EXHIBIT - 2

FILED: NEW YORK COUNTY CLERK 08/07/2014 01:34 PM

INDEX NO. 652044/2014
NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 08/07/2014
Index No. GScaoLi
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
TCR SPORTS BROADCASTING HOLDING, LLP,
Petitioner,
-against-
WN PARTNER, LLC; NINE SPORTS HOLDING, LLC;
WASHINGTON NATIONALS BASEBALL CLUB, LLC;
THE OFFICE OF COMMISSIONER OF BASEBALL; and
THE COMMISSIONER OF MAJOR LEAGUE
BASEBALL,
Respondents,
-and-
THE BALTIMORE ORIOLES BASEBALL CLUB and
BALTIMORE ORIOLES LIMITED PARTNERSHIP, in its
capacity as managing partner of TCR SPORTS
BROADCASTING HOLDING, LLP,
Nominal Respondents.
VERIFIED PETITION TO
VACATE ARBITRATION
AWARD
Petitioner TCR Sports Broadcasting Holding, LLP ("TCR"), d/b/a Mid-Atlantic Sports
Network (collectively "MASN" or "Petitioner"), by its attorneys Chadbourne & Parke LLP, as
and for its Verified Petition to vacate the arbitration award issued on June 30, 2014 (the
"Award") (Ex. 1) by the Revenue Sharing Definitions Committee of Major League Baseball
("Baseball"), and which adversely affects Petitioner's rights in violation of applicable law,
respectfully alleges as follows:
NATURE OF PETITION
1. The Official Rules of Major League Baseball are, as any American child knows,
sacrosanct. Baseball insists upon "strict observance of all the rules governing the playing of the
game," and requires its "players, managers, coaches, umpires and administrative officers [to]
respect the discipline of its code of rules.
2. After exhausting all reasonable efforts to resolve this matter, MASN asks this
Court to vacate the Award made by a committee of Major League Baseball ("Baseball" or
"MLB") through a corrupted and biased process that failed to honor, as fastidiously as Baseball
enforces the rules of the game, the substantive and procedural requirements set forth in the
arbitration clause in a settlement agreement among the parties. Petitioner, who has great respect
for the institution of baseball, does not advance this action or its claims lightly.
3. The Award should be set aside as it was issued in violation of 9 U.S.C. 10 and
CPLR 7511. If the Award is not set aside it would have the effect of relieving Baseball, the
Commissioner and the Washington Nationals ("Nationals") of their contractual obligations and
undertakings and would do so as a result of an arbitration that was lacking in honesty and
objectivity.
4. Central to this action is the contractual undertaking that established a
methodology for determining telecast rights fees. That methodology was expressly set forth in
the March 28, 2005 Agreement By and Among the Office of the Commissioner of Baseball d/b/a
Major League Baseball, MASN, the Nationals (then owned by MLB), and the Orioles (the
"Settlement Agreement"). (Ex. 2.)
5. The Settlement Agreement was entered into for the purpose of compensating the
Orioles for the acknowledged annual harms to their established markets, future revenues,
television territorial rights and other economic opportunities that were caused by MLB's
Official Baseball Rules, Foreword.
relocation of the Montreal Expos ("Expos") to Washington, D.C. in 2004. As the Major League
Executive Council ("Executive Council"), the highest governing committee of MLB,
acknowledged in approving the Settlement Agreement, "the Orioles were being damaged by the
relocation of the Expos" and the Commissioner expressly stated that, "it was indeed his job to
focus on the damage to the Orioles."
6. Prior to the execution of the Settlement Agreement, and for almost thirty years
after the Washington Senators relocated to Arlington, Texas in 1972, the Orioles served as the
exclusive Major League Baseball Club for Washington, D.C. and the entire surrounding area.
During that period, with Baseball's encouragement and support, the Orioles expended
considerable resources to cultivate and grow fan loyalty and commercial support for the Orioles
and Baseball throughout that area. By 2004, the Washington, D.C. area accounted for more than
one-third of the Orioles' revenues and a significant portion of the viewership of Orioles' games
on television and their sponsors and advertisers.
7. In the years prior to the relocation of the Nationals, the Orioles also invested
heavily in the development of its regional sports network, TCR, to broadcast and ultimately
telecast Orioles' games throughout the Orioles' seven-state television territory, which extends
from central Pennsylvania through eastern North Carolina and includes all of Maryland, the
District of Columbia and surrounding areas ("Orioles Television Territory").
8. At the time of the Settlement Agreement, the television territory of the Expos, by
then renamed the Nationals, was Montreal, Canada, and other parts of the Province of Quebec.
That Club's television territory did not include any part of the Orioles' Television Territory and
the Nationals had no right to telecast its games therein.
9. Thus, Section 2 of the Settlement Agreement established a painstakingly
negotiated and carefully crafted framework to compensate the Orioles and TCR for the harms
caused by the relocation of the Nationals and to provide the Nationals with access to the Orioles'
Television Territory for the telecast of its games. Specifically, Section 2 provides for the
formation of a two-club regional sports network ("RSN") partnership, built upon the foundation
of TCR and rebranded as MASN. MASN was provided with the "sole and exclusive" right to
telecast the games of the Orioles and the Nationals throughout the Orioles' Television Territory.
