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Nominal Respondents BOLP and the Orioles respectfully submit this consolidated reply
in support of MASNs Amended Petition to vacate the RSDC Award and opposition to the
Nationals cross-motion to confirm. This brief focuses on two specific grounds for vacatur
manifest disregard and exceeding the scopeand further explains why the proper remedy in this
case is to remand the dispute to a neutral arbitral panel rather than back to the RSDC. In
addition, BOLP and the Orioles adopt the arguments presented in MASNs reply brief.1
ARGUMENT
The Nationals and MLB have not offered any meaningful response to the two central
points that BOLP and the Orioles made in their opening brief: (1) Vacatur is warranted because
the RSDC manifestly disregarded the methodology mandated by the Settlement Agreement and
exceeded the scope of its authority under that contract; and (2) The Court should remand this
case to a neutral arbitral body instead of ordering another hopelessly tainted RSDC proceeding.
First, both MLB and the Nationals emphasize that the FAA and the CPLR give
arbitrators broad leeway in resolving a dispute. But they ignore the fact that there are clear and
fundamental limits to that poweran arbitrators power to decide a dispute is both created and
confined by the terms of the parties agreement to arbitrate. In this case, 2.J.3 of the Settlement
Agreement expressly limited the RSDCs authority by mandating that the panel apply a fixed,
preexisting rule of decision: the RSDCs own established methodology, as it had been applied
to all other related party telecast agreements in the industry.
In fact, the Nationals defense of the RSDC Award (like the text of the Award itself)
effectively concedes that the RSDC did not follow that unambiguous contractual directive.
Unable to explain away the Awards many impermissible deviations from the established
1Defined terms used here have the same meaning as in the nominal respondents Memorandum of Law in Supportof Petitioners Amended Petition to Vacate Arbitration Award (Orioles Br.) [Doc. No. 245].
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methodology, the Nationals repeat the RSDCs implausible statement that the established
methodology, as developed by Bortz Media and consistently applied by the RSDC for many
years, was not capable of determining fair market value in this case because the methodology
had never been applied prospectively. Nationals Br. 13. This claim is doubly wrong. The Bortz
methodology not only canbe used prospectively, butas explained by Mark Wyche, the man
who developed the Bortz methodology on MLBs behalf was specifically designed for that
purpose. See Wyche 11/3/14 Aff. Ex. A 2.d.i. Further, it is ultimately irrelevant whether, as
the Nationals contend, it makes little sense to use the established methodology prospectively.
Nationals Br. 12. Because the parties to the Settlement Agreement, including MLB, expressly
and unambiguously required the RSDC to use the very same established methodology that has
been applied to all other related party telecast agreements in the industry in addressing
prospective rights fee disputes arising under 2.J.3, the RSDC had no lawful authority to devise
and apply a different approach.
The Nationals argument, like the Award itself, thus confirms that the RSDC simply
refused to apply the RSDCs established methodologythe Bortz methodologywhich had
been applied to at least 19 other related-party RSNs both before and after the Settlement
Agreements execution, including after the arbitration in this case. SeeWyche 7/22/14 Aff. 7,
11. The RSDC refused to do so even though Mr. Manfred confirmed two days after the
Arbitration hearing that the RSDC did not have any methodology other than Bortz. Rifkin
1/12/15 Aff. 9. The RSDC instead resorted to using assumptions and approaches that are so
outside the norms of accepted economic standards that the resulting valuation of the Nationals
telecast rights is illegitimate and unreliable. Singer 7/27/14 Aff. 5. The RSDCs refusal to
use its own established Bortz methodology plainly constitutes manifest disregard of the
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arbitrators contractual duty, and just as clearly demonstrates that they exceeded the scope of
their powers by applying a one-off, ad hoc, and illegitimate sampling of concepts in place of the
established methodology that the Settlement Agreement directed them to use. The Award
accordingly cannot stand.
Second, respondents have failed to meet the Orioles and BOLPs demonstration that the
Court should remand this case to a new, neutral arbitral panel rather than to the now
demonstrably and irredeemably biased RSDC process. They primarily contend that no matter
how gross the misconduct in an arbitration, a court that vacates an award tainted by that
misconduct simply has no choice but to send the case back to the same arbitral forum and hope
against hope for a better result. Neither New York nor federal arbitration law supports such a
pointless exercise. The respondents position simply ignores the most pertinent case law
including decisions addressing arbitration in professional sports contexts. These cases establish
that where an arbitration occurs within a close industry circle, and that arbitration has
demonstrably failed to operate in the neutral, unbiased fashion that New York and federal law
rightly demand, a court need notand should notsend the case back to the same failed arbitral
forum. It follows a fortiorifrom these decisions that remand to a neutral forum is required here,
because MLB is hopelessly biased and controls both the RSDC process and the selection of
arbitrators, as demonstrated clearly by the record in this case. There is no way to eliminate that
taint on the RSDC as a fair forum. Thus, to effectuate the parties original intent to obtain a fair
and impartial arbitration, as well as the broader societal interest in ensuring that courts of law do
not inadvertently lend their authority to corrupt and biased private processes, the Court has clear
authority to send the dispute to an arbitral body that canbe expected to operate evenhandedly
such as an appropriately constituted AAA panel.
