Orioles, Nationals showdown over MASN boils down to influence of Commissioner-elect Rob Manfred

The battle between the Orioles and Nationals over MASN rights fees, already having been waged for nearly three years, will be stretching out a few months longer. Sports Business Daily reported on Monday that the scheduled December trial date has been pushed back into March of next year. This means that the dispute over 2012-2016 rights fees won't be decided until at least 2015, a truly impressive feat of filibuster by all involved parties.

A postponement of the trial date follows a recent round of documents filed by the MASN side last Friday. The reason for this could prove to be beneficial to MASN, as the trial was pushed back in order to allow them to pursue a chance to compel discovery in the case. This amounts to MASN wanting the court to force MLB to hand over a specific set of documents, be they e-mails, letters, or other records, that may be helpful to MASN's case.

Standard reminder: The plaintiff in the court case is actually TCR Sports Broadcasting, which does business as MASN; the Orioles (that is, the Baltimore Orioles Limited Partnership) own the supermajority stake in MASN per the agreement that allowed the Expos to relocate to DC. MASN's interests are thus the Orioles' interests, and one of Peter Angelos' sons is even the president of TCR, although they are not the same entity legally.

The court has to get involved in this process because MASN made five requests for documents from MLB and MLB objected to three of those five requests. As with the last round on the MASN trial, I have reviewed the assorted legal stuff that's publicly available in the case, because it beats trying to make sense of conflicting hot stove rumors.

What MASN is trying to compel MLB to provide generally involves finding out what, if any, influence that either Commissioner-elect Rob Manfred or Commissioner Bud Selig had over the process by which the Revenue Sharing Definitions Committee (RSDC) rendered its decision. The first preliminary meeting took place in January 2012 and the panel did not hand down a decision until June of this year.

That MLB does not want to hand over documents out of the goodness of their hearts could be a sign that they know there's bad stuff for their case in there. Of course, it could mean no such thing. If tracking this case has impressed one thing upon this layman, it's that if you don't object to something right away, that can be construed as waiving your right to object to it later. Objecting to something seems to almost be like breathing.

MLB's claim is that they are not required to provide any such documents due to the "deliberative process privilege," which as far as I can tell holds that the reasoning of arbitrators should not be subject to court scrutiny under ordinary circumstances. MASN's argument for discovery is that, because they are seeking to find out whether MLB had influence over the panel, they are not in trying to violate the sanctity of the arbitrators themselves.

There is a further argument by MASN that, in submitting nearly-identical affidavits from each of the three arbitrators, MLB has opened the door to scrutiny of their independence. You could only get that level of an exact match if a third party effectively prepared the affidavits for those individuals. This struck me as odd when I first read them, and MASN's counsel, Thomas J. Hall, Esquire, who'd know much better than me, described it in this way:

It is no accident that the same phrases are repeated mantra-like throughout MLB's supporting Affidavits. They are worded carefully to avoid disclosing the level of involvement that MLB and Mr. Manfred actually had with the RSDC Arbitration. Tellingly, not one of MLB's witnesses describes how Mr. Manfred supported the Arbitrators or what MLB and the Arbitrators consider to be "administrative."

Then again, that's what he's getting paid to argue. Maybe this kind of uniform affidavit thing is par for the course.

MLB did respond to two of the five requests, saying they found no evidence of any communication of what MASN wanted to know: Whether Manfred had ever transmitted to the members of the RSDC (which was one representative from each of the Rays, Pirates, and Mets) the MASN objections to the law firm chosen to represent it before the RSDC. That firm, Proskauer Rose, had various concurrent ties to the league, the teams, and even a business owned by the Mets owner.

In declaring that there was no such evidence, MLB has effectively played into MASN's hand - at least, if MASN's legal reasoning is sound. To MASN, the fact that MLB claims there was no such communication means that Manfred was effectively acting as a gatekeeper between the parties in the arbitration and the arbitrators themselves. All information flowed through Manfred, which is backed up by a long series of e-mails submitted to the court.

Thus, the Manfred claim that he and MLB only functioned as "support staff" in the panel doesn't seem to describe what actually occurred. This jumps off the page as a "Gotcha!" moment, or at least, it does if the Honorable Lawrence Marks, the judge presiding over the case, agrees and grants the request for discovery.