The annual compensation for the harms caused by the relocation of the Nationals comes from
MASN's profits. MASN's profitability, thus the Orioles' compensation, is achieved by the strict
adherence to the terms and conditions of the Settlement Agreement, particularly the method by
which the Clubs' telecast rights fees, which are MASN's single largest expense, are determined.
10. Section 2J.3 of the Settlement Agreement requires a three member committee of
Baseball, known as the Revenue Sharing Definitions Committee (the "RSDC"), to determine,
through an arbitration proceeding, the fair market value of the Clubs' telecast rights fees using
"the RSDC 's established methodology for evaluating all other related party telecast agreements
in the industry."2 For nearly a decade and a half prior to the Award, MLB and the RSDC
retained the services of the consulting firm Bortz Media & Sports Group, Inc. ("Bortz"), to
assess the fair market value of telecast rights fees paid by RSNs owned in whole or in part by
MLB Clubs (i.e., related party RSNs). Bortz developed the established methodology and
consistently applied it over 19 times on behalf of Baseball and the RSDC to MLB related party
RSNs.
2
Unless otherwise indicated, emphasis is added throughout this Petition.
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11. As part of the RSDC proceeding, MASN presented a pro forma of telecast rights
fees for the years 2012 to 2016 prepared by Bortzthe very same consulting group that Baseball
had consistently relied upon for such fair market value assessments. As attested to by the
Managing Director of Bortz in his affidavit, MASN's five-year telecast rights fees pro forma was
"determined in a manner that adhered to and was consistent with the RSDC's established
methodology for evaluating all other related party telecast agreements in the industry and reflects
the fair market value of Nationals' telecast rights fees."
12. The merits hearing before the RSDC took place on April 3, 2012. The RSDC was
staffed at the hearing by employees and high-raking Baseball officials. MASN was not
permitted to cross-examine any party, person or expert witness. Over MASN's objection,
moreover, the RSDC and MLB permitted Baseball's outside counsel, who was also counsel for
all three members of the RSDC, to be counsel for the Nationals in the RSDC arbitration
proceedings.
13. Most egregiously, upon information and belief, the RSDC had predetermined the
amount of the telecast rights fees that it would award the Nationals and, as a result, the
arbitration proceedings and the RSDC's arbitration Award, and the decision purporting to justify
the predetermined Award, were all a sham. The predetermined result was an award of rights fees
to the Nationals that were far in excess of the rights fees that could be awarded through any
reasonable or honest application of the established methodology. In an effort to justify that
Award, therefore, the RSDC crafted a decision that either ignored or manipulated every
component of the established methodology for the illicit purpose of justifying inflated telecast
rights fees for the Nationals, thereby exceeding the scope of the arbitrators' authority under the
arbitration clause set forth in Section 2.J.3 and manifestly disregarding the law. Thus, the
decision, as well as the process, was thoroughly corrupted.
14. The Managing Director of Bortz in his affidavit attests that, "the cumulative effect
of the RSDC's numerous outside the norm assumptions, cherry picked data and deviations from
its established methodology renders the RSDC's analysis and determination so grossly different
from its established methodology applicable to all other related party RSNs in the industry that it
completely corrupts the established methodology and the RSDC's ultimate decision."
15. Moreover, a well-respected economist with extensive experience and expertise in
the area of the economic and financial assessments of RSNs and telecast rights fees attests in his
affidavit that the RSDC's analyses lacks any notion of an accepted financial methodology and
"employs 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."
16. The end result is an Award that will deprive MASN of tens of millions of dollars
in profits every year and hundreds of millions of dollars in asset value. That the RSDC's Award
disregards the RSDC's established methodology is not happenstance. As discussed further
below, upon information and belief, the improper purpose of the RSDC and Baseball was to
force the economic restructuring of MASN by and through the RSDC process and Award to the
benefit of all Respondents and much to the detriment of MASN and the Orioles.
17. The Federal Arbitration Act ("FAA") expressly authorizes this Court to vacate an
arbitral award "where the award was procured by corruption, fraud, or undue means," 9 U.S.C.
10(a)(1); on the grounds of arbitrator "partiality," 9 U.S.C. 10(a)(2); where there is
"misbehavior by which the rights of any party have been prejudiced," 9 U.S.C. 10(a)(3); and
6
where the arbitrators "exceeded their powers," 9 U.S.C. 10(a)(4). Similarly, CPLR
7511(b)(1)(i), 7511(b)(1)(ii) and 7511(b)(1)(iii) provide for vacatur when the record discloses
that an arbitral award is the product of "corruption, fraud or misconduct," "partiality," or the
arbitrators "exceeding" their power.
18. Accordingly, for the reasons set forth in this Petition, the Award should be
vacated in its entirety, and the dispute remanded before a new and independent panel of
arbitrators for proper determination. Petitioner further intends to file an amended petition,
affidavits, additional exhibits and memoranda of law.
PARTIES
19. Petitioner MASN is a limited liability partnership between Baltimore Orioles
Limited Partnership ("BOLP"), Baltimore Orioles, Inc. and WN Partner LLC, which was formed
pursuant to the laws of the State of Maryland. Its principal place of business is in Maryland.
