A New York State Supreme Court justice ruled Tuesday that the Orioles can seek arbitration outside Major League Baseball's system in part of their long-running legal dispute with the Washington Nationals over television rights.
At issue was a claim from the Nationals trying to compel a profit dividend payment from the Mid-Atlantic Sports Network (MASN) for 2018, which the network withheld from both the Orioles and Nationals amid unmet projections and the looming financial uncertainty surrounding eight years of rights fee payments.
The Nationals filed a motion that sought to have the arbitration for this dispute over the request for dividends occur before MLB, and filed an emergency petition to block it from beginning before the American Arbitration Association (AAA), an independent arbiter. The New York Supreme Court justice denied that motion.
The initial MASN agreement, agreed upon when the Orioles allowed the Montreal Expos to move into their home territory in 2005, calls for all disputes to be settled before MLB, provided "MLB does not have an ownership or a financial interest in [MASN, the Orioles or the Nationals] at the time that the dispute that is the subject of arbitration arose," according to Tuesday's ruling.
According to reports from the Hollywood Reporter and The Washington Post, the Orioles cited a $25 million loan MLB made to the Nationals earlier this decade as the reason the latest dispute needs to be seen by an independent arbiter.
Justice Barry R. Ostrager wrote in his decision that "it would be illogical to allow MLB — a potentially interested party — to determine whether MLB itself had a financial interest in one of the parties to the dispute at the relevant time."
In a statement, Jonathan Schiller, managing partner at Boies Schiller Flexner and counsel for the Orioles and MASN, said: “[The Baltimore Orioles Limited Partnership] and MASN are grateful that the New York Supreme Court issued a final decision and order dispatching the Nationals’ efforts to take away [the Orioles'] right to an independent AAA tribunal to resolve the parties’ current dispute, and entering judgment against the Nationals’ unwarranted lawsuit against another Major League Baseball team where both clubs had agreed in writing to resolve their disputes through private, confidential arbitration."
This week's dispute isn't directly related to the ongoing litigation that began in 2014 over the rights fees paid by MASN to the Nationals, though the Orioles contend they're closely connected.
When MASN was created to broadcast Orioles and Nationals games in the regional territory that once solely belonged to the Orioles, the Orioles owned 90 percent of the network and the Nationals’ stake would increase by 1 percent each year until 2032, when it reached 33 percent.
That's more related to the profits than anything else. But at issue since litigation began in 2014, amid the boom of television rights fees, was how much MASN would pay the Nationals (and the Orioles, as well) for their broadcast rights each year.
The formula the Orioles and MASN used dictated that the Nationals would get approximately $40 million per season for the five-year period beginning in 2012. But the Nationals sought more than double that. An MLB arbitration panel, called the Revenue Sharing Definitions Committee (RSDC), convened in 2014 and ruled the Nationals should get approximately $60 million per year from MASN. But the Orioles challenged the ruling on the grounds that the difference would make MASN insolvent and that the Nationals’ legal counsel at the time, Proskauer Rose, had represented both MLB and the clubs on the three-owner panel in other matters.
After baseball's owners meetings in November, a separate two-day hearing was argued in Atlanta to retry that case. With the amount of potential back rights fees the Orioles and MASN might have to pay the Nationals, combined with declining television revenues based on falling cable subscriptions, the Orioles decided to withhold the network's profits last summer.
If the payments the Orioles have made are deemed sufficient by the RSDC, they contend there will be profits to distribute to each club, even with a shrinking subscriber base. Tuesday's ruling, however, took the arbitration over those profit payments out of MLB's hands and placed them before the AAA.