N.Y. court enjoins Nationals, MLB in dispute over TV rights and MASN

August 8

Having set the terms of their television rights dispute with the Washington Nationals as a battle for the viability of the Mid-Atlantic Sports Network, the Baltimore Orioles claimed a preliminary, significant legal victory in New York Supreme Court on Thursday afternoon.

A judge found Major League Baseball temporarily cannot take further action against MASN and the Orioles in regard to the ruling MLB’s arbitration panel made in favor of the Nationals on June 30, which the Orioles and MASN described in court filings as corrupt.

The judge enjoined both the Nationals and MLB, the first step in challenging the MLB arbitration panel’s ruling. It is believed to be the first time MLB has been enjoined.

“The court made no determination regarding the merits of MASN’s and the Orioles’ claims but merely instructed the parties to maintain the status quo until a further hearing can be conducted later in the month,” an MLB spokesman said. “We remain committed to working with both clubs to reach an amicable resolution.”

The MLB spokesman said only the Nationals — and not MLB — had been enjoined. But both the Nationals and MLB were listed as respondents on the order the judge signed.

The order stated all respondents “hereby restrained and enjoined from taking any action to terminate MASN’s license to telecast the Nationals’ games pursuant to the Settlement Agreement or any other taking action to deprive MASN of that right.”

The order will remain until Aug. 18 unless an agreement is reached sooner outside the court. A hearing is scheduled for that date to determine whether the injunction will continue until final resolution of the case.

MLB has badly wanted to keep the matter private and worked for years to do so. Thursday’s ruling increased the chances of the public seeing more details.

Through a spokeswoman, the Nationals declined to comment. Approached by a reporter in the Nationals clubhouse, Nationals principal owner Mark Lerner declined comment.

The Nationals and Orioles have squabbled over revenue from MASN since the Nationals moved to Washington from Montreal in 2005. Orioles owner Peter Angelos opposed the relocation because he said it cut into his regional television territorial rights. MLB appeased him with a unique arrangement. He would own a share of the Nationals’ television rights through a regional sports network that broadcast both teams’ games.

Under the terms of the arrangement, the Nationals started with a 5 percent ownership stake in MASN. It has grown to 15 percent and will increase by 1 percent each year until the Nationals own 30 percent. Every five years, there would be a “reset” period allowing the Nationals to receive rights fees commensurate with the formula in the contract.

By fall 2011, the first “reset” period, television rights fees for professional sports teams had exploded. The Nationals and Orioles entered into a bitter dispute over how much MASN owed the Nationals. As of 2012, the Orioles proposed giving the Nationals $34 million in rights fees from MASN; the Nationals asked for between $100 million and $120 million.

The contentiousness back then foretold the current legal maneuvering and ill will. When the Orioles presented their proposal to the Nationals, principal owner Ed Cohen literally ripped the paper apart, according to a person familiar with the situation.

The Orioles have argued the Nationals should honor the contract because the 2005 agreement calls for the use of a rights fee formula developed by Colorado-based consulting firm Bortz Media & Sports Group. The agreement also states the rights fees for the Nationals and Orioles are to be the same, which could affect the viability of MASN if the arbitration ruling is enforced.

If MLB’s arbitration panel’s ruling stands, MASN would be required to pay the Nationals rights that would leave MASN with a 5 percent profit margin. Under those financial restrictions, MASN would collapse.

“These harms are irreparable; they cannot be avoided by simply paying the Nationals, as the Nationals facilely suggest,” attorneys representing MASN wrote in court filings. “The amounts it demands are so excessive as to be confiscatory, would deprive MASN of cash reserves and drive its operating margins to an unsustainable level.”

MASN’s argument for the injunction centered on three main claims. One, that the same law firm that represented MLB also represented the Nationals and the three teams owned or managed by the arbitrators, and the relationships were not disclosed. (“These arbitrators, one of whom sat as chair, own or manage two of the clubs that are among MLB’s largest beneficiaries of revenue sharing,” the filing read.)

Two, that MLB, Commissioner Bud Selig and the three arbitrators all had financial interests in the outcome of the arbitration.

And finally, the arbitration committee didn’t use established methodology to determine the fair market value of the rights fees.

In their court filing, the Orioles cast aspersions on every level of the Nationals’ dealings with MLB. They alleged MLB entered into a wink-wink deal with the Nationals when they purchased the team: If the Lerner family purchased the team for $460 million — $340 million more than MLB bought it for from the Expos — then MLB would use its power to sweeten their side of the MASN deal.

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