A judge blocked Major League Baseball on Monday from compelling the TV network controlled by the Baltimore Orioles to pay tens of millions of dollars a year more to the Washington Nationals for the rights to show their games — for now.
Following a hearing, New York Supreme Court Judge Lawrence Marks granted the request of the Mid-Atlantic Sports Network and the Orioles to extend an injunction he had granted Aug. 7 while the case proceeds in the court.
The judge said Major League Baseball needs to answer questions about whether the panel that ordered the higher fees was impartial.
The injunction means MASN, which is owned 85 percent by the Orioles and 15 percent by the Nationals, won't have to pay — at least not now — the increased rights fees ordered on June 30 by a panel of three major-league owners.
It also blocks the Nationals from terminating MASN's license to broadcast their games to protest the network's refusal to pay.
Marks raised concerns that the Washington team's threat to pull the license looked like "blackmail" and "possible extortion" because pulling its games off the air would seriously harm MASN's operations.
Ruling from the bench, Marks said the possibility of MASN losing Nationals' broadcasts posed a "credible threat" to the network, which also broadcasts Orioles' games.
The judge accepted MASN's offer to put up a $20 million bond so the Nationals are guaranteed the higher fees if the court ultimately rules in the Washington team's favor.
No trial date has been set.
Major League Baseball argued before — and its attorney did so again Monday — that the case didn't belong in court because MASN has no right to appeal a baseball decision to a court. It also argued the issue already is being heard by an arbitration organization.
Retiring commissioner Bud Selig had hoped the teams could reach a settlement and threatened sanctions if they proceeded to litigation.
But MASN argued that it had a right to seek judicial review under federal arbitration law, and the judge said Monday the case was properly before him.
The panel of three team owners had arbitrated because the neighboring clubs could not agree. But MASN attorneys raised questions Monday about whether the owners of the New York Mets, Pittsburgh Pirates and Tampa Bay Rays were truly impartial.
"Those questions [of neutrality] are not answered here today," said Marks, suggesting that the issue would surface again as the case proceeds.
Pennsylvania State University law professor Stephen Ross said that the injunction doesn't settle anything but gives the Orioles an early advantage. He described Monday's ruling as a "homerun" but cautioned it's only the first inning of the legal proceedings.
In a prepared statement, Orioles attorney Arnold Weiner said he was pleased the court blocked Major League Baseball's decision, which he called "fundamentally flawed."
"Hopefully, during this standstill Baseball and the Nationals will join MASN's and the Orioles' efforts to reach an amicable resolution," Weiner said in the statement.
MASN attorney Thomas Hall said in a statement that the network "deserved a fair and impartial proceeding, particularly from Baseball. We made that case today in Court."
There was no reaction from the Nationals, and the team's attorney declined to comment.
The three-owner panel ruled June 30 that the market dictates that the Nationals should receive about $60 million in TV rights fees per year. Since MASN now pays $40 million annually, the network would owe the Washington team about $20 million more for 2014 by the end of the year.
The $20 million would come out of the network's profits, and MASN attorneys told the court that it would have serious difficulty paying.
Because of high expenses incurred during the season, "this is the worst time of year for MASN," Weiner told the court. "We have $3.5 million in the bank."
But Nationals' attorney Stephen Neuwirth called MASN's claims "frankly outlandish."
"These are very wealthy baseball teams," Neuwirth told Marks. "To suddenly say they don't have money is another example of the ground shifting."
John Buckley, an attorney for Major League Baseball, told the judge that the commissioner's office could "work out a reasonable payment plan" if MASN could not pay the full sum now.
The New York Supreme Court — a trial-level court, not an appeals court — had several options. Marks could have denied the preliminary injunction and forced MASN to pay the money owed. As of June, the bill was already about $10 million, according to court records.
In July, MASN and the Orioles also filed a claim with the American Arbitration Association seeking at least $800 million in damages if the panel's decision is imposed. The club argued that Major League Baseball breached a previous agreement by using the wrong methodology to establish the rights fees MASN must pay. That case is continuing.
Weiner argued Monday that the same outside counsel — New York-based Proskauer Rose — represented the Nationals, Major League Baseball and the three teams whose owners made up the arbitration panel.
"Even as of today, there has been no affirmative disclosure of what these relationships were," Weiner said.
Neuwirth countered that important information about the relationships was public and that MASN agreed to proceed with the panel's arbitration.
"For them to just stand here and tell you they were duped, it just isn't true," he said.
But the judge said the Orioles had "raised timely questions regarding the relationships. The question about who know what about which conflictss and when is a significant issue."
Procedures for determining TV rights fees were brokered by baseball when the Nationals, formerly the Montreal Expos, arrived in 2005.
A 2005 agreement was weighted toward the Orioles — giving the team a bigger ownership stake in MASN and a proportionately larger share of the profits — after the team argued that the Nationals' arrival into the region deprived Baltimore of a third of its market.
The Nationals' share of MASN and its profits are climbing by a percentage point a year up to an eventual total of 33 percent.
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