New Allegations of MLB Bias in MASN Dispute

The MASN dispute between the Orioles and Nationals continues to wage on in New York state court. As a review, the fight involves an arbitration decision issued last year by MLB’s Revenue Sharing Definitions Committee (the “RSDC”), awarding the Nationals roughly $60 million dollars per year in broadcast rights fees from the Mid-Atlantic Sports Network. This award was nearly $30 million more per year than the team had previously been receiving, but far less than the roughly $120 million it had requested.

The Orioles, who own a majority share of the MASN network, have contested the arbitration outcome, contending that the arbitrators – the owners of the New York Mets, Pittsburgh Pirates, and Tampa Bay Rays – were biased in favor of the Nationals. MASN and the Orioles filed suit back in August, asking the court to overturn the arbitration decision. Last month, the court ordered MLB to produce documents in the case relating to commissioner-elect Rob Manfred’s involvement in the arbitration proceedings.

This week both MASN and the Orioles filed new papers with the court, further describing the alleged bias of MLB and its arbitrators.

MASN’s argument focuses on two primary issues.  The first centers on the Proskauer Rose law firm – the Nationals’ outside attorneys in the dispute – and its ties to MLB. As MASN’s brief details, the Proskauer firm has served as outside legal counsel to MLB and its teams on 74 different matters over the last decade. These matters range from Proskauer’s representation of MLB in the Biogenesis investigation and Dodgers bankruptcy case, to its representation of outgoing MLB commissioner Bud Selig during the negotiation of his $22 million-per-year employment contract with the league. In addition, the Proskauer firm has represented individual MLB teams (or their owners) in the past, including the Pirates, Mets, and Rays, whose owners made up the MASN arbitration panel.

MASN argues that the arbitration panel’s decision should be set aside in light of Proskauer’s prior representations. Basically, the network is contending that the panel members’ and league’s prior (and in some cases on-going) relationships with the firm may have biased the panel in favor of the Nationals. Although courts are typically quite reluctant to set aside an arbitration decision, bias on the part of the arbitrator is one of the few circumstances in which an arbitration award will be overturned.

Of perhaps greater significance – although buried in MASN’s brief – the network also contends that MLB manipulated the arbitration process in order to ensure that the panel reached the league’s desired outcome. This argument is based on an allegedly secret agreement reached between the Nationals and MLB in 2013, in which the league agreed to pay the Nationals nearly $25 million, with the team agreeing to repay the league out of any award it received in the MASN arbitration.

MASN argues that MLB was motivated to ensure that the arbitration outcome would allow the league to recover its $25 million. For example, the network points to evidence indicating that Rob Manfred selectively decided which materials would be passed on to the arbitrators, in some cases withholding some of the Orioles/MASN’s submissions from the panel. MLB then allegedly wrote the final arbitration decision itself, on the panel’s behalf.

Meanwhile, the Orioles filed their own brief with the court this week focusing on a separate grounds for overturning the arbitration award, asserting that the arbitration panel exceeded its authority by basing its rights fees determination on an impermissible methodology. In particular, the team argues that when it originally agreed to arbitrate any disputes with the Nationals back in 2005, the parties agreed that future rights fees would be calculated under the so-called “Bortz methodology,” which was developed to help MLB calculate the fair market value of local television broadcasting rights.

Rather than apply the Bortz methodology, however, the Orioles contend that the arbitration panel applied its own, unauthorized methodology. The team argues that this departure from the agreed upon standard itself warrants setting the decision aside (as arbitrators can only rule in the way that the parties have authorized).

In short, then, MASN and the Orioles have provided the New York court with several plausible grounds on which it could potentially overturn the arbitration decision. And while some of these arguments are stronger than others, the court must only be persuaded by one of them in order to throw the decision out.

The most damning of these allegations may prove to be those regarding MLB’s improper involvement in the arbitration process. Considering MLB’s financial interest in the outcome of the arbitration, the allegedly heavy-handed role that MLB took in directing the arbitration process could be enough to convince the court to set aside the prior decision.

However, even if the court does decide to overturn the arbitration decision, the actual impact of the decision will be rather modest. All that MASN and the Orioles are asking the court to do is to reassign the arbitration to a new, neutral arbitrator. And while the team obviously hopes that a new arbitrator would issue a more favorable ruling, there is no guarantee that that would be the case.