20. Respondent Washington Nationals Baseball Club, LLC, the owner of the Major
League Baseball Club known as the Washington Nationals, is a District of Columbia limited
liability company. Upon information and belief, since 2006, the Nationals' principal place of
business is located in the District of Columbia. It further maintains offices in Maryland and
engages in material actions and activities in New York and Maryland.
21.
Respondent WN Partner LLC ("WN Partner") is a Delaware limited liability
company. At the time that it was owned by Baseball, WN Partner became a limited liability
partner in MASN upon its execution of the Partnership Agreement on or about September 6,
2005, and its principal place of business was in New York. WN Partner is now owned and/or
controlled by Nine Sports Holdings, LLC. Upon information and belief, its principal place of
business is currently in the District of Columbia, and it engages in material actions and activities
in New York and Maryland.
22. Respondent Nine Sports Holdings, LLC ("Nine Sports") is a Delaware limited
liability company with a principal place of business in Maryland. In July 2006, Baseball
assigned its ownership of WN Partner to Nine Sports. Nine Sports is the sole member of WN
Partner. On information and belief, Nine Sports engages in actions and activities in New York.
23. Respondent the Commissioner of Major League Baseball is also the Chairman of
Baseball's Executive Council, and an additional party to the Settlement Agreement, as well as the
Plan Administrator of Baseball's Revenue Sharing Plan among MLB Clubs and oversees the
activities of Baseball's Revenue Sharing Definitions Committee, which implements the Plan.
The Commissioner's address is Office of the Commissioner of Baseball, 245 Park Avenue, New
York, NY 10022.
24. Respondent Office of the Commissioner of Baseball is an unincorporated
association d/b/a Major League Baseball. Its principal place of business is located at 245 Park
Avenue, New York, New York. Major League Baseball is a professional baseball association
and acts as agent for the 30 MLB Clubs that comprise Baseball.
25. Nominal Respondent The Baltimore Orioles Baseball Club, the owner of the
Major League Baseball team known as the Baltimore Orioles, is organized in Maryland. Its
principal place of business is located in Maryland. It is owned by Baltimore Orioles Limited
Partnership.
26. Nominal Respondent Baltimore Orioles Limited Partnership ("BOLP") is a
limited liability partnership organized in Maryland. Its principal place of business is in
Maryland. BOLP is the managing partner of MASN.
JURISDICTION AND VENUE
27. Jurisdiction over this special proceeding is proper pursuant to CPLR 7502(a).
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28. Venue is proper in New York County pursuant to FAA 10(a) and CPLR
503(a) and 7502(a) because at least one of the parties resides or is doing business in New
York County and the arbitration was held in New York County. Specifically, the RSDC
arbitration at issue was conducted under the auspices of Baseball out of its headquarters at 245
Park Avenue, New York, New York; all submissions to the RSDC were made to that office;
communications concerning the RSDC proceeding were made with that office; and the
arbitration hearings were held there.
29. Jurisdiction over the Nationals is proper under CPLR 302(a) because this
proceeding arises out of its transaction of business within New York, including business related
to the RSDC Award at issue and its participation in the RSDC arbitration in New York.
30. Jurisdiction over Baseball is proper under CPLR 301 because it is a resident of
and maintains its principal place of business in New York.
31. Jurisdiction over the Commissioner and the Office of the Commissioner is proper
under CPLR 301 because their principal place of business is in New York and, under CPLR
302(a), because this proceeding arises from their transaction of business in New York.
32. Jurisdiction over WN Partner is proper under CPLR 302(a) because this
proceeding arises out of its transaction of business within New York, including business related
to the RSDC Award at issue.
33. Jurisdiction over Nine Sports is proper under CPLR 302(a) because this
proceeding arises out of its transaction of business within New York, including business related
to the RSDC Award at issue.
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FACTUAL BACKGROUND
A. The Settlement Agreement Provides the Means to Compensate TCR
and the Orioles for the Annual Harms Caused by the Relocation of
the Expos to Washington, D.C.
34. From 1972 until 2005, the Orioles served as the exclusive Major League Baseball
Club for Washington, D.C. and the entire surrounding area. The Orioles had the exclusive
baseball telecast rights for that area; no other team was pei lifted to telecast its games therein.
After Baseball purchased the failing Montreal Expos in 2002, it moved that Club to Washington,
D.C., and rebranded it as the Nationals. Baseball sought the Orioles' consent to allow the
Nationals the right to telecast its games in the Orioles' Television Territory, including in the
Nationals' core market, Washington, D.C.
35. The Orioles' Television Territory and the local game telecast exclusivities
associated with that territory are extremely valuable assets of the Orioles that were among the
assets for which BOLP paid a then-record purchase price of $173 million to acquire the Orioles
in 1993. Also included within that then-record purchase price was the value of current and
reasonably anticipated revenues, business opportunities, fan loyalty and goodwill from the
Washington, D.C. area market.
