Petition

EXHIBIT - 2

FILED: NEW YORK COUNTY CLERK 08/07/2014 01:34 PM INDEX NO. 652044/2014NYSCEF 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

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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


to the RSDC Award at issue.

33. Jurisdiction over Nine Sports is proper under CPLR 302(a) because this


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.

22

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))



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))



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))



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)



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.

25

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 [email protected]

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

m X =

0 -a.

To Be F{'fled Under Seal

To Be Filed Under Seal

Documents

Petition