A New York appeals court ruled Thursday that the Orioles-controlled Mid-Atlantic Sports Network must return to a Major League Baseball arbitration panel for a resolution to its long-running dispute over how much it owes the Washington Nationals for the rights to televise their games.
On a 3-2 vote, the New York Supreme Court's Appellate Division ordered the case remanded to an arbitration panel composed of a group of owners of Major League Baseball clubs. That's not the outcome the Orioles proposed — the club wanted the case heard by a forum outside of baseball — and the team said it will appeal.
More than $100 million is potentially at stake —- money that bears significantly on the two teams' ability to attract free agents and retain their own stars.
The figure represents the accumulated difference between what MASN, which broadcasts both clubs' games, pays the Nationals each year and the higher amount that a baseball arbitration panel recommended in 2014 be paid to Washington.
That 2014 decision was thrown out by a judge the following year, and the appeals court, in a separate 5-0 vote Thursday, affirmed that dismissal — a victory for MASN, which has argued that its operating margins would be dangerously thinned if the decision were allowed to stand.
"To my knowledge, for the first time in history, an internal MLB arbitration was vacated by the court and was done so unanimously," said Arnold Weiner, counsel to the Orioles in their capacity as MASN's managing partner.
The Nationals, in a news release, claimed "a major legal victory."
"It's one thing to declare victory, as the Nationals do, and it's another thing to have actually won, which they didn't," Weiner said.
Under the court's two decisions, no money will change hands, and the case pitting baseball neighbors will continue.
"It's important for a variety of reasons," Lee Berke, head of the New York-based consulting firm LHB Sports, Entertainment & Media, said of the case. "The more money you have, the more money you have to sign players. Your base payroll can go up according to how much media money you're bringing in."
Berke called the dispute unusual. "This is the only regional sports network where two baseball teams are housed together, and it doesn't seem like a happy marriage," he said.
Major League Baseball declined to comment on the court's decisions.
MASN has long argued that Major League Baseball has stacked the deck against Baltimore and in favor of the Nationals. The network said the same outside counsel — the law firm of Proskauer Rose —- represented the Nationals, Major League Baseball and three teams whose owners were on the 2014 arbitration panel.
The justices agreed with with MASN's assessment Thursday.
"We find that the [Major League Baseball] arbitration award was correctly vacated based on 'evident partiality,' " they wrote.
But the panel declined the request of MASN and the Orioles to remove the case from baseball's internal arbitration panel, which is called the Revenue Sharing Definitions Committee, or RSDC.
"Contrary to the view of the dissent, there has been no showing of bias or corruption on the part of the members of the reconstituted RSDC, and the Nationals will use new counsel at the second arbitration." the justices wrote. "The dissent's position that the new panel will remain puppets of MLB, rather than exercise its independent judgment, is pure conjecture."
In dissenting, presiding justice Rolando T. Acosta wrote: "MLB's pervasive bias and unfair conduct has infected the RSDC so as to frustrate the parties' intent to submit their dispute to a fundamentally fair arbitration."
It was the Nationals' first big win in the legal battle, which began when a New York Supreme Court justice blocked baseball from enforcing its initial arbitration decision in 2014.
"The Nationals are gratified that the appeals court recognized the importance of enforcing contractual arbitration agreements," Stephen Neuwirth, who argued the appeal for Washington, said Thursday in a written statement. "We look forward to finally having the rights fees determined in the forum the parties chose."
The case landed in court in 2014 when MASN and the Orioles challenged the original panel's decision awarding the Nationals $53 million per year, with the amount scheduled to rise slightly every year. MASN said that the determination was based on flawed methodology and that the correct amount was about $40 million. The teams had been arguing about fees long before they ended up in court.
Procedures for determining TV rights fees were brokered by baseball when the Nationals, formerly the Montreal Expos, moved to Washington 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 in the region deprived Baltimore of a third of its market.
MASN said MLB telegraphed its intentions by advancing the Nationals $25 million in August 2013 to make up the difference between what the club was receiving from MASN and what it was expected to get from the arbitration panel.
MLB countered that the loans "were fully justified [and] were done with the Orioles' and MASN's knowledge and encouragement."