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Judge upholds arbitration ruling that Orioles owe Nationals about $100 million in MASN TV rights dispute

The Orioles lost the latest round in the long-running Mid-Atlantic Sports Network television rights dispute Thursday when a New York judge upheld a second arbitration ruling ordering the network to pay the Washington Nationals $296.8 million in rights fees for the 2012 to 2016 seasons.

Judge Joel M. Cohen rejected the Orioles’s request to throw out the award based on questions about the impartiality of the Major League Baseball arbitration panel. Such questions led a judge to overturn the original award.

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The new arbitration award is almost identical to the one that was thrown out and sent back to a second MLB arbitration panel, but the gross compensation figure is believed to include the reported $197.5 million the network already paid the Nationals for the five seasons covered.

The Orioles would still owe the Nationals about $100 million if the award survives further appeal, though the amount the Washington team actually would receive likely would be reduced once MASN restates its profits from that period to reflect the higher rights fees. The judge also ruled the Orioles must pay the Nationals interest on the unpaid fees.

Thursday’s late ruling did not come as a surprise. The Baltimore Sun reported in May that the arbitration panel had made its decision in favor of the Nationals. The Sun, citing people familiar with the case, reported the Nats would net from $60 million to $70 million when all adjustments were made.

Still, it doesn’t appear the sides are much closer to a resolution of the dispute, which has percolated through the New York courts since 2014.

MASN and the Orioles not only have the right to appeal this new ruling; they also have a pending appeal already awaiting consideration by the New York State Court of Appeals that, according to a source close to the litigation, could render the most recent arbitration process moot.

That appeal has been pending since the Court of Appeals decided to allow the lower New York Supreme Court to vacate the original MLB arbitration panel ruling and send the case back to MLB for another attempt to get it right. The source said the Court of Appeals is expected to decide in September whether to hear the case.

According to a person with direct knowledge of the litigation, the Orioles retained a right to appeal, but could not exercise it until this second arbitration process was complete. The Orioles and MASN are expected to exercise the “reserve appeal” that allows them to challenge the new court ruling to the Court of Appeals if the justices decide not to hear the pending appeal that will come before them next month.

The Orioles have long contended the $197.5 million MASN paid the Nationals from 2012 to 2016 was consistent with the formula for determining the rights fees contained in the original contract agreed upon by both clubs and MLB when the Montreal Expos moved to Washington and became the Nationals in 2005.

The 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 the Nationals’ arrival in the region deprived Baltimore of a third of its market.

Orioles attorneys have long contended in court documents that MLB has been trying to unravel the agreement, which allowed the Nationals to move from Montreal that year. The agreement gave the Orioles a 90% stake in MASN that has been rebalancing toward the Nationals by 1 percentage point per year since 2007, until it locks in permanently at a 67-33 split in 2032.

The Orioles have sought to have the dispute decided by an independent arbitration panel not affiliated with MLB, which was a willing party to the original deal. It called for the Orioles to receive compensation in perpetuity for the loss of revenue because of the presence of another team in the region, a concept team lawyers have contended could be threatened by outsized annual rights fees.

Though the rights fees determined by the two arbitration panels were less than a percentage point apart, they were arrived at differently. The original agreement called for increases in future rights fees to be determined by a formula called the Bortz methodology, named for the consulting firm that devised it for MLB in 1997 and employed to value regional rights until 2012.

In the first arbitration hearing, the Nationals used a newer method to make their case for a large increase in the annual rights fee and were awarded $59 million per year — $25 million more than the approximately $34 million per year the Orioles paid the Nats from 2012-16. Though the ruling was not vacated on that basis, the Orioles have maintained the original contract requires the use of the Bortz method in perpetuity.

In the second hearing, according to two sources, the Nationals did employ the Bortz method, but the two sides disagreed on the numbers used to reach the $296.8 million award.

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The dispute could drag on for several more years and the outcome is hard to predict, but it’s certain to again stoke paranoia among Baltimore sports fans that the team might be sold or moved.

Public angst bubbled up last week when a unverified report surfaced that the club was in extensive talks to sell the franchise or move it to Nashville, Tennessee.

Though a high-ranking club official characterized talk of a potential sale as “rank speculation” and renewed rumors about Nashville as “nonsense,” it doesn’t take much to keep the rumor mill churning in a town that has never gotten over the snowy night in 1984 when the beloved Colts skipped town and relocated to Indianapolis.

There is no reason to believe an unfavorable ruling in the MASN dispute would send the Orioles packing. Any move or sale would have to be approved by MLB, which is highly unlikely to allow the Orioles to jump to a city that might be a promising expansion candidate. Major league owners would share the approximately $1 billion expansion fee for placing a new team in one of those cities.

Orioles officials maintain the outcome of the MASN dispute would not endanger the team’s ability to survive in Baltimore, but continue to insist the advantageous MASN revenue split is critical to their ability to field a competitive team.

That might seem like a tough case to make while the Orioles are in the middle of a painful rebuilding period, but they did have the best cumulative regular-season record in the American League from 2012-16, the period that is the focus of the rights dispute.

Lawyers handling the case did not respond to requests for comment.

The Orioles have insisted the enlarged rights payment demanded by the Nationals — which also would have to be paid to the Orioles — would dramatically slash MASN profits, which are distributed to both teams on a percentage basis agreed upon in the original contract.

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MASN lawyers told the court after the initial arbitration ruling that the amount granted to the Nationals would leave the network with an “economically unsustainable 5% profit margin.”

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