United States: Court Vacates Arbitration Award Due To Evident Partiality Of Panel, But Parties Must Re-Arbitrate Matter Before Same Arbitral Forum

Last Updated: August 16 2017
Article by Carlton Fields

In a dispute between the Washington Nationals, the Baltimore Orioles, and affiliated parties regarding the value of broadcasting rights for Nationals games, an appellate court has affirmed a trial court order vacating an arbitration award on the basis of evident partiality by the arbitration panel, while also denying a motion to compel the parties to re-arbitrate the matter in a different arbitral forum.

In 2005, the Montreal Expos moved to Washington, DC, and became the Nationals. This led to an agreement under which the Orioles Television Network, which the Orioles had established with TCR Sports Broadcasting Holding, LLP, became MASN, a regional sports network with rights to broadcast both Orioles and Nationals games. The agreement set the broadcast fees from 2005-2011, after which the parties were to negotiate those fees. The parties further agreed to arbitrate disputes before the Revenue Sharing Definitions Committee ("RSDC"), a MLB-created body comprised of representatives of other MLB clubs.

A fee dispute arose between the parties regarding the broadcasting of Nationals games, and the matter proceeded to arbitration. The Nationals were represented by Proskauer Rose, which the Orioles and MASN objected to based on Proskauer's past representations of the Nationals, MLB, and each of the three teams with members participating on the RSDC. Despite this objection, the arbitration proceeded and resulted in an order setting the amount MASN would pay the Nationals from 2012-2016.

MASN moved to vacate the award on numerous grounds, but the district court rejected all but one; the court found that that Proskauer's representation of the Nationals led to "evident partiality," making the proceedings fundamentally unfair. However, the district court rejected MASN's motion to order the parties to re-arbitrate the matter in an arbitral forum unaffiliated with MLB.

The appellate court upheld the finding of evident partiality, noting that, under the FAA, a party seeking to vacate an arbitration award on this basis "bears the burden of showing that a reasonable person, considering all the circumstances, would have to conclude that an arbitrator was partial to one party to the arbitration". The court found that MASN and the Orioles had met this burden based on the sheer volume of Proskauer's representation of the RSDC panel members and MLB and the failure of the panel members to investigate the issue sufficiently or to fully disclose their own relationships to Proskauer. The appellate court also upheld the trial court's refusal to order the parties to re-arbitrate the matter in a different forum. Emphasizing the FAA's strong bias in favor of enforcing agreements to arbitrate as written, the court held that parties are free agree to "insider" arbitral forums that, like the RSDC, may be inherently prone to certain conflicts. The court also noted that the problem that led the original award to be vacated – Proskauer's conflicts – had been remedied by the National's hiring of new counsel. Thus, the court found that the parties could not be ordered to arbitrate the matter in a forum other than the RSDC.

TCR Sports Broad. Holding, LLP v. WN Partner, LLC, 3595, Index 652044/14 (N.Y. App. Div. July 13, 2017)

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