36. The Orioles established TCR in 1996, then trading as O's TV, as the foundation
for the Orioles' RSN to telecast and distribute Orioles' games throughout the Orioles' Television
Territory. Pursuant to MLB rules and procedures, Baseball approved the formation of TCR and
various telecast rights agreements. In each instance, Baseball approved the territorial and local
game telecast distribution exclusivities associated with the Orioles' Television Territory.
37. Baseball repeatedly reassured the Orioles and, thus, TCR that no MLB Club
would be located or placed within the Orioles historic market and Television Territory, and in
particular in Washington, D.C., without the Orioles' consent. Despite these promises, on
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September 29, 2004, Baseball nevertheless announced to the press that the Expos would, in fact,
be relocated to Washington, D.C.
38. The Orioles immediately and vigorously objected and protested the Expos'
relocation. The Orioles informed Baseball that the Orioles and TCR would take legal action to
protect and preserve the Club's historical rights, markets and exclusivities in the Orioles'
Television Territory. The Orioles informed Baseball that, among other legal actions, the Orioles
and TCR would seek to enjoin Baseball from permitting the Nationals to telecast or license to a
third party the right to telecast the Nationals' games within the Orioles' Television Territory.
39. To avoid litigation, Baseball guaranteed the Orioles and TCR that they would be
compensated for the acknowledged annual harms they would suffer from allowing the Nationals
access to the Orioles' historic markets including the Orioles' valuable Television Territory.
40. During negotiations between the parties in 2004 and 2005, with the aid of pro
formas and projections prepared on behalf of Baseball by its long-standing investment banking
firm, Allen & Co., Baseball proposed a two-Club RSN between the Orioles and the Nationals.
Under that proposal, the Orioles would be the supermajority partner of the RSN, TCR, and
would be compensated through the Orioles' supermajority profits interest in TCR.
41. The Allen & Co. pro formas, upon which Baseball intended the Orioles to rely,
and upon which the Orioles did rely, reflected overall operating profits margins for the two-club
RSN partnership in the mid to high 30% range and imputed operating profits from Baseball
programming in excess of 20%. Baseball and Allen & Co. represented that such profit margins
were industry standard and within Baseball's accepted norms. Various iterations of the pro
formas and related documents also reflected free cash flow from profits distributions to the
partners of the RSN between $50-$80 million in 2013 and escalating thereafter.
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42. The Orioles and TCR accepted Baseball's proposal. Section 2 of the Settlement
Agreement established MASN as a two-Club RSN partnership between the Orioles and the
Nationals wherein the Orioles hold a supermajority partnership interest. Under the Settlement
Agreement, the parties assigned to MASN the exclusive rights to televise their games throughout
the Orioles' Television Territory. The compensation to the Orioles for the haniis caused by the
relocation of the Nationals to Washington, DC, including allowing the Nationals access to its
markets and to the Orioles' Television Territory, is derived from MASN's profits, which are
distributed in accordance with the parties' respective partnership profits interests. MASN's
enterprise and enterprise value also are a direct function of its profitability.
43. Because telecast rights fees are MASN's single largest expense, the determination
of those fees directly impacts MASN's profitability. The Settlement Agreement obligates
MASN to pay annual telecast rights fees to the Nationals and to the Orioles in the same amounts.
For the first seven years of the partnership, the Settlement Agreement specifies the annual dollar
amounts that MASN is to pay the Orioles and the Nationals for telecast rights fees. Beginning in
2012, and for each five-year period thereafter, the Settlement Agreement requires MASN, the
Orioles and the Nationals, if they cannot agree to the amount of telecast rights fees by
negotiation or mediation, to arbitrate the fair market value of their telecast rights fees before the
three-member MLB arbitration panel, known as the RSDC.
44. The members of the RSDC are Club owners or their representatives and are
handpicked by the Commissioner, who is the Administrator of Baseball's Revenue Sharing Plan
("Plan"). The Commissioner oversees the activities and functions of the RSDC. Together, the
Commissioner and the RSDC implement the Plan, which, among other things, "taxes" MLB
Clubs' local revenues at a rate of approximately 34% and redistributes those funds to certain of
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the Clubs under the Plan. The telecast rights fees that MASN pays to the Nationals and the
Orioles are considered local revenues and, thus, are taxed by Baseball.
45. Section 2.J.3 of the Settlement Agreementthe arbitration clause at issue
expressly mandates the exclusive method by which the RSDC is to determine the fair market
value of the Clubs' telecast rights fees in the arbitration. Specifically, Section 2.7.3 requires:
Appeal: In the event that the Nationals and/or the Orioles and RSN are unable to
timely establish the fair market value of the Rights by negotiation and/or
mediation as set forth above, then the fair market value of the Rights shall be
determined by the Revenue Sharing Definitions Committee ("RSDC") using the
RSDC's established methodology for evaluating all other related party telecast
agreements in the industry.
46. The mandate in Section 2.3.3 of the Settlement Agreement that the RSDC "shall"
use "the RSDC's established methodology for evaluating all other related party telecast
agreements in the industry" plainly refers to a specific, accepted and preexisting methodology.
47. The RSDC is obligated to determine the fair market value of the telecast rights
fees solely by using "the RSDC's established methodology for evaluating all other related party
telecast agreements in the industry." That methodology, which by the time of the Settlement
Agreement in 2005 had consistently been applied by Baseball and the RSDC for almost a decade
and continued to be the only method applied by Baseball or the RSDC at the time of the
arbitration in 2012, is commonly referred to in the industry as the "Bortz Methodology."
