When we last looked in on the pending court case between MASN and the Nationals/MLB, the MASN side of the case successfully petitioned the court to require MLB to turn over documents about communications that may aid the MASN case. MLB provided those documents to MASN between Christmas and New Years, leading to a new wave of filings with the court on Monday and Tuesday as MASN's attorneys refine their arguments in advance of a March trial date.
If MASN is successful in court with Judge Lawrence Marks, they will win a new hearing in front of an independent arbitrator that has no connection whatsoever to baseball. MASN essentially believes so strongly in their case that they think an independent arbitrator could only rule completely in their favor.
Standard reminder: The plaintiff in the case is actually TCR Sports Broadcasting, which does business as the Mid-Atlantic Sports Network; the Orioles (that is, the Baltimore Orioles Limited Partnership) own a supermajority stake in MASN as a result of the agreement that brought the Montreal Expos to Washington, DC. The respondents are Washington Nationals Baseball Club, LLC, the Office of the Commissioner of Major League Baseball, and the Commissioner of Major League Baseball. On January 25, the latter will officially transfer from Bud Selig to Rob Manfred, who is already a key figure in this case due to his role with the MLB panel that heard the case.
Over the months of back-and-forth legal jockeying that have taken place between MASN's lead counsel, Thomas J. Hall of the firm Chadbourne and Park LLP, and the MLB and Nationals counsel, the kernel at the center of the dispute has not changed. MASN and the Orioles believe that they were unfairly dealt with by baseball's Revenue Sharing Definitions Committee in a process that began in 2012 and stretched all the way until a ruling was finally handed down on June 30, 2014.
The specific bone of contention continues to revolve around this sentence from Section 2.J.3 of the Settlement Agreement:
... the 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 Settlement Agreement was inked in 2005. This was the deal that moved the Expos and turned them into the Nationals. The doom was sealed even then, as the Agreement provided that the two teams would have fixed rights fees until 2011 and rights fees would reset every five years thereafter. If the teams couldn't agree, that would bring the RSDC into the process. The Nationals owner's son-in-law literally ripped up MASN's first proposal and ended the first negotiation, setting the sides on the path that they stand on today.
THE RSDC'S ESTABLISHED METHODOLOGY
MASN argues, persuasively in my opinion, that a process known as the Bortz methodology is the only thing that has ever been applied by the RSDC in evaluating telecast agreements. The numbers that Mr. Edward Cohen, the son-in-law, ripped up, were prepared by Mark Wyche, the man who developed the Bortz methodology. That is a good person to have in your corner. Wyche believes, and so does MASN, that the Nationals demand is an attempt to bankrupt MASN.
Essentially, as far as MASN is concerned, ignoring the Bortz methodology by even one dollar constitutes the arbitration panel acting outside of its legal scope, which should be reason enough to get a new, outside hearing. As it turns out, the RSDC set aside Bortz and crafted its own decision. Perhaps I should say instead, "a decision was crafted for the RSDC," as one of the pillars of MASN's argument is that MLB exerted undue influence over this entire process and that it was not independent at all.
Regardless, the RSDC admits in the decision itself that it is acting outside of any prior precedent, the result of which would require MASN to pay about $70 million more from this 2012-2016 period than they would have based on the Bortz analysis. Yes, it's now 2015 and we're still arguing over 2012 rights fees.
By the way, regardless of the outcome of this court case, they get to do it all again starting in the 2017 season, the next time the rights fees reset. One reason the Orioles are likely fighting tooth and nail is that if MASN has to pay the Nationals more now, they'll have to pay even more when the next rights fee period is negotiated. The lower the baseline is for the rights fees, the better for the O's: MASN profits flow largely to the Orioles. The higher the baseline, the better for the Nationals.
THE ORIOLES' BELIEF THAT THE PROCESS WAS CORRUPTED
1. The firm representing the Nationals in front of the RSDC, Proskauer Rose, is one that had numerous concurrent dealings with MLB and even members of the RSDC panel's teams and family businesses.