The MASN side submitted several affidavits of their own attesting to the level of participation by Manfred in the process, noting that Manfred effectively served as a "super arbitrator" by asking questions of both sides during the hearing and even interrupting counsel at different points. The MASN affidavits, which included statements by long-time Orioles counsel Alan Rifkin and also John Angelos, were not identically-worded as they discussed their key assertions. In these affidavits, the Orioles-affiliated personnel also state that Manfred told them that it was his staff who wrote the RSDC decision.

A central contention of MASN/the Orioles all along has been that MLB had some pre-arranged agreement with the Nationals on the sly and that this arrangement exerted undue influence on the hearing. When MLB, which owned the fledgling franchise as it moved from Montreal to DC, sold it to the current Nationals owners (whose son-in-law ripped up the first MASN proposal about these rights fees, putting the whole process on this path back in January 2012), the O's seem to think that MLB sold the Nationals at an inflated price with an implicit promise to the new owners that they would get money back when this 2012-2016 rights fee negotiation took place.

On top of that, an undisputed fact in the case is that MLB extended a $25 million loan to the Nationals in 2013 with the expectation that they would pay it back with the rights fees they would soon be winning.

As a result of this, MASN argues that the RSDC ignored its own precedent in setting the rights fees for the Orioles and the Nationals. Bias brought into the process from outside of the arbitration panel resulted in a corrupted ruling, one that was predetermined, and thus it should be overturned. Or so they say. It could be that the RSDC was right to rule the way it did in the sense that the Orioles-Nationals situation is itself unprecedented.

MLB also claims that the RSDC decision was set in stone not long after the hearing, although when it was finally handed down over two years later, it made reference to both teams having enjoyed recent success on the field as a reason why MASN should be able to absorb the figure it imposed for rights fees.

Another Orioles contention is that the Nationals are deliberately trying to bankrupt MASN with their demand of rights fees over $100 million, in order to get out from under its yoke. The RSDC even noted that what the Nationals demanded would bankrupt MASN. However, they didn't care for the Orioles' case either and imposed on MASN a lower profit margin (8%) than the RSDC has ever imposed on another team (20%), and MASN seems to think that this is because MLB told them to do so.

Their request for discovery is an attempt to strengthen this argument. It may not be granted. While MASN's counsel cites an array of cases with names like Dalke v. X-L-O Automotive Accessories, Inc., National Hockey League Players Association v. Bettman, and Wendy's Restaurants LLC v. Assessor, Town of Henrietta, MLB will surely argue its own dizzying display of legal precedent. The judge has ruled in MASN's favor for everything up until now, but he may not continue to do so if their legal footing is not as sound once the case gets to the heart of the matter.

If the RSDC decision is upheld, MASN will owe the Nationals in the vicinity of $70 million. Presumably, the Orioles would be on the hook for the bulk of that money. The figure represents the difference between what MASN paid and what the RSDC ruling said they should pay from 2012-2014 combined.

MASN has posted a $20 million bond with the court in New York that will be paid to the Nationals for 2014 if MASN loses the court case, but that doesn't address the two prior years. The O's will also make about $24 million less off MASN revenue per year than they would right now, owing to the shifting of money from profit to rights fees. MLB taxes rights fees at a 34% rate, so if the O's receive a greater share of MASN money as their rights fee, they keep less of it.

It's also possible that MASN is making more money than it was two years ago. The various correspondence submitted as evidence seems to say that MASN will be re-negotiating all of its carriage agreements in the 2012-2016 window, other than Comcast. Sports television being what it is, and the quality of the Orioles and Nationals teams improving as they have, those carriage fees have probably increased or soon will increase in ways that may not have been anticipated two and a half years ago.

So, it could be that MASN's claim about the 8% profit margin is based on an overly conservative revenue estimate that is no longer operative. Where this kind of specific information is referenced in the court documents, it is redacted, so even if an observer could be unbiased, there's no way to know for sure.

The trial date was originally supposed to be December 15. That date will now be when the judge hears the arguments for and against requiring MLB to turn over the information MASN seeks. MASN counsel Hall wrote that he was told by MLB's counsel that, if MLB had to comply, it could do so within two weeks, although that may get fudged due to proximity to Christmas and New Years and the like. If the discovery revelations don't push a settlement, the trial is now set for March, unless another delay arises.

However this court case ends up resolving, the Orioles and the Nationals will have to turn around and do all of this again starting in the 2017 season. I'm sure they can hardly wait.