B. Section 2.J.3 of the Settlement Agreement Mandates a Specific and
Established Methodology for Setting Telecast Rights Fees that Had Been
Historically Accepted and Applied by the RSDC
48. Contemporaneously with the negotiations of the Settlement Agreement, the
RSDC issued Reports and the Commissioner (in his capacity as Plan Administrator) issued
Rulings, intended to be precedent for and binding on all MLB Clubs. Those Reports and Rulings
endorsed the continuing use of the Bortz Methodology, calling it "time-tested" and proclaiming
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its fairness and objectivity. Those and other Reports and Rulings of the RSDC and the
Commissioner, respectively, described the Bortz Methodology, its consistent practices, accepted
assumptions and analyses. During the negotiations, MLB represented to the Orioles that the
Orioles could rely upon these materials as precedent and examples of the formula that the RSDC
would apply in determining the fair market value of the telecast rights fees that would be payable
to the Nationals. Petitioner and the Orioles reasonably relied upon those material
representations.
49. The established methodology is an accounting-based margin analysis of an RSN's
actual revenues and expenses in its particular market area. There are two critical assumptions to
the established methodology. First, the established methodology assumes that a related party
RSN will have revenues and expenses that are not attributable to the Club's baseball operations
and thus allocates an industry norm amount of revenues and expenses to baseball programming.
Second, the established methodology assumes, consistent with industry experience and
consistent practice, that a profit margin of at least 20% from an RSN's baseball programming is
reasonable. Indeed, in each instance in which Bortz has conducted fair market value assessments
of telecast rights fees on behalf of MLB and the RSDC, Bortz has assumed that a 20% operating
profits margin from baseball programming is reasonable. The RSDC has historically and
consistently accepted those critical assumptions of the established methodology.
50. Prior to and after the execution of the Settlement Agreement, and except for the
Award at issue here, the RSDC has never adjusted the rights fees paid to a Club by a related
party RSN with an operating profits margin for subscription television in excess of 20% to an
amount that would cause the RSN to achieve an operating profits margin of less than 20%.
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51. In fact, even during the arbitration process, including up to the time of the Award,
several related party RSNs were and are permitted by Baseball and the RSDC to achieve
operating profits margins for subscription television well in excess of 20%.
52. The RSDC's Award relegates MASN to an empirically unreasonable and
financially unsustainable 5% operating margin from its baseball programmingan operating
margin that the RSDC has never before applied to any other related party RSN in the industry
by, among other things, refusing to honor the methodology's two key assumptions.
53. The RSDC intentionally discarded its established methodology as part of the
scheme to restructure the economics of MASN, contrary to Section 2 of the Settlement
Agreement, by diverting MASN's profits to the payment of telecast rights fees, an expense item.
MASN's profits are distributed to the Clubs in accordance with their respective ownership
interests. As the Orioles hold a supermajority interest in MASN, that Club receives a
supermajority of MASN's profits distributions. Telecast rights fees, however, are under the
Settlement Agreement to be paid equally to the Orioles and the Nationals. Therefore, the
diversion of MASN's profits to the payment of telecast rights fees reallocates MASN's
economics to the benefit of the Nationals and to the detriment of MASN and the Orioles. The
restructuring of MASN's economics also benefits Baseball. A Club's telecast rights fees are
considered local revenue subject to the revenue sharing tax under the Plan. A Club's profits
from an equity interest in a RSN are not considered local revenue and are not subject to the
revenue sharing tax under the Plan. Thus, MLB has an interest in diverting MASN's profits to
taxable telecast rights fees.
C. Conflicts of Interest Deprived the RSDC Proceeding of Any Semblance of
Fairness or Integrity
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54. In compliance with its obligations under the Settlement Agreement, on January 4,
2012, MASN submitted to the Nationals a five-year telecast rights fees pro forma for 2012-2016.
To ensure the fair and objective application of the established methodology, MASN, with
Baseball's consent, retained Bortz to determine the fair market value of the Orioles' and
Nationals' telecast rights fees for that period. In doing so, Bortz applied the same procedures
and analyses and made the same assumptions that Bortz has consistently applied on behalf of
MLB and the RSDC for nearly a decade and a half as to other related party RSNs in the industry.
55. The Nationals immediately rejected the Bortz-prepared five-year telecast rights
fees pro forma without review or discussion, and demanded that the matter be submitted to
RSDC arbitration under Section 2.J.3 without the necessity of mediation.
56. On January 5, 2012, the parties noticed the RSDC arbitration. The Nationals
informed MASN and the RSDC that it would be represented by Baseball's long-time outside
counsel in that arbitration. MASN and the Orioles immediately objected. That firm had
represented, and continues to represent, MLB on a number of high-profile litigation matters
involving the Office of the Commissioner of Baseball. It had provided and continues to provide
advice and counsel to Baseball, the Commissioner and Baseball's Labor Relations Committee,
which has oversight of the RSDC, on matters including labor relations and the revenue sharing
plan. Because the RSDC is a committee of Baseball, appointed by the Commissioner, Petitioner
believed that Baseball's outside counsel's concurrent representation of MLB, including the
Office of the Commissioner and the Labor Relations Committee, among other MLB retentions,
while representing the Nationals before the RSDC, was a direct conflict of interest and would
compromise the integrity and fairness of the arbitration process.
