The Baltimore Orioles took an early lead in the court battle against the Washington Nationals and Major League Baseball over television rights fees from the teams' shared regional sports network.
A New York court temporarily blocked a recent Major League Baseball decision that would have diverted tens of millions of dollars in profits from the regional network MASN that flow primarily to the Orioles. The Orioles say that money is critical to maintaining competitiveness and affording quality players.
A judge in the New York Supreme Court Commercial Division for New York County issued a temporary restraining order Thursday in response to a Mid-Atlantic Sports Network petition to block the league decision. A hearing on a permanent injunction is scheduled this month.
Judge Lawrence Marks' order also prohibited the Nationals or the league from "taking any action to terminate MASN's license." MASN, which is controlled by the Orioles, argued that it faced irreparable harm because of a threat that the Nationals could prevent it from continuing to show Washington's games.
The judge rejected the league's request to seal the record, meaning that documents filed by the Nationals and MASN will be open to the public. In documents filed with the court, MASN accused the league of botching the process used to determine television rights fees and of improperly influencing the arbitration procedure aimed at settling the clubs' differences.
There was no response Thursday from the Nationals, but Major League Baseball issued a statement noting that "the court made no determination regarding the merits of MASN's and the Orioles' claims but merely instructed the parties to maintain the status quo until a further hearing can be conducted later in the month.
"We remain committed to working with both clubs to reach an amicable resolution," it concluded.
Commissioner Bud Selig, who is retiring in January, had hoped that the fight over the MASN financial split would not be decided in court. He urged the parties to settle their differences and threatened sanctions.
But the parties remain far apart. On May 30, the Nationals sent MASN a default notice contending that the club was not receiving fair-market television rights fees. The ballclub later told MASN it reserved the right to terminate the network's license to broadcast Nationals games.
The dispute began several years ago but only proceeded to court in early July, when the clubs filed petitions that could be considered precursors to full-blown lawsuits. Marks' order prevents the league's decision from taking effect until the matter can be heard by the court.
MASN is contesting a June 30 decision by the owners of the New York Mets, Pittsburgh Pirates and Tampa Bay Rays. The panel, called the Revenue Sharing Definitions Committee, was selected by Selig to resolve the TV rights dispute between the Orioles and the Nationals.
At the heart of the dispute is how much the Nationals should receive in television rights fees. The club received $29 million in 2011 — the last year for which figures were available — plus more than $6 million for the team's small but growing equity stake in MASN.
The Nationals sought a television deal many times higher — reportedly up to $120 million — on par with the lucrative long-term deals that other clubs have signed in recent years.
The committee's decision, released to the parties last month, has not been made public but would increase the TV rights fees paid to the Nationals and the Orioles. It would divert a substantial portion of MASN profits into rights fees. That would be a blow to the Orioles because 85 percent of MASN's profits flow to Baltimore and 15 percent to Washington, based on their ownership share of the network. Washington's share will climb by 1 percentage point a year up to 33 percent.
In arguing against the temporary restraining order, attorneys for the Nationals noted that the MLB committee had concluded that Washington's fair-market rights fees should be "tens of millions of dollars closer to the amounts advocated by MASN than the amounts the Nationals argued should be awarded."
MASN has argued that there should be no dispute over rights fees because a 2005 agreement calls for using a formula developed by Bortz Media & Sports Group, a Colorado consulting firm.
The 2005 agreement with the league gave the Orioles a majority stake in the network that the team said was necessary to ensure its viability after the Nationals arrived from Montreal, taking a large swath of what was once Orioles territory.
The agreement set up MASN's divided ownership structure and called for the rights fees to be reset at "fair market value" every five years to account for ratings and other considerations. The teams divide the rights fees evenly.
MASN recently submitted an affidavit to the court in which Bortz's managing director said the league committee "cherry picked" data and that it "completely corrupts the established methodology" for determining telecast rights fees.
The Nationals argued in a memorandum to the court that the committee "applied the exact methodology required by the parties' agreement, and MASN is not entitled to vacate or modify the award because MASN does not agree with how the [panel] applied the correct formula."
The MLB panel rejected MASN's argument that it was to be bound by the Bortz approach, according to the Nationals' memorandum.
MASN contends that the committee's decision was unfair because, in effect, the league was being asked to render a decision in which it has a stake. Because of revenue-sharing, MASN contends, the league stands to gain money if rights fees are boosted.
MASN noted in court documents that the same outside counsel represented the Nationals, the league and the three teams whose owners made up the panel.
MASN said that the committee's decision "would have the effect of relieving baseball, the commissioner and the Washington Nationals of their contractual obligations and undertakings and would do so as a result of an arbitration that was lacking in honesty and objectivity."