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These precedents point the way here because the RSDC demonstrably and spectacularly
failed in this case. The RSDC flagrantly refused to apply the RSDCs established
methodology employed in all other related party telecast agreements in the industry. MLB
and the RSDC refused to investigate or disclose the nature and extent of their relationships with
the Nationals counsel, Proskauer Rose LLP. MLB maintained a vise-like grip on the entire
RSDC process, capriciously (and silently) determining which of the parties objections and
submissions would reach the arbitrators and which would not, making procedural rulings that
prejudiced MASN and BOLP, and drafting the Award in its entirety, taking only ministerial edits
from the ostensible decision-makers. And, most egregiously, MLB took a $25 million stake in
the outcome of the Award, secretly agreeing to pay the Nationals that amount and then recoup its
payment from MASN through the inflated proceeds of an illegitimate RSDC award. MASN
could not have foreseen any of this in 2005 when it agreed to arbitrate before the RSDC, and for
obvious reasons never would have agreed to arbitrate under such conditions. This Court should
therefore give effect to the parties original contractual intent by appointing a neutral arbitral
body to decide this dispute fairly using the contractually agreed-upon methodology, in place of
the hopelessly failed RSDC forum.
I. The RSDC Manifestly Disregarded the Settlement Agreement and Exceeded the
Scope of Its Authority Under that Contract.
The Award itself makes clear, and the respondents arguments confirm, that the RSDC
did not apply the RSDCs established methodology for evaluating all other related party
telecast agreements in the industry, as mandated by the Settlement Agreement. MLB and the
Nationals defense of the Award boils down to a plea that the Court should slavishly defer to
whatever ruling an arbitral panel issues, and a set of excuses for the RSDCs failure to comply
with the Settlement Agreements clear mandate. But the court does not sit as an administrative
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rubber stamp over an arbitrators determination, Staklinski v. Pyramid Elec. Co., 6 N.Y.2d 159,
167 (1959), and the RSDCs deliberate refusal to apply the established methodology cannot be
excused.
To begin with, MLB and the Nationals misstate the applicable legal standards. First, the
Nationals argue that [s]ince the parties did not explicitly select New York arbitral law in the
Settlement Agreement, only the provisions of the FAA, and not those of CPLR article 75
apply in this case. Nationals Br. 9 (quoting Salvano v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 85 N.Y.2d 173, 180 (1995)). This assertion reflects a clear misreading of Salvano, in which
the Court of Appeals went on to discuss and apply the grounds for vacatur under both the New
York and federal statutes. See85 N.Y.2d at 183. As the First Department recently explained,
even [where] the FAA governs, this Court may apply state grounds for vacatur, where they are
consistent with the FAAs terms and purposes. ACN Digital Phone Serv., LLC v. Universal
Microelecs. Co., 982 N.Y.S.2d 126, 127 (1st Dept 2014). As relevant, the state and federal
grounds for vacatur are entirely consistent and thus are equally applicable.
Respondents also misstate the content of these standards. According to MLB, an award
cannot be vacated for exceeding the scope of the arbitrators authority unless the parties did not
intend for the panel to decide the issue in question. MLB Br. 20 n.18. The New York Court of
Appeals and the U.S. Supreme Court, however, have held that an award can be vacated on this
ground if the award . . . clearly exceeds a specifically enumerated limitation on the arbitrators
power, In re Kowaleski (New York State Dept of Corr. Servs.), 16 N.Y.3d 85, 90 (2010), or
the panel imposed its own policy choice instead of identifying and applying a rule of
decision derived from applicable authority, Stolt-Nielsen S.A. v. AnimalFeeds Intl Corp., 559
U.S. 662, 67677 (2010);see also City of Oswego v. Oswego City Firefighters Assn, 21 N.Y.3d
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880, 882 (2013) (affirming vacatur of award that explicitly conflicted with governing law). That
is precisely what MASN has shown herethe RSDC exceeded the scope of its powers by
impos[ing] its own policy choice and ignoring the specifically enumerated limitation that the
dispute could be resolved only by applying the RSDCs established methodology for evaluating
all other related party telecast agreements in the industry.
Similarly, both respondents contend that an award will survive manifest-disregard review
under the FAA as long as it provides a barely colorable justification for the outcome reached.
Nationals Br. 10; see MLB Br. 21. But an arbitrator may not ignore or violate the parties
agreement. To avoid vacatur, an award must always draw[] its essence from the parties
agreement, because the agreement is the sole source of the arbitrators power. See Dist. No. 1-
PCD v. Apex Marine Ship Mgmt. Co., 745 N.Y.S.2d 522, 526 (1st Dept 2002). When the
arbitrators words manifest an infidelity to this obligation, courts have no choice but to refuse
enforcement of the award. Id. Thus, whether or not the awards reasoning is colorable, it
must be vacated if the arbitrators dispense[d] [their] own brand of industrial justice, id., or
refused to apply (or ignored) a well-defined and clearly applicable legal or contractual principle,
see Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 N.Y.3d 471, 481 (2006); Sawtelle v. Waddell
& Reed, Inc., 754 N.Y.S.2d 264, 270 (1st Dept 2003); see also Lumbermens Mut. Cas. Co. v.
Eugene, 467 N.Y.S.2d 125, 126 (Sup. Ct. N.Y. Co. 1983) (where the substantive provision at
issue is incorporated by reference into the very contract the arbitrator is bound to interpret, the
arbitrator is bound by that provision).2
2 MLB also suggests that, despite the Settlement Agreements express adoption of the established methodology asapplied in all other cases, the Court cannot consider materials extrinsic to the Settlement Agreement itself.MLB Br. 3 n.3, 1920. This assertion is meritless, and indeed is directly contradicted by authorities explaining thata petitioner may in fact show through extrinsic evidence that arbitrators exceeded their powers. See Overseas
Distributors Exch., Inc. v. Benedict Bros. & Co., 173 N.Y.S.2d 110, 112 (1st Dept 1958); 23A Carmody-Wait 2d 141:254 (2014 update) (same).