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57. On several occasions, Petitioner inquired into the extent of Baseball's outside
counsel's relationship with the RSDC, Baseball and the Nationals. However, Petitioner's
attempts to learn the full extent of that firm's roles were rebuffed. On February 1, 2012, MASN
and BOLP moved to have Baseball's outside counsel disqualified from representing the
Nationals in this matter. That request was denied.
58. Eventually, after commencement of the arbitration, Petitioner came to learn that
Baseball's outside counsel's improper concurrent representations of MLB and the Nationals
extended beyond the improper concurrent representations than those it knew of before. Among
other things, Petitioner learned that, during the course of the RSDC arbitration, Baseball's
outside counsel not only had an ongoing attorney-client relationship with Baseball and the
Nationals, but also with all three MLB Clubs whose owners or owners' representatives served as
the RSDC arbitrators.
59. Even after Petitioner informed the RSDC and Baseball that Baseball's outside
counsel's participation in the arbitration raised "serious concerns" and that "[Baseball's outside
counsel] appears to have certain insider access and advantages, all of which are prejudicial to the
process and our client's interests," the members of the RSDC never revealed their relationships
with Baseball's outside counsel nor did they investigate the full extent of Baseball's outside
counsel's improper concurrent representations or the potential for conflicts.
60. In addition to the clear conflicts from Baseball's outside counsel's concurrent
representations, the arbitrators appointed by the Commissioner to the RSDC's arbitration panel
were neither unbiased nor neutral arbitrators. As noted, Baseball imposes a substantial tax of
34% on telecast rights fees received by the Clubs, but does not impose this tax on the profits
derived from a Club's RSN. Therefore, the higher the telecast rights fees paid to the Clubs, the
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higher the tax proceeds received by Baseball, and thus, the higher distribution that will be paid
out to the less financially successful Clubs.
61. Significantly, the Clubs represented by two members of the panel are among the
two largest recipients of revenue sharing under the Plan and, thus, had a direct financial interest
in securing the highest possible telecast rights fees for the Nationals and the Orioles. The
Chairman of the RSDC panel, and the largest recipient of revenue sharing under the Plan, made
statements during the arbitration hearing confirming an interest in receiving more funds for the
Plan. Further evidencing a predetermined result in the RSDC proceeding, he at one point even
noted that the RSDC was rejecting the Bortz methodology and was not going to apply that
methodology in this proceeding.
62. The RSDC arbitrators were handpicked by the Commissioner, and Baseball had
an obligation to appoint fair and neutral arbitrators with no material financial interest in the
outcome or conflicts of interest. Baseball did not provide MASN or the Orioles with the
opportunity to comment on the suitability of the arbitrators, whose identifies it did not know and
could not have known at the time the Settlement Agreement was executed.
63. The RSDC was staffed by employees of the Office of the Commissioner of
Baseball under the direct management and oversight of high-ranking Baseball officials, and the
RSDC Report was also written and issued by Baseball employees under the direction and control
of Baseball.
64. Under the direct management and oversight of high-ranking Baseball officials, the
RSDC committed extensive procedural misconduct including its willful failure to hear evidence
pertinent and material to the controversy, barred MASN from conducting discovery, from cross-
examining witnesses, and from allowing MASN to introduce evidence as to material events
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affecting MASN's pro forma. The RSDC also improperly permitted the Nationals, through
Baseball's outside counsel, to introduce post-hearing evidence while denying the same to
MASN; and permitted Baseball's outside counsel to have ex parte communications with
members of the arbitration panel.
65. After the RSDC hearing, MASN obtained evidence that Baseball, without any
reference to Baseball's established methodology, had "backed into" predetermined telecast rights
fees that Baseball wanted MASN to pay the Nationals, and that Baseball had determined that it
would subsequently attempt to rationalize the predetermined payment in a decision that would
not honestly or objectively apply the established methodology.
D. The RSDC Manifestly Disregarded the Contractually-Mandated
Methodology and Exceeded the Scope of Its Authority
66. The mandate that the RSDC "shall" use "the RSDC's established methodology
for evaluating all other related party telecast agreements in the industry" is not discretionary.
Nor does it leave room for interpretation. In the Award, in an attempt to justify inflated telecast
rights fees for the Nationals, the RSDC intentionally and corruptly disregarded the established
methodology required by the arbitration clause.
67. On June 30, 2014, the RSDC issued its Award. In the Award, the RSDC
concedes that it intentionally did not apply the RSDC's established methodology for evaluating
all other related party telecast agreements in the industry, noting that the Award is not to be
considered precedent for any other RSNs in the industry. See footnote 2 of the Award.
