Matter of TCR Sports Broadcasting Holding, LLP v. WN Partner, LLC
153 A.D.3d 140
| N.Y. App. Div. | 2017Background
- In 2005 the Orioles, MASN (TCR), the Nationals and MLB agreed that telecast-fee disputes would be finally resolved by MLB’s Revenue Sharing Definitions Committee (RSDC) using the RSDC’s “established methodology.”
- For 2012–2016 the parties could not agree on fair-market-value (FMV) fees; they waived mediation and submitted the dispute to the RSDC. The Nationals were represented by Proskauer Rose LLP.
- MASN and the Orioles repeatedly objected that Proskauer concurrently represented MLB and clubs affiliated with RSDC members and sought disclosure/disqualification; MLB/RSDC provided limited disclosure and declined to disqualify Proskauer.
- The RSDC issued an award (June 30, 2014) substantially above MASN’s valuation; MLB advanced $25 million to the Nationals during settlement talks (repayment terms tied to the award).
- MASN/ Orioles petitioned to vacate under the FAA for evident partiality, fraud and related grounds; Supreme Court vacated the award based solely on evident partiality arising from Proskauer’s conflicts and preserved MASN’s request for a new forum but declined to order a different forum.
- Appellate court (this opinion): affirms vacatur for evident partiality but holds the court may not (on this record) order rehearing before an arbitral forum other than the RSDC; modifies a stay/compel ruling in favor of the Nationals.
Issues
| Issue | Plaintiff's Argument (MASN/Orioles) | Defendant's Argument (Nationals/MLB) | Held |
|---|---|---|---|
| Whether the RSDC award must be vacated for evident partiality | Proskauer’s concurrent representations of MLB and clubs with RSDC ties and MLB’s failure to disclose/remedy created objective evident partiality making the proceeding fundamentally unfair | The RSDC process was an industry-insider arbitration the parties chose; conflicts were known/waived and did not establish evident partiality | Vacatur affirmed: objective facts of Proskauer’s relationships and MLB/RSDC’s nondisclosure met the FAA evident-partiality standard |
| Whether the court may order rehearing before a different, neutral forum (reform arbitration clause) | The RSDC and MLB are so tainted (MLB’s $25M advance, administrative control, Commissioner’s comments) that a rehearing before RSDC cannot be fundamentally fair; court should reform contract and refer to AAA | FAA and contract law require enforcing the parties’ agreed forum (RSDC); absent extraordinary showing, courts should not substitute a different forum | Court rejects ordering a different forum on this record: parties knowingly chose RSDC, conflicts remedied (new counsel, new panel), and no showing the reconstituted RSDC will be corrupt or incapable of impartiality |
| Whether MASN waived its right to challenge partiality by proceeding in arbitration without moving to disqualify | MASN preserved objections repeatedly and explicitly reserved all rights in submissions and communications with MLB/RSDC | Nationals/MLB argue challenge was untimely or waived by participation | No waiver: MASN and Orioles repeatedly preserved and documented objections; preserved right to seek vacatur |
| Whether courts have inherent equitable power to substitute an arbitral forum in exceptional cases | MASN: courts retain power under FAA §2 and equity to reform agreements or direct rehearing in a new forum when fundamental fairness is otherwise impossible | Nationals/MLB: FAA jurisprudence favors enforcing negotiated forum selections; courts lack power to reassign forum absent contract invalidation | Court (plurality): declines to decide the broader inherent-power question but holds on the facts here there is no basis to reform the clause; dissent would exercise such power and remand to AAA |
Key Cases Cited
- Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Trust, 729 F.3d 99 (2d Cir.) (adopting reasonable-person standard for evident partiality)
- U.S. Elecs., Inc. v. Sirius Satellite Radio, Inc., 17 N.Y.3d 912 (N.Y.) (discussing arbitration review under New York law)
- Morelite Constr. Corp. v. New York City Dist. Council Carpenters Benefit Funds, 748 F.2d 79 (2d Cir.) (vacatur standard; appearance of bias insufficient but nondisclosure can warrant vacatur)
- Scandinavian Reins. Co. Ltd. v. Saint Paul Fire & Marine Ins. Co., 668 F.3d 60 (2d Cir.) (circumstances when evident-partiality standard is met)
- Applied Indus. Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 F.3d 132 (2d Cir.) (failure to disclose a material relationship supports evident partiality)
- Aviall, Inc. v. Ryder Sys., Inc., 110 F.3d 892 (2d Cir.) (arbitration-agreement reformation; limits on pre-award removal absent contract-based grounds)
- Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (U.S.) (FAA requires impartial arbitrators)
- Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (U.S.) (courts must enforce arbitration agreements according to their terms)
- Sphere Drake Ins. Ltd. v. All Am. Life Ins. Co., 307 F.3d 617 (7th Cir.) (parties may choose industry-insider arbitrators; FAA’s §10(a)(2) has limited role where parties consent to interested arbitrators)
- Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir.) (district court substituted a neutral arbitrator to ensure fairness)