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Indeed, the respondents do not dispute (because they cannot) that the key language in the
Settlement Agreementthe command that the RSDC apply the RSDCs established
methodologyfor evaluating all other related party telecast agreements in the industrycan be
read only as referring to a singular, fixed, preexisting methodology. SeeOrioles Br. 8. Nor do
they dispute (because they cannot) that, until the arbitration in this case, the RSDC consistently
applied what the RSDC itself called the time-tested Bortz analysis, see Wyche 7/22/14 Aff.
10, which has always determined the fair market value of a Clubs telecast rights fees using
two bedrock assumptions: 1) a permissible profit margin of at least 20% from an RSNs
subscription television (cable) baseball programming; and 2) a historically accepted allocation of
the RSNs revenues and expenses between baseball and other programming. SeeOrioles Br. 5;
Wyche 7/22/14 Aff. 12, 26. The RSDC ignored both bedrock assumptions in manufacturing
its illegitimate award. SeeWyche 7/22/14 Aff. 2833. Indeed, neither respondent makes any
real effort to connect what the RSDC did in this case to what it had done in every other case.
Rather, they offer excuses for the RSDCs multiple, blatant deviations from the established
methodology, echoing the RSDCs own acknowledgement that the awardinstead of treating
this case like all other related party telecast agreements in the industrywas enough of a
departure that it shall not constitute precedent of the RSDC. Hall 9/23/14 Aff. Ex. 2 at 2 n.2.
But there is no way to justify the RSDCs ad hoc, result-driven approach, which is so far
divorced from any accepted valuation methodology that it is simply illegitimate. Singer
7/27/14 Aff. 5.
First, MLB and the Nationals both observe that the term Bortz does not appear in the
Settlement Agreement itself. Nationals Br. 10; MLB Br. 19. But there was no need for the
Agreement to use that term or spell out the established methodologys fundamental precepts,
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because the RSDCs own precedents made clear that its established methodology was the
time-tested Bortz analysis, including its 20% profit margin baseline. SeeWyche 7/22/14 Aff.
10, 26, 29;see alsoRifkin 1/12/15 Aff. 67. Indeed, this argument is impossible to square
with Commissioner Seligs ruling, just two months before the Settlement Agreement was
executed, that he was unwilling to endorse any material variation from the objective and
consistent Bortz methodology, and that for cable operations the assumed operating margin
ordinarily should be 20%. Hall 9/23/14 Aff. Ex. 29 at 2, 3 (emphasis added); see Wyche
7/22/14 Aff. 10. These precedents and rulings are the materials that MLB itself identified as
defining the established methodology when the parties negotiated the Settlement Agreement.
SeeRifkin 9/23/2014 Aff. 1824.
MLBs abrupt abandonment of the established Bortz methodology also cannot be
reconciled with Mr. Manfreds confirmation, just days after the RSDC hearing, that the RSDC
had not adopted any new methodology, and that insofar as the RSDC had decided to depart from
the Bortz approach when dealing with otherrelated-party RSN agreements going forward, that
decision would not [a]ffect[] a case applying an established methodology. Rifkin 1/12/15
Aff. 9. And, as recently as April 2014, Mr. Manfred himself acknowledged that no related-
party RSN that had actually achieved at least a 20% profit margin from its baseball programming
had ever been forced by the RSDC to operate on a profit margin from baseball programming less
than 20%, and in fact several related-party RSNs had been allowed to operate at substantially
greater profit margins. Rifkin 1/12/15 Aff. 58;see also Singer 7/27/14 Aff. 7 (explaining that
it is well established that the average [RSN operating margin] is between 30 and 40 percent).
The Nationals take MLBs argument a step further by asserting that the parties
deliberately left out language from an earlier draft of the Settlement Agreement that
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contemplated a Bortz approach. Nationals Br. 13. This is exactly backwards. The draft
language in question was stricken because it referred to the Nationals preferred approach of
basing the fees on supposedly comparable telecast agreements. SeeCohen 10/20/14 Aff. Ex. 11
at 8 (March 25, 2005 draft agreement striking, inter alia, the phrase the rights fees of
comparable markets where appropriate); Rifkin 1/12/15 Aff. 7. But a comparables approach
is, as the RSDC itself has previously said, inherently flawed, and was never the RSDCs
established methodology. SeeWyche 11/3/14 Aff. Ex. A 2.c.i, 2.c.iv (explaining that sports
television rights deals are based on distributor economics, not comparables. . . . [I]f
[comparables] are to be used for any purpose, it is essential to properly normalize them to
account for market-specific variations). Instead of the rejected comparables approach, the
parties to the Settlement Agreement incorporated the RSDCs established methodology, which
is and always has been, as the Commissioner has said, the objective and consistent Bortz
methodology. Hall 9/23/14 Aff. Ex. 29 at 3. For the same reason, the valuation offered by the
Nationals expert, Mr. Bevilacqua, is simply beside the point. Even if it were methodologically
sound (which it is not, because it is so distorted as to bankrupt MASN if put into practice, see
Wyche 11/3/14 Aff. Ex. A 2.c.i2.c.v), it is not the RSDCs established methodology. In fact,
the Nationals valuation merely highlights the RSDCs disregard for the established
methodology; like the Nationals expert, the RSDC relied on comparisons that inappropriately
combine[d] heterogeneous television markets without any correction for differences in market
size. Singer 7/27/14 Aff. 9.
