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Mediation scheduled in Orioles, Nationals TV rights fee dispute

Unable to reach agreement over tens of millions of dollars in fees for the right to televise games, the Orioles and the Washington Nationals are going to pursue help from an umpire of sorts to try to resolve a dispute that has lasted more than four years.

In a court document filed Monday, New York Supreme Court Justice Lawrence K. Marks said attorneys in the case chose "to go to private mediation and selected their own mediator," and that the process is scheduled to begin April 12.

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The procedure will mark the latest chapter in a Major League Baseball rarity — teams airing grievances outside of MLB's purview. MLB had long sought to broker a deal that would keep the bickering neighbors out of court, even threatening sanctions if they proceeded to litigation, though the league never imposed them.

In mediation, the facilitator typically shuttles between the sides seeking common ground but has no authority to render a decision. Mediation does not preclude the possibility of arbitration, in which each party presents evidence and is bound by the ruling.

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On their own, the Orioles and Nationals, who share a television network but compete against each other on the field, have failed to reach a settlement.

The Nationals argue that the Mid-Atlantic Sports Network, which is majority-controlled by the Orioles, should be paying the Washington team millions more for the right to show its games. The Nationals say they are not receiving fair-market value from the network, placing them at a competitive disadvantage with other teams.

MASN and the Orioles counter that the Nationals are receiving fair-market value under terms of an agreement between the clubs and MLB signed in 2005.

While the Orioles have supported the idea of mediation, the Nationals submitted because the judge was likely to require it, according to Stephen Neuwirth, a Nationals' attorney. "Under pressure, the Nationals agreed to mediate," Neuwirth wrote in a memorandum filed in court Monday.

The memorandum identified the mediator as Eric Green, a Boston-based professor who once mediated a Microsoft antitrust case.

"It's an excellent idea," said Stephen Ross, a Pennsylvania State University law professor who wondered why the third-party approach wasn't tried previously. "You have a trained mediator, and their sole goal is to try to get the parties together," he said.

Ross said the mediator could work confidentially with each party, pointing out where their case is weak in an attempt to get them to the table for a settlement.

The case landed in Marks' court in 2014 when MASN and the Orioles challenged the decision of an MLB arbitration panel composed of three baseball team owners that awarded the Nationals about $60 million per year in rights fees. MASN, which now pays the Nationals about $40 million, said the panel applied the wrong formula in determining the fee structure.

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The case represents "an unprecedented example of a challenge to a commissioner's authority," Ross said. "The commissioner has this traditional power to act in the best interest of the game. Usually, major-league clubs do everything they can to keep things out of court."

In November, Marks tossed out the arbitration panel's decision, concluding that MASN was denied a fair hearing. The judge suggested the parties settle the matter through a "neutral dispute resolution process."

The parties, who have declined to publicly discuss the case since the judge's ruling, did not respond to interview requests on Monday.

While MASN attorneys have long embraced an independent forum outside MLB, the Nationals sought a different course.

Attorneys for the Washington team had asked the court to return the issue to a new arbitration panel of baseball club owners.

The Nationals recently hired new television rights fee lawyers in preparation for a possible hearing before the panel. The judge said the team's previous counsel, New York-based Proskauer Rose, had a conflict of interest because the firm also had represented MLB and the three teams whose owners were on the arbitration panel in other matters.

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The possibility of the teams returning to MLB for judgment had been left open by Marks' decision, provided the parties agreed.

But MASN and the Orioles resisted. The network said it could not receive an objective hearing from MLB because the league was involved in the case. It said in a December court filing that "high-ranking MLB officials who report directly to the Commissioner were intimately involved in every aspect of the arbitration."

MLB has argued that its arbitration process is fair.

As the dispute continues, the Nationals say they are being increasingly harmed. In January, the team said in an affidavit that MASN's "underpayment of rights fees has already required the Nationals to fund payroll and other expenses from its own reserves, and further delay could require the Nationals to seek further financing."

John Mansell, a Northern Virginia-based sports and media consultant, said $20 million in rights fees per year would be important to Washington "over the long haul." But in the short term, he said: "I don't think it is all that significant ... thanks to the quality players in the Nats' minor league system and the astute trades and free agency moves by management."

Mansell also said mediation won't necessarily lead to a speedy conclusion. Mediation has "become standard procedure in many complicated civil cases, but is often just a prelude to further litigation," he said.

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jebarker@baltsun.com

twitter.com/sunjeffbarker


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