The Orioles-controlled television network asked a judge on Monday to send its court battle with the Washington Nationals to a neutral arbitrator or to decide the matter himself — but not to send the case back to Major League Baseball.
A three-member MLB panel decided in June 2014 that the Nationals should receive about $60 million in broadcast rights fees per year from the Mid-Atlantic Sports Network. MASN, which is majority-owned by the Orioles and televises both teams' games, now pays $40 million annually to both clubs.
MASN lawyers asked New York Supreme Court Justice Lawrence K. Marks to toss out that arbitration decision, which it said could render the network "economically unsustainable." If not, they argued, he should send the case to the American Arbitration Association or another neutral third party.
Attorney Carter Phillips, who represents the Orioles, told Marks that MLB can't be impartial.
"You cannot send this back to the commissioner," he said.
Marks concluded the four-hour hearing by saying he would issue a written decision. It is uncertain when he will rule.
The arbitration panel — composed of the owners of the Pittsburgh Pirates, New York Mets and Tampa Bay Rays — took over after the Orioles and Nationals could not agree on fair-market value of television rights fees that are parceled out equally to the two teams.
Both teams say local television money is critical to their ability to sign players and make other investments. The Nationals had originally sought $109 million for 2012 — an amount Marks noted was higher than the biggest-market teams.
During Monday's hearing, MASN attorney Thomas Hall told Marks that soon-to-be baseball commissioner Rob Manfred participated in the panel's purportedly independent decision. Manfred was baseball's chief operating officer when the panel made its decision and became commissioner in January after Bud Selig stepped down.
"Mr. Manfred and his staff participated in every deliberation that we have been made aware of," Hall said.
MASN and the Orioles said the commissioner's office asked MASN to pay the higher fees to the Nationals under threat of sanctions.
John Buckley Jr., an attorney for MLB, said it is "certainly not true" that top MLB officials influenced the panel's decision.
"There was no attempt to dictate or control the result of the case," Buckley said. The arbitrators made "an independent judgment," he said.
MASN attorneys previously said in a court filing that the panel's decision would leave it with an "economically unsustainable 5 percent profit margin."
They argued that the "net effect" would so deplete MASN's cash reserves that any changes to its business, including a major affiliates discontinuing service, would leave the network "on the brink of insolvency."
Analysts say regional sports networks typically maintain profit margins of at least 20 percent. MASN's current profit margin has not been made public.
The Orioles receive the lion's share of MASN's profits because the club was given control of the network as part of the deal allowing MLB to relocate the Montreal Expos to Washington to become the Nationals. The Orioles argued that the Nationals' arrival into the region deprived Baltimore of a third of its market.
The Orioles own 84 percent of the network, while the Nationals own 16 percent, a stake that grows by a percentage point each year until it tops out at 33 percent.
By asking the network to accept a profit margin of less than 20 percent, Phillips said Monday, MLB seemed to single out the Orioles. Team attorneys have said that the agreement that created MASN in 2005 implicitly calls for a profit margin of that size.
"We are in fact treated worse than every other team," Phillips said.
The Nationals counter that they are not receiving fair-market value from MASN.
Nationals attorney Stephen Neuwirth said the notion that regional sports networks should have 20 percent profit margins "is something that is not in the agreement" that created MASN.
Nationals attorneys said in a recent court document that MASN's refusal to abide by the panel's ruling has left the club "at a competitive disadvantage compared to other teams."
Neuwirth repeated Monday that the club is "strapped for cash" because it is not receiving television money it needed and anticipated.
In addition to Manfred's influence on the panel, MASN and the Orioles questioned the role of the New York-based law firm Proskauer Rose, telling Marks that the firm represented the Nationals, MLB and the three teams whose owners were on the arbitration panel as outside counsel.
"These are relationships of trust and confidence," Orioles attorney Arnold Weiner told the judge. "These are relationships in which the highest officials of baseball trust their lawyers with their most important problems."
Proskauer's legal work for the league dates to 1999, according to court documents. The firm represented the Nationals when the case came before the panel.
MLB argued that the arbitration was fair. Its attorneys said MASN never sought to disqualify Proskauer or any committee member.
Neuwirth told the judge: "There is no evidence there was any undue influence on this process."
Neuwirth said the arbitration was, by definition, an "inside baseball arbitration" process, and its participants were never intended to be an "independent, pristine group of arbitrators who have no relationship to the parties."
Analysts say the burden is on MASN and the Orioles to prove bias in the process.
"It's a pretty high bar to overturn the arbitration when you agreed to participate in the arbitration," said John Mansell, president of a Washington-area sports and media consulting firm.
MASN attorneys argued that the arbitration panel's decision appeared preordained by MLB.
Phillips told the judge that MLB telegraphed its intentions by advancing the Nationals $25 million in August 2013 to make up the difference between what the club currently receives from MASN and what it expected to get from the arbitration panel.
MLB acknowledged making the loans but said in court documents they "were fully justified, were done with the Orioles' and MASN's knowledge and encouragement, and were intended to allow additional time for the parties to negotiate a settlement."
The clubs did discuss a settlement but ended up in court — a resolution MLB had tried to avoid.
A dozen attorneys were present for Monday's arguments, held in the courthouse across from Foley Square in lower Manhattan. Participating were a lawyer for MASN, two for the Orioles and attorneys for the Nationals and MLB. Nationals owner Ted Lerner also was in the courtroom.