Equally irrelevant is the fact that the Settlement Agreement does not expressly say that its
purpose is to compensate the Orioles for the ongoing harms caused by the Nationals invasion of
the Orioles markets. Nationals Br. 5. Even if the Agreement had no such purpose, that would
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not excuse the RSDCs failure to apply the RSDCs established methodology, i.e., Bortz. In
any event, contemporaneous documents demonstrate that compensation plainly was the
Agreements key premise. See, e.g., Rifkin 9/23/14 Aff. Ex. 23 (memorandum agreement
between MLB and the Orioles confirming that the Orioles and Major League Baseball have
reached an agreement with regard to compensation for the location of the [Nationals] to
Washington, D.C.), Ex. 24 (minutes from MLB Executive Council conference call addressing
Agreement with Orioles for Compensation). Indeed, it is bizarre for the Nationals to say that
the Agreement makes no reference to any purpose of compensating the Orioles while
observing in the very next breath that the Agreement gives the Orioles tremendous benefits,
Nationals Br. 5, in exchange for the release of any claims related to the relocation of the
[Nationals] to Washington, D.C. Hall 9/23/14 Aff. Ex. 1 11.I.
Next, the Nationals contend that the RSDCs mandate was to determine the telecast rights
fees fair market value, full stop. Thus, they say, the RSDC was free to depart from the Bortz
methodology because a strict adherence to Bortz would have written market out of the
Agreement. Nationals Br. 13. Both the premise and the conclusion of this argument are wrong.
First, the entire function of the Bortz methodology is to determine the fair market value of
telecast rights fees in a closed-market setting where there is no open-market competitive bidding,
i.e., the circumstance of a related-party RSN. Bortz developed its methodology on MLBs behalf
specifically for use where a Club or Clubs own, in whole or in part, their own RSN. SeeWyche
7/22/14 Aff. 10; Wyche 11/3/14 Aff. Ex. A 2.d.iii (the Bortz methodology, including the 20%
baseball programming margin, is specifically designed to produce a rights fee result that reflects
fair market value.). In any event, the RSDC did not have any legal or contractual authority to
set the telecast rights fees in any way it saw fit. To the contrary, its contractual mandatewhich
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is also to say, all that it was lawfully empowered to do with respect to this disputewas to set
those fees using the RSDCs established methodology for evaluating all other related party
telecast agreements in the industry. Hall 9/23/14 Aff. Ex. 1 2.J.3. The Nationals argument
that the RSDC based its decision on a supposedly new and improved formula thus does not
provide any legitimate basis for confirming the Award. To the contrary, that argument directly
demonstrates that the Award must be vacated. See Stolt-Nielsen, 559 U.S. at 67677 (vacatur
ordered where arbitration panel exceeded its authority by impos[ing] its own policy choice);
Apex Marine Ship Mgmt. Co., 745 N.Y.S.2d at 52527 (similar).3
In much the same vein, the Nationals argue that the Bortz methodology was not capable
of determining fair market value in this case because the RSDC had previously applied Bortz
only retrospectively, not prospectively. SeeNationals Br. 13. In the Nationals view, applying
Bortz prospectively makes little sense, and so the RSDC was free to disregard the Settlement
Agreements express command. Id.at 12. This argument simply parrots the RSDCs rationale
for distinguishing this case from all others, offering the claimed retrospective/prospective
distinction as a pretext for rejecting the established methodologys requirement of a minimum
20% operating margin for baseball programming and other mandates imposed by the Bortz
methodology. SeeHall 9/23/14 Aff. Ex. 2 at 1011. This contentionaside from amounting to
a concession that the RSDC did not apply the established methodologyis wrong in two critical
respects. First, as Mr. Wyche explains, he developed the Bortz approach specifically for the
3 The Nationals claim that the Orioles previously acknowledged that the established methodology would includeexamination of the market for comparable rights fees, rather than a strict Bortz approach. Nationals Br. 13. Thatargument reflects a mischaracterization of Mr. Peter Angeloss observation that the Nationals could request asurvey of rights fees. In point of fact, the Nationals werepermitted to present the RSDC with evidence of rightsfees that other Clubs receive. But Mr. Angelos did not in any way suggest that, in the event of an arbitrable disputeunder 2.J.3 of the Settlement Agreement, a survey approach would displace the Settlement Agreementsunambiguous directive that the RSDC would proceed by faithfully applying the Committees establishedmethodology, just as it has done in evaluating all other related party telecast agreements in the industry.
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purpose of determining the fair market value of rights in competitive markets on a prospective
basis, and so a retrospective use is actually the exception . . . rather than the rule. Wyche
11/3/14 Aff. Ex. A 1.d, 2.d (emphasis added). Second, the RSDC was bound to apply the
Bortz methodology because the Settlement Agreement specifically and unambiguously required
it to apply the very same established methodology it had used for evaluating all other related
party telecast agreements in the industry in resolving any prospective valuation dispute that
might arise under 2.J.3 of that Agreement. That was the mandate agreed to by the parties and
the governing standard set forth in the Settlement Agreement. The RSDC was bound by that
contractual mandate, which unmistakably limit[ed] the authority of the arbitrator[s], Apex
Marine Ship Mgmt. Co., 745 N.Y.S.2d at 527, and therefore had no lawful authority whatsoever
to jettison the Bortz methodology and instead dispense [its] own brand of industrial justice, id.
at 526;see also Wien & Malkin LLP, 6 N.Y.3d at 481.
