TCR Sports Broad. Holding v. WN Partner, LLC

• Decision Date: 13 July 2017
• Docket Number: 652044/14.
• Citation: 153 A.D.3d 140,59 N.Y.S.3d 672 (Mem)
• Parties: In re TCR SPORTS BROADCASTING HOLDING, LLP, Petitioner–Appellant–Respondent, v. WN PARTNER, LLC, et al., Respondents, Washington Nationals Baseball Club, LLC, et al., Respondents–Respondents–Appellants, The Baltimore Orioles Baseball Club, et al., Nominal Respondents–Appellants–Respondents. In re TCR Sports Broadcasting Holding, LLP, Petitioner–Respondent, v. WN Partner, LLC, et al., Respondents, Washington Nationals Baseball Club, LLC, Respondent–Appellant, The Baltimore Orioles Baseball Club, et al., Nominal Respondents–Respondents. E. Leo Milonas, Diamond Dealers Club, Inc., Kenneth R. Feinberg and Robert S. Smith Amici Curiae.
• Court: New York Supreme Court — Appellate Division

153 A.D.3d 140
59 N.Y.S.3d 672 (Mem)

In re TCR SPORTS BROADCASTING HOLDING, LLP, Petitioner–Appellant–Respondent,
v.
WN PARTNER, LLC, et al., Respondents,

Washington Nationals Baseball Club, LLC, et al., Respondents–Respondents–Appellants,

The Baltimore Orioles Baseball Club, et al., Nominal Respondents–Appellants–Respondents.

In re TCR Sports Broadcasting Holding, LLP, Petitioner–Respondent,
v.
WN Partner, LLC, et al., Respondents,

Washington Nationals Baseball Club, LLC, Respondent–Appellant,

The Baltimore Orioles Baseball Club, et al., Nominal Respondents–Respondents.

E. Leo Milonas, Diamond Dealers Club, Inc., Kenneth R. Feinberg and Robert S. Smith Amici Curiae.

652044/14.

Supreme Court, Appellate Division, First Department, New York.

July 13, 2017.

Chadbourne & Parke LLP, New York (Thomas J. Hall of counsel), and Cooley LLP, New York (Rachel W. Thorn, Alan Levine and Caroline Pignatelli of counsel), for TCR Sports Broadcasting Holding, LLP, appellant-respondent/respondent.

Sidley Austin LLP, Washington, DC (Carter G. Phillips of the bar of the District of Columbia and the State of Maryland, admitted pro hac vice, of counsel), for TCR Sports Broadcasting Holding, LLP, the Baltimore Orioles Baseball Club and the Baltimore Orioles Limited Partnership, appellants-respondents/respondents.

Sidley Austin LLP, New York (Benjamin R. Nagin, Eamon P. Joyce, Kwaku A. Akowuah and Tobias S. Loss–Eaton of counsel), for the Baltimore Orioles Baseball Club and the Baltimore Orioles Limited Partnership, appellants-respondents/respondents.

Quinn Emanuel Urquhart & Sullivan, LLP, New York (Stephen R. Neuwirth, Sanford I. Weisburst, Julia J. Peck and Cleland B. Welton II of counsel), for Washington Nationals Baseball Club, LLC, respondent-appellant/respondent.

Kirkland & Ellis LLP, Washington, DC (Paul Clement of the bar of the District of

59 N.Y.S.3d 673

Columbia, admitted pro hac vice, Erin E. Murphy of the bar of the District of Columbia and the State of Virginia, admitted pro hac vice, and Michael H. McGinley of the bar of the District of Columbia, admitted pro hac vice, of counsel), Williams & Connolly, New York (John J. Buckley, Jr. of counsel), and Lupkin and Associates, New York (Jonathan D. Lupkin of counsel), for the Office of Commissioner of Baseball and the Commissioner of Major League Baseball, respondents-appellants.

Pillsbury Winthrop Shaw Pittman LLP, New York (David G. Keyko of counsel), for E. Leo Milonas, amicus curiae.

Jenner Block LLP, New York (Stephen L. Ascher, Irene M. Ten Cate and Jeremy H. Ershow of counsel), for Diamond Dealers Club, Inc., amicus curiae.

Moses & Singer LLP, New York (Lawrence I. Ginsburg, Jay R. Fialkoff and Robert B. McFarlane of counsel), for Kenneth R. Feinberg, amicus curiae.

Friedman Kaplan Seiler and Adelman, New York (Robert S. Smith, Robert J. Lack and Nora Bojar of counsel), for Robert S. Smith, amicus curiae.

ROLANDO T. ACOSTA, P.J., ROSALYN H. RICHTER, RICHARD T. ANDRIAS, MARCY L. KAHN, ELLEN GESMER, JJ.

PER CURIAM.

