to get involved in those negotiations to protect the teams, they would tell MLB to get lost.

The RSDC's role is to review another category of rights fees transactions: those in which an MLB team (or its owners) own or control the RSN that carries that team’s games. At one time, there was a close correlation between the size of a team’s metro market and its ownership or control of an RSN. That has become less true. There’s a summary chart in this article: https://blogs.fangraphs.com/lets-update-the-estimated-local-tv-revenue-for-mlb-teams/ .

Where an MLB team owns or controls an RSN, it has an incentive to set a low fee for televising its games. Higher rights fees will result in higher revenues for the team, and those revenues are subject to the team's obligations under revenue sharing. Lower rights fees will reduce the team's revenues and increase the revenues for the RSN, which can be paid to the team and other shareholders as dividends; those RSN revenues are not subject to revenue sharing. That's where the RSDC comes in, as described in one of its briefs early in the court case:

The RSDC was created as part of the implementation of [revenue sharing by MLB] in 1997 . . . . The RSDC’s typical role is to hear appeals from the Clubs on issues related to [revenue sharing]  . . . The RSDC also analyzes related party transactions between Clubs and [RSNs} in order to ensure that the rights fees received by the Clubs under—which are subject to revenue sharing—are at fair market value.    

What was revealed in the litigation is that the RSN had never analyzed the fair market value of a team’s cable rights fee in the usual sense: in simplest terms, what price a hypothetical willing seller and hypothetical willing buyer would agree on. The RSDC members (three club owners or officials) are unlikely to have expertise in that area beyond their own teams’ markets, or to be experts in valuation generally. Accordingly, in “real” arbitrations over the value of sports’ teams cable rights, the arbitrators are consultants or former RSN officials who have that expertise along with experience in transactions in multiple cable markets.

In lieu of traditional fair value determinations, from 1997 until the 2021(!) arbitration, what the RSDC did in related-party transactions between teams and RSNs was to approve rights fees in instances where the effect was to provide the RSN with operating earnings of 20 percent or less (or sometimes a little more): if the cable network wasn't making more than hat, that was deemed to imply that the rights fees were high enough to pass muster with the RSDC. That’s hardly surprising. In addition to the RSDC members’ probable lack of the appropriate expertise to conduct a ground-up fair market valuation, no team official would want sign on on to determinations of the fair value of RSNs that might be discoverable in future disputes with RSNs, the IRS or others.

That's what the RSDC should do in the arbitration, MASN and the Orioles argued, under the settlement agreement's arbitration provision that the RSDC should use its "established methodology for evaluating all other related party telecast agreements." The RSDC didn't, and that's that: when you agree to arbitrate, you give up your right to have the courts direct a legally correct result.

 

[Beetlejuice]

On 10/4/2021 at 2:35 PM, spiritof66 said:

’m not sure where you got that. I'm pretty sure the Resource Sharing Definitions Committee (and MLB generally) play no role in arm’s-length negotiations between teams and regional sports networks, and that if MLB tried to get involved in those negotiations to protect the teams, they would tell MLB to get lost.

 

On 10/4/2021 at 2:35 PM, spiritof66 said:

Where an MLB team owns or controls an RSN, it has an incentive to set a low fee for televising its games. Higher rights fees will result in higher revenues for the team, and those revenues are subject to the team's obligations under revenue sharing.

I thought it was implied that everyone knows the RSDC makes sure owners aren’t keeping all the cream for themselves.  MLB has to be involved in RSN deals, if only to make sure teams are paying their fair share of “tax” to the revenue pool.  Would you trust a guy like Angelos to voluntarily pay what he owes?  Hell, would you trust any of them?

 

On 10/4/2021 at 2:35 PM, spiritof66 said:

That's what the RSDC should do in the arbitration, MASN and the Orioles argued, under the settlement agreement's arbitration provision that the RSDC should use its "established methodology for evaluating all other related party telecast agreements." The RSDC didn't, and that's that: when you agree to arbitrate, you give up your right to have the courts direct a legally correct result.

Is that a fact?  It was my understanding that MLB provide the RSDC with resources to do exactly that.  In Real Estate parlance, they give them the “comps”.   Theoretically a different arbitration venue should arrive at a similar number using the same comps.  And that’s what happened with the second RSDC decision.  There is no reason to think that a “neutral” arb using the same comps would be any different.

The part no one is saying out loud is that Angelos desire to change the venue is not about fairness, but renegotiating/litigating what “comps” should be used.

Edited October 9, 2021 by Beetlejuice

[drjohnnyfeva]

This is all still fascinating to me.

Isn't it MLB that is the cause of all of this?  As much as I dislike the Angelosi, the Nationals, in moving from Montreal, agreed to move into an established media area and to have "their share of that media" that was already in existence here.  We all knew that that small slice they agreed to and that was endorsed - and maybe even partially negotiated - by MLB to get the deal done was probably something the Nationals ownership group never intended to really submit to.  For me, it's proof that no agreement is truly binding if there are bottomless pits of money to argue with.

For me, the bigger question is how this case is going to screw up real arbitration cases.  And more specifically, if deep pockets can stall arbitration judgements on grounds of "unfairness" just to get another judgement.

 

[Frobby]

Here’s a procedural update on the MASN arbitration appeal.   The briefing schedule before New York’s highest Court, the NY Court of Appeals, has been amended twice, and now extends to March 17, 2022.  No date for oral argument has been set.

The Nationals have asked the trial court to increase the amount of the monetary undertaking that MASN had to make to take the appeal, because postjudgment interest has been running at about $25,896 per day (9% per annum on $105 mm) for the last two years since the trial court affirmed the arbitration award.   That’s about $19 mm over the last two years.   They state that under the current schedule, the appeal “may not be resolved before some time in late 2022, at the very earliest.”   They also want to have the undertaking increased by $1.55 mm every 60 days to account for the additional interest that is accruing.

Basically, this is a pressure tactic by the Nats to try to choke off a bit more of MASN’s cash flow while the appeal slogs along and perhaps push MASN towards a settlement.   I doubt it will work.   
 

[accinfo]

Two things that will never end, the Pandemic and this lawsuit.

[Beetlejuice]

March 17th came and went.  Anything happen?

[OsFanSinceThe80s]

1 hour ago, Beetlejuice said:

March 17th came and went.  Anything happen?

I can't find any media outlet reporting any updates on the lawsuit.