68. The RSDC's departure from its established methodology is so extreme that there
is no colorable justification for the Award. The RSDC intentionally disregarded the established
methodology, as well as any pretense of procedural fairness, by, inter alia, selecting MASN's
2007 profit margin as its primary evidentiary support for justifying a 5% operating margin from
19
baseball programing. The RSDC and Baseball knew that MASN was in its initial start-up phase
in 2007; that MASN did not have the rights to telecast Orioles' games until April 1, 2007; that
MASN had only seven affiliates prior to April 1, 2007; and that MASN's total subscriber base at
the beginning of 2007 was only 60% of MASN's subscriber base at the beginning of 2008. As
the RSDC was also aware, by the very next year, MASN's operating margin for baseball
programming was in excess of 20%. As part of the RSDC's arbitration process, the RSDC
requested and obtained MASN's financial and subscription data. Baseball and the RSDC,
therefore, were aware that MASN's 2007 financial and subscription data was not representative
of MASN's operations at any time since.
69. The RSDC and Baseball also attempted to rationalize the Award by referring to
three Bortz reports that the RSDC and Baseball knew were entirely inapplicable. One report
involved over-the-air broadcast fees and not telecast rights fees for cable and satellite
distribution. A second referenced report did not involve a related party RSN. The third report
involved an RSN that, for business reasons, chose to operate with a below market operating
margin for a short period of time, but, as the RSDC knew, more than doubled its operating
margin in short order thereafter. As the Managing Director of Bortz attests in his affidavit, "the
RSDC improperly ignored those facts and intentionally ignored other applicable reports that
applied the established methodology" in an attempt to support its predetermined Award.
70. While the RSDC's scope of authority is expressly defined and limited and the
RSDC was contractually obligated by the arbitration clause to apply the established
methodology, the RSDC falsely stated in its decision that it could not apply that methodology
either prospectively or to an RSN that telecasts the games of two Clubs. The absurdity of the
RSDC's rationale for not applying the established methodology for these two reasons is belied
20
by the fact that, in executing the Settlement Agreement, Baseball established a two-Club RSN
and committed to applying the established methodology to that two-Club RSN on a prospective
basis. Moreover, as the Managing Partner of Bortz affirmed, "there is no material distinction
between applying the methodology prospectively or retroactively. In fact, Bortz developed the
methodology for prospective use."
E. Baseball and the Commissioner Improperly Influenced the Arbitral Process
71. Upon information and belief, as borne out by subsequent events, Baseball
suffered from buyer's remorse after the Settlement Agreement and recognized that Section 2 of
the Settlement Agreement, particularly that the Nationals held only a minority interest in MASN,
would have a substantial negative impact upon the amount that Baseball could ultimately
command for the sale of the Nationals. As such, upon information and belief, Baseball let it be
known to the prospective purchasers of the Nationals that Baseball would use its powers to
restructure the economics of the MASN partnership to the benefit of the Nationals, by and
through the arbitration process when Baseball could exercise control over the determination of
the amount of telecast rights fees. By so promising, Baseball was able to garner a substantial
windfall from the sale of the Nationals and achieve a sales price that could not have been
obtained otherwise. The effectuation of that scheme knowingly and intentionally deprives
MASN and the Orioles of their promised compensation, assets and rights.
72. Baseball found it necessary to disregard the established methodology in order to
accomplish predetermined result later embodied in the Award. Among other things, Baseball's
outside counsel provided a conduit among Baseball, the Nationals and the RSDC arbitrators, to
achieve that end. Respondents shared an interest in restructuring MASN's economics to their
mutual benefit. After failing in many attempts to force MASN and the Orioles to accede to
21
restructuring MASN's economics to Respondents liking by threatening the issuance of the
Award, the RSDC issued the Award to consummate that improper objective.
73. Reflective of the scheme, Petitioners learned that during the period after the
RSDC hearing in 2012 and while Baseball was threatening MASN and the Orioles with the
issuance of the Award, Baseball made a substantial payment to the Nationals. The payment
reflects an amount approximating the amount of the RSDC's Award net of the revenue sharing
tax for the years 2012 and 2013. Upon information and belief, Baseball borrowed those funds
from a third party, which must be repaid by Baseball, and Baseball's agreement with the
Nationals provides that Baseball would recoup that substantial payment through the proceeds of
the Award once issued.
74. Baseball's payment to the Nationals which was made while Baseball was
attempting to force MASN and the Orioles to restructure the economics of MASN, and
Baseball's expectation of repayment from the proceeds of its Award, evinces the
predetermination of the Award, Baseball's direct financial interest in that Award, and the
pervasiveness of the many conflicts of interest that tainted the fairness and integrity of the
arbitration process and the Award.
75. The entire arbitration process and the RSDC's Award violate 9 U.S.C. 10 and
CPLR 7511, and in so doing, improperly restructures MASN's fundamental economic
underpinnings and, thus, Settlement Agreement's compensatory purpose causing Petitioner and
the Orioles enormous harms. The Award should be vacated on any of the grounds set forth
below.
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COUNT ONE
(9 U.S.C. 10(a)(1) and CPLR 7511(b)(i))
76. Petitioner repeats and re-alleges the allegations of all the paragraphs of the
Petition as if fully set forth herein.
77. The Award was procured by means prohibited by 9 U.S.C. 10(a)(1).
78. Petitioner's rights were further prejudiced by means prohibited by CPLR
7511(b)(i).