The order of the Supreme Court, New York County (Lawrence K. Marks, J.), entered on or about November 4, 2015, which, insofar as appealed from as limited by the briefs, denied respondent Washington Nationals Baseball Club, LLC's motion to confirm an arbitration award issued June 30, 2014 by Major League Baseball's Revenue Sharing Definitions Committee, granted the part of petitioner's motion seeking to vacate the award, and denied the part of petitioner motion seeking to direct that a second arbitration proceed before an impartial panel unaffiliated with Major League Baseball, should be affirmed, without costs. The order of the same court and Justice, entered July 11, 2016, which denied the Nationals' motion to compel the parties to re-arbitrate the claim before the Revenue Sharing Definitions Committee, and granted petitioner's cross motion to stay the parties from compelling or conducting another arbitration of this dispute until the final determination of the appeals from the November 4, 2015 order, should be modified, on the law, to grant the Nationals' motion, and otherwise affirmed, without costs.

Order, Supreme Court, New York County (Lawrence K. Marks, J.), entered on or about November 4, 2015, affirmed, without costs. Order, same court and Justice, entered July 11, 2016, modified, on the law, to grant the Nationals' motion, and otherwise affirmed, without costs.

ANDRIAS and RICHTER, JJ. concur in a separate Opinion by ANDRIAS, J. KAHN, J. concurs in a separate Opinion.

ACOSTA, P.J. and GESMER, J. dissent in part in an Opinion by ACOSTA, P.J.

ANDRIAS, J.

Pursuant to the negotiated terms of the parties' written agreement, the subject arbitration, governed by the Federal Arbitration Act (FAA) ( 9 U.S.C. § 1 et seq. ), was initiated before the Revenue Sharing Definitions Committee (RSDC) of Major League Baseball (MLB), to resolve a contractual dispute over telecast rights fees between TCR Sports Broadcasting Holding, LLP d/b/a the Mid–Atlantic Sports Network (MASN) and the Baltimore Orioles, and the Washington Nationals. For the reasons stated herein, we find that the arbitration award issued by the RSDC on June 30, 2014 was correctly vacated based

59 N.Y.S.3d 674

on "evident partiality" ( 9 U.S.C. § 10 [a][2] ) arising out of the Nationals' counsel's unrelated representations at various times of virtually every participant in the arbitration except for MASN and the Orioles, and the failure of MLB and the RSDC, despite repeated protests, to provide MASN and the Orioles with full disclosure or to remedy the conflict before the arbitration hearing was held. However, even if this Court has the inherent power to disqualify an arbitration forum in an exceptional case, on the record before us there is no basis, in law or in fact, to direct that the second arbitration be heard in a forum other than the industry-insider committee that the parties selected in their agreement to resolve this particular dispute, fully aware of the role MLB would play in the arbitration process.

Contrary to the view of the dissent, there has been no showing of bias or corruption on the part of the members of the reconstituted RSDC, and the Nationals will use new counsel at the second arbitration. Speculation that MLB will dictate the outcome of the second arbitration by exerting pressure on the new members of the RSDC does not suffice to establish that they will not exercise their independent judgment or carry out their duties impartially, or that the proceedings will be fundamentally unfair.

In 2001, the Orioles and TCR Sports Broadcasting Holding, LLP (TCR) established the Orioles' Television Network as a platform to broadcast Orioles games in a seven-state television territory. In 2002, MLB purchased the failing Montreal Expos for $120 million. In 2004, MLB announced the relocation of the Expos to Washington, D.C. to become the Nationals. The Orioles objected to the move on the grounds that the introduction of the Nationals into its previously-exclusive markets would cause it significant economic harm.

In an effort to resolve several issues associated with the Expos' relocation, on March 28, 2005, MLB, TCR, the Nationals, and the Orioles entered into an agreement which provided, among other things, that TCR would be converted into a two-club regional sports network, MASN, which would have the sole and exclusive right to telecast, in the television territory, Nationals' and Orioles' games that were not otherwise retained or reserved by MLB's national rights agreements. The Orioles would be the managing partner and, initially, own 90% of MASN. The Nationals would own 10%, with its stake increasing, starting in 2010, by 1% per year, until it reached 33% in 2032. This allocation would allow the Orioles to receive reparative compensation through the distribution of profits in accordance with its then-applicable supermajority interests.

The agreement set the annual telecast fees to be paid to the teams between 2005 and 2011.¹ For 2005–2006, the Nationals would be paid $20 million per year. The Orioles would be paid up to $75,000 per game, with the final amount to be agreed upon between TCR and the Orioles. Beginning in 2007, the Orioles and the Nationals would each be paid $25 million per year, escalating at a noncompounded 4% rate.

The agreement also provided a methodology for determining future fees. "After 2011, and for each successive five year period, the Orioles, the Nationals and [MASN] [had to] first negotiate in good faith using the most recent information

59 N.Y.S.3d 675

available which is capable of verification to establish the fair market value [FMV] of the telecast rights." If they were unable to agree on FMV during the mandatory negotiation period (30 days), they were to enter into nonbinding mediation under the auspices of the American Arbitration Association (AAA) or JAMS. If negotiation and mediation failed, "then the fair market value of the Rights [would] be determined by [the RSDC] using the RSDC's established methodology for evaluating all other related party telecast agreements in the industry." The RSDC determination would be final and binding on the parties, who could seek to vacate or modify the FMV...