Finally, the Nationals claim that they were disappointed with the Award because the
RSDCs fee determination was closer to what MASN had proposed than to the staggering and
ridiculous number the Nationals requested. Nationals Br. 2, 8. But that fact merely underscores
that the Nationals proposalunder which they would have been paid telecast rights fees that
exceed what the New York Yankees and Los Angeles Dodgers receive in markets that dwarf the
Nationalswas wildly unrealistic. The Nationals vigorous defense of the Award tells the
Court all it needs to know about their claim that the Award is a huge victory for MASN and the
Orioles. Cohen 10/20/14 Aff. 55. By the same token, if the Award were a huge victory for
MASN and the Orioles, it would be beyond strange for them to ask the Court to vacate it.
Respondents defenses aside, the Award itself confirms that the RSDC did not consider
itself constrained by its prior decisions. At the outset, the RSDC explained that it viewed this
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case as a one-off that shall not constitute precedent of the RSDC. Hall 9/23/14 Aff. Ex. 2 at 2
n.2;see also id.at 11 (framing the dispositive question as what fair market operating margin is
appropriate for MASN). The RSDC then acknowledged that its usual practice involves a
bottom up or closed market analysis of the [RSNs] revenue and expenses, which is often
referred to as the Bortz approach. Id. at 56. But the RSDC openly distinguished this case
from all others in the industry and jettisoned that approachin the RSDC chairs words, the
panel had thrown Bortz out, Pet. 120instead adopting an analysis that completely corrupts
the established methodology and the RSDCs ultimate decision, Wyche 7/22/14 Aff. 38, and
itself is simply illegitimate and unreliable, Singer 7/27/14 Aff. 5. Because that novel, result-
driven analysis was not authorized by the parties agreement or derived from the RSDC
precedents, which the parties had expressly chosen to govern the dispute, the Award must be
vacated. See Stewart Tabori & Chang, Inc. v. Stewart, 723 N.Y.S.2d 492, 494 (1st Dept 2001);
see also Apex Marine Ship Mgmt. Co., 745 N.Y.S.2d at 52527; In re UBS Warburg LLC, 744
N.Y.S.2d 364, 365 (1st Dept 2002) (affirming vacatur for manifest disregard where the panel
did not adequately discuss or apply the governing rule and one panel member declared that she
would not consider the applicable authorities).
II. The Court Should Remand This Dispute to Neutral Arbitrators.
The record in this case clearly establishes that the RSDC was not remotely a neutral
forum for the determination of the telecast rights fees and that MLBs interest in the outcome of
this dispute means that the RSDC cannot ever be a fair and impartial forum to decide the matter.
At every step, MLB has influenced, delayed, cajoled, obfuscated, and threatened, all with the
clear purpose of imposing, and then forcing MASN, the Orioles, and BOLP to accept, an
unfavorable decision or an unfair settlement. Alone, MLBs subversion of the arbitral process
provides firm grounds to remand the case to new arbitrators. But MLB went even further.
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Midway through the process, MLB cast its lot with the Nationals by paying them $25 million, to
be repaid by MASN if the RSDC issued an award favorable to the Nationals, i.e., a rights fee
determination in excess of what the Bortz methodology could support. Under these
circumstances, the RSDC can no longer be trusted to call balls and strikes fairly in this dispute.
The Court should therefore exercise its clear authority to replace the RSDC with a neutral
arbitral body.
At the outset, there is no merit to respondents claims that this Court lacks authority to
appoint an impartial decision-maker. To be sure, after vacating an award, courts typically
remand to a new arbitrator within the same arbitral forum. See MLB Br. 24. But that is not
because they lack the power to do otherwise. Rather, it is because the failure of any individual
arbitrator or panel usually does not indicate that the forum as a whole cannot be trusted. Bias on
the part of one AAA arbitrator does not ordinarily imply anything about the capacity of the next
AAA arbitrator to operate evenhandedly. But New York law recognizes that where the
arbitration tribunal designated in the agreement cannot function, the Court may order
arbitration in another forum, approximating the parties original selection to the degree possible.
Options on Shares, Inc. v. Edwards & Hanly, 347 N.Y.S.2d 715, 716 (1st Dept 1973) (per
curiam) (emphasis added); see also Kingsbrook Jewish Med. Ctr. v. Katz, Waisman, Weber,
Strauss, Blumenkrans, Bernhard, 321 N.Y.S.2d 773, 77576 (1st Dept) (where the parties
agreed to arbitrate before an industry association, but the association was unavailable, the court
ordered arbitration before the AAA), affd, 29 N.Y.2d 854 (1971); cf. Klines v. Green, 156
N.Y.S.2d 242, 24344 (2d Dept 1956) (where the parties contracts expressly named two
individuals to arbitrate, but one was unavailable, the court rejected the argument that the
agreements render the court powerless to name a substitute), affd, 3 N.Y.2d 816 (1957).
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By the same token, where misconduct in an initial arbitration demonstrates an on-going
institutional bias in favor of one party over another, courts have not hesitated to cut off that
possibility at the pass by appointing a new, neutral arbitrator. For example, if an arbitration
agreement specifies a specific arbitrator, and that named arbitrator proves biased, courts do not
remand the dispute to that same arbitrator. See Pitta v. Hotel Assn of N.Y.C., Inc., 806 F.2d
419, 423 (2d Cir. 1986) (rejecting the argument that the designated arbitrator could not be
replaced on remand because there was no provision in the [arbitration] Agreement for any other
individual or forum to resolve the dispute); Bos. Ins. Co. v. Carpinter & Baker, Inc., 275
N.Y.S.2d 573, 574 (1st Dept 1966) (parties are in no way obligated to accept the services of
. . . partial arbitrators);cf. Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 93840 (4th Cir. 1999)
(where one party took on the duty under the parties contract to set up a neutral arbitral forum,
but created a biased forum instead, the other party could not be compelled to arbitrate there).
