AUGUST 18: The presiding judge has awarded MASN a preliminary injunction that will prevent the Nationals from acting to enforce the arbitration award for the time being, according to a tweet from James Wagner of the Washington Post. The immediate effect is that Washington will not be able to demand the increased rights fees while the litigation plays out.
More broadly, the order would appear to be a promising development for the Orioles’ side of the dispute, indicating that the court could be inclined to allow the case challenging the arbitration award to move forward. (See the last paragraph of this post for further explanation.) But even that still must be briefed and argued before the sides engage in any discovery or reach the merits of the immediate dispute — which is, itself, a step removed from the ultimate question of the rights fee amount.
JULY 29: The Orioles and Nationals have a long-running dispute over the distribution of broadcast fees from the jointly-owned Mid-Atlantic Sports Network. (Wendy Thurm of Fangraphs detailed the background of the dispute here; James Wagner of the Washington Post did the same here.) The sides have been unable to agree to terms on the broadcast fees to be paid to the Nationals, who own a minority share in MASN. According to a report from The Hollywood Reporter, that the disagreement has escalated to the point that it is now in open court.
While the fact that the parties have now filed competing complaints in New York is noteworthy, the real news probably consists in the precursor to those actions. An arbitration hearing occurred in April, with Mets COO Jeff Wilpon, Pirates president Frank Coonelly, and Rays owner Stuart Sternberg composing the panel. The decision was made on June 30, according to THR, with the result landing in the Nationals’ favor. (Details are not known, but the Nationals were said to be seeking somewhere in the realm of $100MM to $120MM annually.)
In a letter, MLB Commissioner Bud Selig issued warnings to the teams’ owners (Peter Angelos of the Orioles and Ted Lerner of the Nationals) to avoid litigation, saying he would impose “the strongest sanctions available” if that occurred. He had strong words for both men, saying that neither “has approached this negotiation with the best interest of the game at heart” and charging the pair with an “unfathomable inability to agree on a fair division of [the rights fee’s] value.”
The legal battle began (or, really, continued) thereafter. Orioles representatives claimed that the arbitral proceeding lacked in procedural fairness. The club has also claimed that MLB was not disinterested because it stood to recoup a cash stipend paid to the club. As Jonah Keri of Grantland reported, a payment was made to help account for the Washington franchise’s lagging revenue as the dispute carried on. According to the Orioles letter cited in the THR piece, at least one $25MM payment was made by MLB to the Nationals.
Attorneys for the Nationals, meanwhile, countered that MASN (which, remember, is majority-owned by the Orioles) was required to begin paying the newly-escalated rights fee, per the arbitration award. The Nationals presented the network with formal notice of defaults, and later petitioned the MLB Commissioner’s Office to confirm and enforce the panel’s decision. (It appears from the report that no action was taken on that request.)
At this point, MASN initiated a legal proceeding in New York state court seeking to modify or vacate the arbitration award, which is the common cause of action in such circumstances. On July 24, the Nationals responded and apparently filed their own petition (presumably, including a counterclaim to enforce the arbitration award).
MLB issued the following comment: “Although certain legal maneuvering has taken place, Commissioner Selig remains hopeful that the parties can reach an agreement in an amicable manner.” As Adam Kilgore of the Washington Post tweets, the Nationals declined comment, the Orioles said that “contracts are meant to be honored,” and MASN declared that there would be “no impact on the telecast of games.”
The actual legal dispute will of course be governed by standard arbitration law (albeit with all the wrinkles of baseball’s unique circumstances). Arbitration awards are routinely upheld by courts except in limited circumstances such as procedural unfairness, and parties seeking to overturn awards face an uphill battle to plead and prove a claim. Barring settlement, it is likely that the parties to this dispute (as any other) will exchange legal briefs regarding whether a court should hear the complaint at all, with the Nationals arguing that the award should be upheld even if everything alleged by the opposition were to be proved. If the dispute is allowed to proceed (if, in other words, it survives a motion to dismiss), then MLB would be faced with the prospect of an open court battle. That would risk the public disclosure of court filings and, potentially, sensitive documents and depositions.
The odds of the Nationals beating Peter Angelos in court is slim to none.
Why? The Lerners are good, tough litigators.
