The Baltimore Orioles defied an order from commissioner Bud Selig to appear at a sanctions hearing, another sign of the team's widening rift with Major League Baseball.
The hearing, which was canceled, was disclosed in documents filed in a New York court where the Orioles-controlled Mid-Atlantic Sports Network is seeking to void a recent decision by a league committee that would force the network to pay substantially higher TV rights fees to the Washington Nationals.
The documents also disclose that MASN filed an arbitration claim last month against Major League Baseball seeking $800 million to compensate for damages the network says it would sustain if the panel's decision is allowed to stand.
The fight is crucial to the Orioles because the team gets a large share of MASN's profits as 85 percent owner of the network, and losing that money — tens of millions of dollars a year — could affect the club's ability to compete. The Nationals own the other 15 percent, a share that rises by 1 percentage point each year and will top out at 33 percent.
The New York Supreme Court for New York County granted MASN's request for a temporary restraining order Aug. 7, blocking the league from implementing the committee's decision. The court has scheduled a hearing in the case Monday.
The dispute stems from a 2005 agreement brokered by Major League Baseball under which the Orioles allowed the Montreal Expos to relocate to Washington and become the Nationals, taking a piece of what had been Orioles territory. The agreement left the Orioles in control of MASN as compensation, but called for the TV-rights fee to reset every five years under a formula.
Several years ago, the Nationals took issue with the rights fees — now about $40 million a year — they receive from MASN. The team requested $118 million, according to court documents. The matter ended up before a committee of three major league owners who determined that the annual fees should rise, effectively lowering MASN's profit margin.
For months, Selig — who is retiring in January and whose successor is expected to be chosen at the baseball owners meeting this week in Baltimore — has urged the parties to resolve the dispute amicably and reserved the right to impose sanctions if they went to court.
Frustrated when the teams turned to the New York court in July, Selig told the parties to attend an Aug. 6 hearing to discuss sanctions.
But the Orioles challenged Selig's authority to sanction them in the case, balked at appearing at the hearing and threatened new litigation. The team argued that Major League Baseball's constitution, which says final authority for disputes between teams rests with the league, does not extend to MASN.
"In light of the pending New York litigation and the possibility of further litigation if the commissioner attempts to impose sanctions, we must advise you that our clients do not intend to appear at the sanctions hearing," lawyers for MASN and the Orioles wrote in an Aug. 5 letter to the league's attorneys.
Major League Baseball canceled the hearing. Selig has not indicated who might be sanctioned or what the penalties could be. Sanctions could include suspensions or fines.
The Aug. 5 letter raised the possibility that Orioles majority owner Peter G. Angelos might be sanctioned.
Asked Tuesday about the possibility of sanctions, Selig said: "I don't want to discuss my correspondence with the clubs. They know what the rules are, and I know what the rules are. We're having actual constructive dialogue with both clubs."
Recent letters from Selig have asserted his jurisdiction over disputes between MASN and the Nationals. The letters were sent to Angelos and Nationals owner Theodore Lerner, according to court documents.
League spokesman Patrick Courtney said Wednesday that he had no comment on the canceled sanctions hearing.
Separately, MASN filed the arbitration claim seeking compensation if the league committee's decision is enforced, court documents show.
A July 31 letter to the American Arbitration Association from an attorney for the Orioles said MASN and the club are seeking "not less than $800 million in lost asset value" from the league.
The claim was filed with the independent arbitration association, which was designated under the 2005 agreement to settle certain disputes between the Orioles and the league.
Attorneys for the Orioles and the Nationals declined to comment Wednesday, citing the pending litigation.
The attorneys for MASN and the Orioles asserted in the Aug. 5 letter that their clients had a right under federal arbitration law to seek court redress. They said the league should not be able to make decisions about economic issues in which it has a stake. Major League Baseball receives a share of local TV rights fees.
"Ultimately, it is our deepest hope that the commissioner will redouble his efforts to guide all parties to an amicable resolution of this unfortunate dispute," the attorneys wrote.
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