What matters is the parties intent to arbitrate in a fair and impartial manner; if changed
circumstances have frustrated that intent, the Court may take appropriate steps to effectuate it.
See Options on Shares, 347 N.Y.S.2d at 716; Klines, 156 N.Y.S.2d at 24344; see also Aviall,
Inc. v. Ryder Sys., Inc., 110 F.3d 892, 896 (2d Cir. 1997).
Here, where the entire RSDC process has been controlled by MLB from start to finish in
order to ensure an outcome that is in MLBs financial interest, the chosen forum is inherently
incapable of producing a fair result. It would be fanciful to imagine that MLB, given its
significant and continuing financial stake in the outcome and total control over every aspect of
the process, would take its thumb off the scales in any renewed RSDC proceeding. And the
Court should reject any such belated assurance. Mr. Manfred, who played a direct and central
role in the prior tainted RSDC process, will become the Commissioner in a few short weeks. If
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there were a renewed RSDC proceeding, he alone has the power to select the RSDCs members
and he already has shown that he will guide its operations. Nor is there any broader forum
here in which other disinterested arbitrators could be found; the RSDC isthe forum, and the only
available arbitrators are people chosen by the Commissioner, and representing Clubs that are
affected every day by decisions made in the Commissioners Office. Cf. Hooters of Am., 173
F.3d at 939 (Given the unrestricted control that one party . . . has over the panel, the selection of
an impartial decision maker would be a surprising result.).
Equally baseless is the Nationals claim that MASNs requested relief is somehow
unavailable because MASN is seeking remand to a neutral body, rather than a pre-award
disqualification. Nationals Br. 25. If credited, that position would produce the truly absurd
result that parties to a corrupt arbitration would be forever condemned to return to the same
biased arbitrator, who would remain free to issue one-sided (and non-confirmable) awards time
and time again. The law does not require this absurdity. To the contrary, where unforeseen
events have frustrat[ed] . . . the parties contractual intent to submit their dispute to a neutral
expert, the Court has the power to give effect to that intent by reforming the contract and
appointing a new decisionmaker. Aviall, Inc., 110 F.3d at 896; Options on Shares, 347 N.Y.S.2d
at 716;see also, e.g.,Erving v. Va. Squires Basketball Club, 349 F. Supp. 716, 719 (E.D.N.Y.),
affd, 468 F.2d 1064 (2d Cir. 1972); Morris v. N.Y. Football Giants, Inc., 575 N.Y.S.2d 1013,
101617 (Sup. Ct. N.Y. Co. 1991). Indeed, the Settlement Agreement plainly recognizes and
reflects the basic point that a dispute between MLB and one of its Clubs (which is what has
unfolded here) cannot be fairly arbitrated by the Commissioner, and for that reason contemplates
AAA arbitration in that event before a panel constituted of persons with specialized knowledge,
experience or expertise in broadcasting, media rights, or professional sports. Hall 9/23/14 Aff.
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Ex. 1 8.C; cf. Kingsbrook Jewish Med. Ctr., 321 N.Y.S.2d at 775 (ordering arbitration before
the AAA, where the parties designated forum was unavailable and AAA arbitration was
consistent with their intent, as reflected in their agreement and the rules of their chosen forum).
As BOLP and the Orioles have already shown, there is ample reason for the Court to
exercise its own power here to achieve a similar result. The RSDCs manifest disregard for the
established methodology, MLBs and the RSDCs failure to investigate or disclose their myriad,
tangled relationships with Proskauer, and MLBs domination of the arbitral process all justify
replacing the RSDC with an impartial decisionmaker. Orioles Br. 1520. At the very least,
these facts create such a strong appearance of impropriety as to require a new panel of
arbitrators. See Velez Org. v. J.C. Contracting Corp., 734 N.Y.S.2d 164, 165 (1st Dept 2001);
In re Catalyst Waste-to-Energy Corp., 560 N.Y.S.2d 22, 24 (1st Dept 1990). And now, further
factual development has driven home just how strongly MLB is motivated to subvert the arbitral
process, and how easily it can do so.
From the outset, MLB seemed intent on warping the RSDC process to produce an Award
favorable to the Nationals. SeeOrioles Br. 1920. Now, however, it is clear that MLB has an
unwavering motivation to do so. In August 2013, MLB agreed to pay the Nationals roughly $25
million dollars, allegedly to buy time for the parties to reach a settlement or sell MASN. At the
time the payment was made, MLB did not reveal: 1) the full amount of the payment; 2) that
MLB and the Nationals had agreed among themselves as to the repayment terms, including that
MLB intended to recoup its payment through the proceeds of an inflated RSDC award; and 3)
that if MASN were ever sold, MLB would block the sale unless MASN agreed to pay MLB the
$25 million. Rifkin 1/12/15 Aff. 39. Mr. Manfred stated onlyand misleadinglythat MLB
had resolved the Nationals demands for additional telecast rights fees payments, would fund
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the entire cost of the resolution, and would not ask BOLP and MASN to do anything other than
make MASNs regular year-end profits distribution. Rifkin 1/12/15 Aff. 41 & Ex. 17.
MASN did not learn the actual amountof this payment until late 2013, months after the
deal had been struck. See id. 45. MASN did not learn the repayment termsincluding that
MLB and the Nationals had agreed to make MASNa source of repaymentuntil March 2014.
Id. 4849. Nor did MASN receive a copy of the agreement until the Nationals produced it in
this litigation.4 MLBs claim that MASN and the Orioles were aware of this payment and
provided active encouragement is thus wildly misleading: The record shows that, in fact, Mr.
Manfred kept MASN and the Orioles in the dark about the true terms of the deal that MLB and
the Nationals were making.
