Nationals Park, home for the Washington Nationals of Major League Baseball ()
A Manhattan appeals court has batted away the Washington Nationals’ bid to reinstate a television-rights award worth hundreds of millions of dollars, finding problems with the arbitration process.
But the same panel handed a separate victory to the Nationals, narrowly ruling that the team and neighboring Baltimore Orioles must keep their do-over arbitration before a panel of Major League Baseball executives rather than find a new forum.
The re-arbitration ruling, set against a lengthy and passionate dissent penned by Appellate Division, First Department, Presiding Justice Rolando Acosta, constituted the bulk of the opinion in Matter of TCR Sports Broadcasting Holding v. WN Partner, 652044/2014.
And according to Thomas Hall, counsel for the broadcasting company, the split decision has set up a sure-fire appeal to be sought by both his client and the Orioles. Hall, co-head of Norton Rose Fulbright’s commercial litigation practice, said he and his clients “look forward to resolving on appeal the question of the appropriate forum for rehearing.”
Carter Phillips, a Washington-based partner at Sidley Austin representing the Orioles, also said his client would appeal “on the question of rehearing forum.”
Thursday’s 3-2 decision is another marker in a long-running dispute between the Nationals and Orioles that has heavily involved Major League Baseball and TCR Sports Broadcasting Holding, a company that does business as Mid-Atlantic Sports Network (MASN).
MASN owns the rights to show both Orioles and Nationals baseball games in a large swath of the mid-Atlantic. It has been at the center of a legal battle since 2012, when an arrangement requiring the network to pay below-market-rate fees to the Nationals expired.
As new negotiations ensued, MASN, which is majority-owned by the Orioles, and the Nationals found themselves unable to agree on the fair market value for the Nationals’ TV-rights fees for the 2012-2016 period.
Under terms of their contract, the parties entered arbitration before Major League Baseball’s Revenue Sharing Definitions Committee, which consists of a small panel of league owners.
The committee ruled that the Nationals’ fees for 2012 would be roughly $53 million and would rise by about $3 million a year through 2016. But MASN and the Orioles had objected throughout the process, claiming the arbitration was tainted and unfair because the Nationals’ law firm, Proskauer Rose, was simultaneously working for Major League Baseball and its executives in other matters.
In November 2015, Manhattan Supreme Court Justice Lawrence Marks agreed that the arbitration had been problematic and tossed out the award. He said the process had been undermined because Proskauer had been doing legal work for the league and its executives from the very teams sitting on the arbitration panel: the New York Mets, the Pittsburgh Pirates and the Tampa Bay Rays.
“Evident partiality is no minor issue,” he wrote.
Disagreement Over Fairness
The First Department panel unanimously upheld Marks’ discarding of the Nationals’ award. But only three justices—Richard Andrias, Rosalyn Richter and Marcy Kahn—ruled that the forthcoming “re-arbitration” should be held before the league’s revenue committee, even though the committee is now composed of different league executives than before.
Andrias, joined by Richter, pointed repeatedly to the contractual agreement entered into freely by various, “sophisticated” parties and its use of the committee as a forum.
“Even if this court has the inherent power to disqualify an arbitration forum in an exceptional case, on the record before us there is no basis, in law or in fact, to direct that the second arbitration be heard in a forum other than the industry-insider committee that the parties selected,” Andrias wrote.
“Contrary to the view of the dissent,” he continued, “there has been no showing of bias or corruption on the part of the members of the reconstituted [committee], and the Nationals will use new counsel at the second arbitration. “
Andrias said any speculation that the league would dictate the outcome by pressuring new members of the committee “does not suffice to establish that they will not exercise their independent judgment or carry out their duties impartially, or that the proceedings will be fundamentally unfair.”
Kahn concurred on different grounds. Writing separately, she said the arbitration was governed by the Federal Arbitration Act and its “substantial body of case law.” That case law, she said, made clear that negotiated arbitration agreements must be enforced according to their terms, unless those terms were gained by fraud, duress, coercion or unconscionability.
In their dissent, Acosta, joined by Justice Ellen Gesmer, called for an “equitable remedy,” saying MASN and the Orioles would be “unable to obtain a fundamentally fair arbitration” from the committee.
He noted that amici curiae agreed—including Washington-based mediator Kenneth Feinberg, a former special master of the U.S. government’s Sept. 11th Victim Compensation Fund.
Acosta, who was the Eastern Intercollegiate Baseball League pitcher of the year for Columbia University in 1977 and 1979, set out a list of what he called “facts” to support his contention.
They included: Major League Baseball’s past refusal to address the Orioles’ complaints of the unfairness created by Proskauer’s multiple roles; the league’s direct monetary stake in the outcome of the dispute as a result of its $25 million loan to the Nationals; evidence that the league actively supported the Nationals’ attempts to confirm the award and/or compel a rehearing before the committee; and evidence of the current league commissioner’s personal involvement in the prior arbitration, including drafting the vacated award, and publicly stating views about the dispute.
In a statement Thursday, the Nationals cast the panel’s decision as a “major legal victory,” despite the justices upholding the dismissal of the arbitration award and despite any looming appeal.
“The Nationals are gratified that the appeals court recognized the importance of enforcing contractual arbitration agreements,” said Stephen Neuwirth, a New York-based partner at Quinn Emanuel Urquhart & Sullivan, who handled the Nationals’ appeal. “We look forward to finally having the rights fees determined in the forum the parties chose.”
But Arnold Weiner, of Rifkin Weiner Livingston in Baltimore and counsel to the Baltimore Orioles Limited Partnership in its capacity as MASN’s managing partner, said in a statement, “In unanimously affirming the vacatur of the MLB’s arbitration proceeding, it marks the first time to my knowledge that MLB has had such an internal proceeding overturned. We look forward to a fair and neutral proceeding before a fair and neutral forum, which is the next step on appeal.”
Paul Clement, a partner at Kirkland & Ellis’ Washington office and a former U.S. solicitor general, represented the league. He did not return a call and email seeking comment Thursday.
Cooley partners Rachel Thorn and Alan Levine were co-counsel with Hall, of Norton Rose Fulbright, to TCR Sports Broadcasting Holding, which does business as MASN.
Proskauer Rose in New York could not be reached for comment.