With the discovery period concluded, we now have an exact number here: Proskauer has represented MLB-related entities in 74 different matters over the past decade, including 49 different ones during the time the arbitration case was pending. These vary from aiding the Rays, whose owner was on the panel, with salary arbitration, to advising Commissioner Bud Selig as he secured his most recent employment contract from MLB, which was worth $22 million per year.
The specific attorneys who were present at the RSDC hearing were involved in 32 of these 74 cases, with 27 of the 32 occurring while the case was pending before the RSDC. One of these attorneys, for instance, represented MLB in proceedings stemming from the Biogenesis investigation, including the Alex Rodriguez grievance and court case. This same attorney is presently representing MLB in a case that seeks to overturn MLB.tv's blackout rules.
In addition to this possible conflict, a former Proskauer partner, Dan Halem, who is now MLB's Executive Vice President of Labor Relations, served some kind of role in the process. MASN does not know what it is, as MLB claims his involvement is privileged. They believe that he helped to draft the RSDC decision. Manfred is alleged to have admitted to a couple of Orioles-connected attorneys that he and his staff wrote the award themselves.
The Orioles repeatedly objected to Proskauer's involvement in the process, dating back as far as January 23, 2012. They offered for the court no less than 18 instances of this objection occurring. This is not something that only bothered them after the RSDC ruled against them, though that hasn't stopped MLB from trying to claim that it did.
2. While the arbitration case was still pending, MLB loaned the Nationals $25 million, with the expectation that MASN would pay back the money owed after a decision was reached in the case.
One reason that the whole process has taken over two years to play out is that MLB spent a good chunk of that time trying to persuade the Orioles to sell MASN to an existing cable provider like Comcast. If they had reached some kind of sale agreement, it would not have been approved until someone paid back MLB the $25 million. This created a situation where MLB had a direct financial stake in the outcome of the case taking place under their auspices.
In the December hearing over whether the court would grant MASN's request for discovery of documents, MLB's counsel offered the argument that $25 million doesn't mean much to a multi-billion dollar business. Judge Marks does not seem to have been swayed by that reasoning.
Contrary to MLB's claim, according to an affidavit submitted by longtime Orioles outside counsel Alan Rifkin, there were a pair of meetings in April and June of 2014 in which Manfred expressed to Rifkin that the $25 million loan had been secured from an outside lender and that there was pressure for that loan to be paid back, so it seems that Manfred is not writing off $25 million as chump change either.
WHAT COMES NEXT
Some time between now and the trial date, MLB and the Nationals' side will offer their replies to the latest MASN argument, wherein there will be many pages of legal language written that amount to, "Nuh uh! Did not!" When you get down to it, MASN's own argument is a whole lot of, "Did too!"
Now that everything seems to be out in the open, there's always a possibility that the pending trial date will lead to some kind of settlement between the parties. It's hard to imagine this happening unless either the Orioles or the Nationals are absolutely convinced they're on the losing side. One kind of gets the impression that somebody was going to get sued regardless of the outcome of the RSDC decision. The only question was whether it would be the MASN side or the Nationals doing the suing.
In the conclusion of their most recent filing, along with asking for the RSDC decision to be vacated and an independent arbitrator to make a decision on the case within the bounds of the contract, MASN also asks to be awarded "its costs and fees to the full extent provided by law."
Though it's probably not been anybody's full-time job since July working on this case, it all sounds like a lot of billable hours to me, and Mr. Hall doesn't sound like the kind of attorney whose hours come cheap. Victory could be that much sweeter for the Orioles if somebody else pays for it.
So what are their chances of winning if it comes down to the trial? Heck, I don't know. There are many baseball bloggers with law degrees. I am not one of them. It is certainly encouraging for MASN that they've won every incremental hearing along the way. Maybe all of that won't mean much if it gets down to a trial, or maybe MLB is holding back a giant whopper that will torpedo MASN's case at the end.
A team has not fought the league in court in this fashion before, so it's hard to say what will happen other than that someone is going to end up very unhappy and possibly millions of dollars of poorer than they think they ought to be.