As MLBs counsel has since acknowledged in open court, MLBs secret side-agreement
provides that the Nationals will neverhave to repay these funds; rather, the funds would have
[to be] paid, by MASN, to Major League Baseball, to recoup what Major League Baseball had
laid out. 12/15/14 Hrg Tr. 84:910, 84:1820 (emphasis added). By entering into that
agreement, MLB acquired a direct pecuniary interest in the outcome of the RSDC proceeding,
in contravention of the most basic principles of fair play and due process. See Caperton v. A.T.
Massey Coal Co., 556 U.S. 868, 87778 (2009); Coty Inc. v. Anchor Const., Inc., 7 A.D.3d 438,
439 (1st Dept 2004) (affirming vacatur based on arbitrators direct financial interest in the
matter). And while MLBs counsel argued to this court that $25 million is not a material
amount to his client, see 12/15/14 Hrg Tr. 85:1115, the record demonstrates that MLB has
placed great importance on recovering that $25 million stake. Not only did MLB structure its
4 In an August 12, 2014 letter requesting pre-discovery production of the agreement, newly retained counsel forBOLP and the Orioles misstated the approximate date on which the letter was first shown to Mr. Rifkin. SeeAkowuah 1/12/15 Aff. Ex. A. That misstatement was corrected in emails dated August 14, 2014 and August 15,2014. Akowuah 1/12/15 Aff. Exs. B, C.
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secret side-deal with the Nationals in a way that, in Mr. Manfreds words, gave MLB two routes
to recovering our 25 million, but Mr. Manfred himself described the possibility of settling the
dispute without an RSDC award as a huge give for us, precisely because it would eliminate
one of those two routes. Rifkin 1/12/15 Aff. 48 & Ex. 18 (emphasis added). In the same e-
mail, Mr. Manfred said that [p]rotection on the 25 million remained a source of significant
concern for MLB. Id. He also expressed, on another occasion, that he was under pressure to
repay the third-party lender from which MLB borrowed the $25 million. Id. 51. Just as issuing
the Award effectively put $25 million into MLBs pocket, a decision vacating the award would
take that money back out. And if this dispute were returned to the RSDC, MLB would once
again have a $25 million motive to ensure that any resulting award favors the Nationals.
MLB not only has a powerful financial motive to distort the RSDC process, but
undeniably has the means to do so as well. It is now clear that MLBand particularly the
current Commissioner-elect, Mr. Manfredexercised pervasive control over the Arbitration.
MLB decided (without informing MASN or the Orioles of its decisions) which party
submissions would be transmitted to the RSDC members. CompareManfred 11/19/2014 Aff.
20(a), with Rifkin 1/12/2015 Aff. 27. Mr. Manfred and MLB repeatedly requested that
MASN and the Orioles submit materials in connection with the Arbitration, and yet never
forwarded selected materials to the Arbitratorsa course of conduct makes sense only if it was
MLB, and not the Arbitrators, that reviewed the materials and made the determinations relevant
to the Award. MLB ruled (without informing the RSDC) on both procedural and substantive
matters. MLB instructed the RSDC as to the meaning of the Settlement Agreement. SeeRifkin
11/07/2014 Aff. 17. And MLB even drafted the Awardthough it did permit the ostensible
arbitrators to review its drafts for typographical errors. SeeHall 1/12/15 Aff. Ex. 3 (MLB00248,
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MLB00250). In light of these undisputed facts, MLBs unelaborated claim that the RSDC
members exercised their independent judgment, MLB Br. 1415, rings hollow.
After the RSDC hearing ended, MLBs control persisted. Despite the RSDCs supposed
independence, the sitting Commissioner repeatedly ordered that the RSDC not issue a decision,
apparently without even telling the RSDC members themselves, let alone obtaining their
approval. This delay went on for two years, during which time MLB used the threat of an
unfavorable Award to try to coerce MASN to restructure its partnership. SeePet. 140141.
When the decision finally issuedafter MLB had paid out the $25 millionthe Commissioner
threatened that any attempt to seek judicial review of the Award would be met with the
strongest sanctions available. Hall 9/23/14 Aff. Ex. 21 at 2. When MASN nevertheless
exercised its absolute statutory right to seek vacatur of the Award, the Commissioner ordered
MASN to withdraw its petition, Hall 9/23/14 Aff. Ex. 22 at 1, and then demanded, again under
threat of sanctions, that MASN pay the Nationals the amounts supposedly due under the Award
for 2014 even while MASN was challenging the Award in Court, Hall 9/23/14 Aff. Ex. 23 at 2.
Only the Courts orders enjoining such conduct by the Commissioner brought that effort to an
end.
Indeed, financial motivations aside, MLBs litigation conduct further proves that MLB
and its Commissioner cannot fairly oversee a second arbitration of this dispute. Baseball could
have stood to the side once this case reached its merits stage, leaving the parties to make their
arguments for and against vacatur. But Baseball did just the opposite. Just as in the arbitration
proceeding, Baseball pressed itself to the center, and here has openly fought on the Nationals
side. In doing so, it has firmly embraced the RSDCs contorted position on the meaning and
operation of the Settlement Agreementthe very issue that would be at the core of any
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subsequent RSDC proceeding. The result is that this litigation has been just as much a dispute
between MASN and MLB as it is a dispute between MASN and the Nationals. And as a result,
MLB is not in any position to approach this disputeor these partiesin a neutral and open-
minded way. See Morris, 575 N.Y.S.2d at 101617 (NFL Commissioners past advocacy of a
position in opposition to plaintiffs position herein, deprive[d] him of the necessary neutrality);
see also Palmer Plastics v. Rubin, 108 N.Y.S.2d 514, 520 (Sup. Ct. Kings Co. 1951) (arbitrator
could not be impartial going forward after, inter alia, having pressured one party to settle).