Because Peter Angelos got rich enough to buy the Orioles by being a greedy, heartless lawyer who would do whatever it takes to win the case.
Its a mega lawyers baseball team vs. A real state tycoons baseball team in a court case.
Challenging arbitral awards is a lot different than suing tobacco/asbestos companies.
It have to be a bribe or bias of the Arbitrator for the O’s to win in court.
Yeah, more or less — you basically have to show a procedural flaw in the arbitration process.
At this point, getting the PI means that the judge thinks there is a reasonable likelihood of success on the merits, and basically believes that it makes sense to put a hold on enforcing the arbitration award. It is a good sign for the O’s, but hardly the end of things.
The O’s/MASN still have to defeat a motion to dismiss the claim. Then, they have to withstand a motion for summary judgment after discovery. Then, they have to prove the claim and win at trial. If that happens, they’d be looking at another arbitration proceeding.
Of course, each hurdle they clear makes it more likely that they can force a settlement.
To be awarded a PI in federal court a party (the orioles) simply need to raise a factual question (IE: was the arbitration panel biased) A judge by law cannot rule on a factual question before a party has completed their brief and simply raising a factual issue is often enough to open discovery. Good point at the end regarding settlement, discovery is often used as a tool to force settlement. I can only imagine the anger that would ensue if the O’s try and depose Selig.
I don’t think that’s how I’d describe the standards at this stage. That’s more like the summary judgment standard.
1) preliminary injunction: likelihood of success on merits AND harm absent injunction (in essence, does it make sense to make the parties wait, though generally the plaintiff has to show that there’s a pretty good reason other than just money changing hands)
2) motion to dismiss: facts, as pled, state a claim for which requested relief may be granted (i.e., assume everything plaintiff said is true – would they win?)
3) summary judgment: disputed issue of material fact (i.e., is there a reason to hold a trial to determine a fact, or are all the facts already established to the point that a decision can be rendered)
From the ruling:
“The court is to look to the questions of irreparable harm on the likelihood of success on the merits in the balance of the equities. The threat to terminate broadcasting rights virtually immediately is a credible threat and one that can cause irreparable harm. … The fairness of the process is what concerns this court most of all. The money and responsibilities of parties should not be dramatically changed while that is reviewed.”
So, the key here is the rights termination threat. Judge is requiring MASN to post a bond in the amount of the extra $ that the Nats are owed under the ruling.
Maybe I missed something, but it’s not at the full-fledged lawsuit stage yet, as I understand it. The Orioles/MASN still need to show that the arbitral award was flawed, because under the FAA and relevant case law (Hall Street Associates, etc.), the award is valid and must be enforced, baring some manifest disregard for the law/process. I would assume the PI was granted because if they enforced the award and MASN went bankrupt (as they are claiming), then it would not be possible to remedy the situation if the court ruled in MASN’s favor.
At least that’s how I understand it.
Well, it is a full-fledged lawsuit, but it is a lawsuit about the validity of the arb award, not the merits of the actual dispute. (I think that’s what you’re getting at.) If MASN/O’s win that, they’d get a new crack at arb.
And yes, the PI is primarily about avoiding irreparable harm, though the fact that the court granted it indicates that it is taking the claim seriously, which is far from a given in a case seeking to overturn an arb award (given the very high standard).
So are the odds of them beating the orioles on the field
That’s laughable. We beat his firm in court so often its almost a matter of routine. Extremely overrated.
who’s we?
“The Orioles said that “contracts are meant to be honored,”” but weren’t the Orioles the ones who defaulted several payments?
That wasn’t under a contract though, it was payments awarded by MLB’s panel, which MASN claims were unfair for a number of reasons.
If I may put my Nationals’ lawyer hat on … “They most certainly were contractually obligated payments — the contract calls for escalation, by an amount determined through contractually provided mechanisms (including, if necessary, arbitration), and that is precisely what occurred here to determine what was owed!”
Sorry, couldn’t resist … I’ve not been an active litigator for like a year and a half now but the force is strong. Those kinds of statements — “contracts are meant to be honored” — are just great, b/c they are meant to color you on the side of “The Contract.” But at bottom, this is a contractual dispute — the real question is what the parties ought to get under the contract!