The D.C. area has long been considered part of the Orioles’ broadcast territory, and Orioles owner Peter Angelos opposed the relocation, saying the Nationals would deprive his club a third of its market. (Joel Richardson/The Washington Post)

A New York State Supreme Court judge on Wednesday tossed out a Major League Baseball arbitration decision that gave the Washington Nationals millions more in annual broadcast rights fees from the Mid-Atlantic Sports Network. It was a significant victory for the Baltimore Orioles-controlled network in the protracted dispute and a setback for the Nationals that adds a small cloud of uncertainty over the team’s near-term finances.

The immediate impact of the ruling means the Nationals will receive $40 million in TV rights fees from MASN per year, nearly $20 million less than the amount awarded by the MLB panel in June 2014.

In vacating the MLB decision, Justice Lawrence K. Marks suggested that the two sides settle the issue through an independent arbitrator or return to MLB’s arbitration panel.

MASN broadcasts both Nationals and Orioles games, but the Orioles have a controlling stake in the network as part of a 2005 agreement brokered by baseball and then-commissioner Bud Selig to allow the relocation of the Montreal Expos to Washington. The D.C. area had long been considered part of the Orioles’ broadcast territory, and Orioles owner Peter Angelos opposed the relocation, saying the Nationals would deprive his club a third of its market.

The dispute dates from before the 2012 season, when both sides were unable to agree on the size of the Nationals’ broadcast fees between 2012 and 2016. The matter then went before a three-person MLB arbitration panel.

The Nationals chose Bud Black to be their manager, but contract talks broke down over the weekend, leading to the hiring of Dusty Baker, the other finalist, to replace fired Matt Williams. (Thomas Johnson/The Washington Post)

In his 29-page ruling, Marks had few issues with Selig’s former right-hand man and now-league commissioner Rob Manfred’s involvement with the MLB panel; MLB’s $25 million loan to the Nationals during the dispute to bridge the difference in what the two sides believed Washington’s rights fees should be; or with the panel’s methodology.

He found fault, however, with the Nationals’ choice for legal representation — the New York law firm Proskauer Rose. MASN had questioned the fairness of the firm’s involvement because the firm on other issues also represented MLB, the Nationals and the three teams that made up the arbitration panel: the Pittsburgh Pirates, Tampa Bay Rays and New York Mets.

Marks agreed with MASN’s concerns.

“Had MLB, the arbitrators, the Nationals and/or Proskauer taken some reasonable steps to address petitioners’ concerns about the Nationals’ choice of counsel in the arbitration — or indeed any step at all — the Court might well have been compelled to uphold the arbitral award,” Marks wrote in the ruling.

Marks wrote that he didn’t have the authority to send the case back to the MLB panel or to an independent organization, the American Arbitration Association. Marks did not mandate the next move by the sides but urged them to seek redress from a “neutral dispute resolution process.”

“While we are very pleased that the court vacated the award and did so for good reason, it is unfortunate that we had to bring this matter to the courts in the first place,” said Alan Rifkin, an attorney for the Orioles.

MLB said it was reviewing the ruling and had no comment. Stephen Neuwirth, who represents the Nationals, said the team is evaluating whether to appeal the decision to a New York state court. “In all other respects, the court rejected MASN’s and the Orioles’ arguments for vacating the award,” Neuwirth said in a statement.

The Orioles own 84 percent of MASN, while the Nationals own 16 percent. The Nationals’ share is to increase by one percentage point a year until it reaches a maximum of 33 percent under terms of the 2005 agreement between the Orioles and MLB. Under the accord, the TV rights fees are reset every five years; the next period begins after the 2016 season.