79. Respondents' wrongful conduct, including conduct prohibited by 9 U.S.C.
10(a)(1) and CPLR 7511(b)(i), directly and proximately caused a false determination of the
telecast rights fees and results in a 5% profit margin from baseball programming, which has
never been the noun nor applicable to any other related party RSN in the industry, and, thus,
deprives MASN of its profitability, financial reserves and its asset value.
80. Respondents' wrongful conduct, including conduct prohibited by 9 U.S.C.
10(a)(1) and CPLR 7511(b)(i), was only revealed after the RSDC arbitration hearing.
81. The scheme among Baseball, the Commissioner, the RSDC and the Nationals was
done in secret and, accordingly, the conduct prohibited by 9 U.S.C. 10(a)(1) and CPLR
7511(b)(i) could not have been discovered using due diligence during the arbitration
proceedings.
COUNT TWO
(9 U.S.C. 10(a)(2) and CPLR 7511(b)(ii))
82. Petitioner repeats and re-alleges the allegations of all the paragraphs of the
Petition as if fully set forth herein.
83. As set forth more fully above, the existence of two separate conflicts of interests
led to the evident partiality of the RSDC towards the Nationals.
23
84. These conflicts of interests, as well as the plan set forth more fully above,
compromised the fairness, integrity and objectivity of the arbitration and further prejudiced the
rights of Petitioner.
COUNT THREE
(9 U.S.C. 10(a)(3) and CPLR 7511(b)(i))
85. Petitioner repeats and re-alleges the allegations of all the paragraphs of the
Petition as if fully set forth herein.
86. The RSDC committed misconduct in the arbitration by refusing to hear evidence
pertinent and material to the controversy and is guilty of other misbehavior by which the rights
of Petitioner have been prejudiced.
87. The RSDC's misconduct and misbehavior, including in limiting discovery, cross-
examination and presenting evidence, caused prejudice to Petitioner.
COUNT FOUR
(9 U.S.C. 10(a)(4) and CPLR 7511(b)(iii))
88. Petitioner repeats and re-alleges the allegations of all the paragraphs of the
Petition as if fully set forth herein.
89. The RSDC exceeded its powers by failing to apply the RSDC's established
methodology applicable to other related party telecast agreements in the industry when it
deteitnined the fair market value of the Clubs' telecast rights fees for the years 2012 through
2016.
90. Under the Settlement Agreement, the RSDC is not empowered to deviate from its
established methodology for determining telecast rights fees in disputes involving the Nationals,
the Orioles and MASN.
91. This deviation harmed Petitioner and corrupted the RSDC's Award.
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COUNT FIVE
(For Vacatur of the RSDC Award
Manifest Disregard of the Law)
92. Petitioner repeats and re-alleges the allegations of all the paragraphs of the
Petition as if fully set forth herein.
93. An arbitration award can be vacated when the arbitrators manifestly disregard the
law or the terms of the contract.
94. The arbitration clause in Section 2.J.3 of the Settlement Agreement expressly
mandates that the RSDC shall detei nine the telecast rights fees "using the RSDC's established
methodology for evaluating all other related party telecast agreements in the industry."
95. Despite the clear contractual directive to determine the fair market value of the
telecast rights fees using the RSDC's established methodology, the RSDC intentionally refused
to do so under applicable law.
PRAYER FOR RELIEF
WHEREFORE, Petitioner respectfully requests that this Court enter an order:
(a) Vacating the Award pursuant to 9 U.S.C. 10 and CPLR 7511;
(b) Directing that a new hearing be held before an impartial panel who will abide by
all relevant rules and act within the bounds of its prescribed powers; and
(c)
Awarding Petitioner its costs and fees to the full extent provided by law; and
(d) Granting such other and further relief as the Court may determine to be just and
proper.
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Dated: July 28, 2014
New York. New York
Respectfully submitted,
CHADBOURNE ifF4,,PARKE LLP
By

Thornas J. Hall
Pamela J. Marple
Rachel W. Thorn
Benjamin D. Bleiberg
30 Rockefeller Plaza
New York, New York 10112
(212) 408-5100
thall@chadbourne.com
Attorneys for Petitioner
26
VERIFICATION
THOMAS J. HALL, an attorney duly admitted to practice before the courts of the State
of New York, hereby affirms to be true under the penalties of perjury as follows:
1. I am a member of the fiiiii of Chadbourne & Parke LLP, attorneys for the
Petitioner in the proceeding, and make this verification pursuant to CPLR Section 3020(d)(3).
2. I have read the foregoing Verified Petition and know its contents, which are true
to the best of my knowledge, except as to those matters therein stated to be alleged on
information and belief, which I believe to be true. The basis of my knowledge is a review of
client files and communications with client representatives and affiants. The reason why this
verification is not being made by Petitioner is that Petitioner is a foreign (Maryland) limited
liability partnership, and otherwise is not in the county where I have my office.
3. No previous application has been made by Petitioner for the relief requested
herein.
Dated: July 28, 2014
New York, New York

Thomas J. Hall
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To Be F{'fled Under Seal
To Be Filed Under Seal