On February 14, 2022, the NY Court of Appeals heard the appeal from MASN in their ongoing dispute to pay the Washington Nationals their annual rights fees dating back to the 2012-2016 RSDC set fees. There have been several appeals made and a series of Nats’ wins in the courts with subsequent appeals by the Orioles side as the majority owner of MASN. Today, the NY Court of Appeals ruled in favor of the Nationals by a 6-0 unanimous decision.
“By affirming the confirmation of the second arbitration award and directing that the money judgment be vacated, we hold the highly sophisticated parties to the terms of their agreement.”
— excerpt from the NY Court of Appeals decision
Yes, there was a second arbitration award to the Nats because the first one for that same 2012-2016 period was thrown out based on MASN’s appeal of the Nats legal representation had some overlap with the lawyers that MLB used. Per the contract, a new RSDC was formed and a second arbitration award was given at almost identical numbers. That award for the five-year period totaled near $100 million and has not been paid to the Nationals. Per reports, that money is just sitting in an escrow account.
This latest legal decision just leaves the US Supreme Court as MASN’s last hope if they appeal to the highest court which most experts think is just another attempt that will fail, and in this case the highest court can choose to not even hear the case. Some would say that the Orioles could try to maneuver over to a state court to try their luck there on a different set of issues, and you just never know when this can end.
Where the Orioles led MASN will head is anyone’s guess. This has been fought in the courts now for over a decade. When will it end? As of now, it continues to be a cash and revenue drain on the operations of the Washington Nationals as well as we reported that this was the Rubik’s Cube that needed to be solved to sell the team which is now in a holding pattern as we broke the news in January with the news of “no sale.”
When Powerboater reported during the hearing over the winter, he felt it had gone well for the Nats’ side. Today’s decision would back that up with the 6-0 ruling. Here is the 18-page opinion for your reading pleasure.
The fees in dispute total nearly $100 million in annual rights fee payments for only that aforementioned five-year period dating back to 11-years ago. The Orioles led side argued to take this to an independent arbitrator and not use the RSDC which the original contract called for. A contract that was actually made long before the Lerner family purchased the majority share of the Nationals from MLB in 2006.
Talk Nats readers who have been following this case from the start know all to well how this MASN legal proceedings have affected the cashflow of the Washington Nationals and made them fiscally uncompetitive against other big market teams that have had the Regional Sports Network cash to spend on pricey free agents while the Lerner ownership group was reportedly spending money beyond their revenues and operating at a loss per David Samson who was formerly and executive of the Miami Marlin and had knowledge of the situation.
The last formal transcripts were available on the NY Court of Appeals website and provides more insight for anyone who enjoys reading about all of the legal proceedings as well as you can read into the archives on TalkNats that span back nearly eight years ago.
“Concerning the second arbitration award, the courts below correctly concluded that MASN and the Orioles failed to show, by clear and convincing evidence, that a reasonable person would have to conclude that the reconstituted RSDC was evidently partial. For the same reasons that the $25 million advance did not necessitate a new arbitral forum or establish evident partiality in the first arbitration, the prepayment agreement did not establish evident partiality in the second arbitration.
There was also no evidence that MLB engaged in undisclosed activity to influence the RSDC panel members. Vacatur was thus unwarranted under that rationale or based on the RSDC’s denial of MASN’s and the Orioles’ discovery demands, which were premised on that theory. Moreover, a reasonable person could conclude that Manfred’s public statements did not establish evident partiality because the RSDC, not Manfred, made the final determination, and the statements could not realistically be construed as a directive to the RSDC panel members. Although the courts below correctly confirmed the second arbitration award, the order appealed from must be modified because Supreme Court erred by awarding the Nationals prejudgment interest and rendering a money judgment in the Nationals’ favor.
The settlement agreement grants the RSDC the power only to determine “the fair market value” of the telecast rights fees. The parties did not agree that the RSDC could resolve disputes over nonpayment of such fees. Instead, remedies for MASN’s nonpayment of those fees are governed by a different provision of the settlement agreement, which sets forth certain requirements, including a cure period. Only after that cure period expires do the Nationals “have a right to seek money damages.” Further, disputes over nonpayment of the fees appear to be governed by the settlement agreement’s more general dispute – 18 – No. 13 – 18 – resolution provisions. Now that our courts have confirmed the RSDC’s determination of the fair market value of the telecast rights, the parties must resolve any disputes over nonpayment of those fees in accordance with their agreement. While it is unfortunate that our decision may send this protracted litigation into extra innings, that result is necessitated by the settlement agreement’s terms. In the end, these sophisticated and counseled parties agreed to arbitrate their telecast rights fees dispute before the RSDC and to follow a stated procedure concerning nonpayment of those fees.
The parties have failed to establish any basis to deviate from that contract. Accordingly, the order appealed from and so much of the 2017 Appellate Division order brought up for review should be modified, without costs, in accordance with this opinion and, as so modified, affirmed.”
— excerpt from the NY Court of Appeals decision
We will see where this all goes and if it has any bearing on a sale of the Washington Nationals which we do not believe it will based on the fact that it does not solve the MASN situation going forward nor does it even start to address the TV money that could be due from 2017-2023. There is a lot more to be done to feel that the MASN annual rights fees can be paid based on any RSDC decision and not end up in the courts. Also, moving at five year increments to know the TV revenues in short five-year increments is suboptimal, but that is what the MASN contract calls for.
The RSDC awards per the original court filings were much closer to the number the Orioles led side were looking for MASN to pay than what the Nationals were looking for which was nearly $500 million for the five-year period. The subjective definition of “fair market value” is always one that is different through every pair of eyes. That is what makes this high stakes contract so important for the future of both teams.
What the Nats really need is a long-term solution of stability for their TV rights fees as it pertains to MASN before this team can really take a major step forward in determining their future both on the field and off the field in terms of spending on free agents and moving forward to actually sell the team to new ownership.
