The nearest baseball field to the New York Court of Appeals is a sandlot that will soon host a youth league, ages 4 to 6. But inside the Albany, New York, courthouse Tuesday, Big Baseball was taking place.
Attorneys for two Major League Baseball franchises pleaded their cases in a dispute that has gone on for more than a decade over roughly $100 million in television revenue.
The Baltimore Orioles and Washington Nationals have disagreed for several years about how much money each should have received from the Mid-Atlantic Sports Network — the regional television network the teams own, with the Orioles as the majority owner — from 2012 to 2016. Twice, arbitration committees of Major League Baseball executives ruled in the matter, but the Orioles appealed both times.
Over the course of 30 minutes Tuesday, the Orioles asked the highest court in New York to throw out the most recent decision and rule for the case to be reheard in a different forum, one that they would consider a “neutral decision-maker.” The Nationals, in turn, requested the court affirm the arbitration finding.
Watch the replay
The attorney for the Orioles and MASN, Carter Phillips, argued that MLB and its commissioner, Rob Manfred, have not been impartial and, thus, the arbitration process has not been fair.
Attorney Derek Shaffer countered for the Nationals that while there was an issue with the first arbitration, that does not mean the entire arbitration forum should be abandoned. Both teams originally agreed to the forum, he said, adding that MLB arbitration committees are “uniquely competent.”
The oral arguments were the latest in the lengthy legal saga between the two clubs involving MASN, the network created out of compromise when the Montreal Expos relocated to Washington in 2005. In exchange for the Nationals moving into the Orioles’ marketing territory, the Baltimore club received majority ownership of MASN and control of the network.
But for the bulk of MASN’s existence, the two teams have battled over revenue.
In 2011, the teams could not agree on how much MASN would owe the Nationals for the five-year period from 2012 to 2016. MASN paid the Washington club $198 million, but the Nationals argued it should have been $475 million.
As agreed upon by the clubs in advance, a committee of three executives of MLB teams (a panel called the Revenue Sharing Definitions Committee) heard the case in arbitration. It ruled in 2014 that the Nationals should have received $298 million — about $100 million more than MASN paid the club.
But a New York court later threw out that decision, citing “evident partiality,” because the Proskauer Rose law firm that represented the Nationals had represented MLB and the three teams whose executives were on the panel during the years when the case was heard.
The Nationals argued Tuesday that after they switched law firms, evident partiality was eliminated. The Orioles, however, said that MLB and its commissioner, Manfred, have sided with the Nationals since then.
“His view was the Orioles should lose, and he has said that over and over and over again, so that partiality continues on to this day,” Phillips said.
Citing ongoing litigation, MLB declined to comment for this article.
The Nationals said that Manfred has not opposed the Orioles, but merely voiced support for the process and the Revenue Sharing Definitions Committee. Furthermore, Shaffer said, both sides previously agreed to allow the committee to serve as arbitrator.
“That’s exactly what Baltimore signed up for when they did this agreement,” Shaffer said.
The Nationals staunchly defended the arbitration forum, saying industry experts, like MLB executives, are uniquely equipped to serve in such a role. When a justice asked Shaffer about Phillips describing the forum as “corrupted,” Shaffer said: “I think that’s a grotesque caricature of what this tribunal was and what it did.”
But that arbitration forum is composed of executives “hand-picked” by Manfred, the Orioles argued in a brief filed to the court. Phillips requested that the court instead send the arbitration to the American Arbitration Association (AAA).
“If you send it to the AAA, candidly, this dispute will be over a lot sooner than if you don’t send it to AAA and we will continue to go through this process, seemingly in perpetuity,” Phillips said.
If there is one thing the two sides agreed upon, it’s that the saga likely will continue.
Shaffer said future disputes over revenue between the teams could be litigated “as this case has been litigated until kingdom come by my friends for the other side.”
Baltimore Orioles Insider
Siding with the Orioles, he said, “is a recipe for just having this litigation continue and continue in never-ending fashion, as opposed to having one chapter of this, at long last, more than a decade later, conclude.”
Mark Conrad, who directs the sports business concentration at Fordham University’s Gabelli School of Business, noted that over the years, there has been extensive effort, time and money poured into the legal dispute. He said the sides could have settled already and avoided the headache.
“It was eminently settle-able,” he said.
He added that courts are often hesitant to involve themselves in arbitration decisions.
NFL Commissioner Roger Goodell himself served as arbiter when the NFL Players Association sought to overturn New England Patriots quarterback Tom Brady’s suspension related to “Deflategate,” when he was accused of ordering footballs deflated to make them easier to throw and catch in a playoff game. Although Brady appealed to a federal court in 2016, it did not overturn Goodell’s decision.
“It’s apples and oranges to a point,” Conrad said of the Brady case. “But courts are very reticent interfering in the arbitration process unless they have to.”
The New York Court of Appeals — typically composed of seven judges, but operating with six after a resignation last year — did not issue a judgment Tuesday. One will likely come next month.