In light of all this, MLB cannot be trusted to shepherd the RSDC to a fair outcome if
given another chance. And given its iron-fisted control over the RSDC process, it is irrelevant
whether MLB itself or a committee appointed by MLB, advised by MLB, and substantially
controlled by MLB, nominally serves as the decisionmaker. MLB Br. 25. It is also irrelevant
that some of the RSDC members have been replaced by different club representatives, Nationals
Br. 25, who are also appointed by the Commissioner, and are presumably just as eager to please
the new boss as the old. Indeed, in unsuccessfully resisting MASNs discovery requests, MLB
portrayed Mr. Manfred and his staff as essentially inseparable from the arbitrators themselves,
acting as legal advisors and law clerks to the panel. E.g., Manfred 11/19/14 Aff. 8. Likewise,
the privilege log that MLB subsequently produced asserts that Mr. Manfred and certain unnamed
MLB in-house counsel and RSDC Support Staff provided legal advice to the RSDC while this
matter was pending. No court would accept the argument that a law clerk could properly work
on a case in which she has a direct financial stake simply because the judge and not the clerk will
ultimately decide the matter. See, e.g., Williams v. N.Y.C. Hous. Auth., 287 F. Supp. 2d 247, 250
(S.D.N.Y. 2003) (a law clerk may not work on a case if she has a financial interest in the
controversy). And here, Mr. Manfred and his staff exercised far more influence over the RSDC
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and its operations than any law clerk ever would. MLB not only wrote the RSDC Award (which
the panel members then accepted with only ministerial edits, see Hall 1/12/15 Aff. Ex. 3
(MLB00248, MLB00250), but also made final rulings on disputed issues, decided which of the
parties submissions the panel would see, and determined whether and when the Award would
actually issue. Nor has Mr. Manfred denied informing Mr. Rifkin that he instructed the
arbitrators as to their charge. Rifkin 11/07/2014 Aff. 17. Simply put, MLB exercised
pervasive control over the entire RSDC process and surely would do the same if this case were
remanded to the RSDC.
None of these problems can be waved away with the claim that MASN agreed to arbitrate
before the RSDC and thus knew what it signed up for. While MASN agreed to resolve certain
telecast rights fees disputes before an MLB committee, it did not agree to a tainted and contrived
process. Rather, by agreeing to conduct an arbitration, MLB and the RSDC took on an
affirmative obligation to act as neutraladjudicators, carrying out a fair and impartial decisional
process in a manner consistent with federal and state arbitration law, and obeying the specific
terms of the arbitration clause in section 2.J.3 of the Settlement Agreement. See Hooters of Am.,
173 F.3d at 940; see also Goldfinger v. Lisker, 68 N.Y.2d 225, 231 (1986) (arbitrators . . . are
expected to faithfully and fairly hear the controversy over which they have been chosen to
preside . . . and ought to conduct themselves in such a manner as to safeguard the integrity of the
arbitration process); Catalyst Waste-to-Energy Corp., 560 N.Y.S.2d at 24 (basic, fundamental
principles of justice require complete impartiality on the part of the arbitrator and mandate that
the proceedings be conducted without any appearance of impropriety). It is therefore irrelevant
whether the RSDC ordinarily falls below these minimum standards of fair procedure and
unbiased decisionmaking mandated by the FAA and the CPLR when it acts in other, non-
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adversarial settings. Cf. Belanger v. State Farm Mut. Auto. Ins. Co., 444 N.Y.S.2d 406, 407
(Sup. Ct. Albany Co. 1981) (rejecting the argument that the petitioner should not now be heard
that he is aggrieved because of the rules and regulations surrounding the forum which he has
elected, because he was entitled to have a fair, impartial, equitable and legal arbitration).
When the RSDC became an arbitration panel, the law required it to act like one.5
MASN and BOLP bargained for a fair and neutral arbitral process, but that is not what
the RSDC delivered. Instead, at every turn, MLB has chosen one side in this dispute: the
Nationals. It chose the Nationals when it allowed Proskauer to represent them despite myriad
and breathtaking conflicts of interest; when it dictated the outcome of the RSDC process; when it
gave the Nationals money while secretly putting MASN on the hook for repayment; when it
attempted to coerce MASN to abandon its challenge to the Award in this Court; when it tried to
make MASN pay the Nationals even while this suit was pending; and when it joined the
Nationals in asking this Court to dismiss MASNs vacatur petition. In view of that history, the
Court should assume that MLB will do whatever it can to prevent the RSDC from being a neutral
forum for the fair resolution of this dispute. At this point, the parties contractual agreement to
arbitrate this dispute before an impartial decisionmaker can be salvaged only by replacing the
RSDC with a neutral, outside body. Accordingly, under both Federal and State law . . . neutral
arbitrator[s] should be substituted for the [RSDC] in order to insure a fair and impartial hearing.
Morris, 575 N.Y.S.2d at 1016.
5 Even if MLB were right that MASN accepted a process with fewer procedural safeguards by agreeing to arbitratein front of the RSDC, that would merely heighten the need to ensure that the process was administered fairly andimpartially. See Fein v. Fein, 610 N.Y.S.2d 1002, 1007 (Sup. Ct. Nassau Co. 1994) (For the purposes ofenforcement under CPLR Article 75, the need to guarantee impartiality . . . increases in direct proportion to thedegree to which the tribunal departs from procedural requirements common to statutory arbitration.).
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