NEW YORK — A New York judge granted Baltimore Orioles-controlled Mid-Atlantic Sports Network a preliminary injunction against Major League Baseball and the Washington Nationals on Monday afternoon, a significant early victory in the legal battle over the Nationals’ television rights fees.
Extending a temporary restraining order from Aug. 7 that was set to expire at midnight, New York Supreme Court Justice Lawrence Marks’s ruling prevents the Nationals from terminating MASN’s license to broadcast their games, a threat made to force the network to pay the money owed under a disputed ruling by an MLB panel. Marks’s ruling means MLB cannot force MASN to pay those higher rights.
After hearing nearly three hours of arguments from attorneys representing MASN, MLB and both teams in a Manhattan courtroom, Marks ruled that the status quo be maintained while the process behind the disagreement is evaluated.
Although a final decision has yet to be reached in the dispute, Marks agreed that MASN’s questions about the arbitration process and allegations of conflict of interest should be examined.
“There is no question regarding the test of a preliminary injunction,” Marks’s decision read. “ . . . The threat to terminate broadcasting rights virtually immediately is a credible threat and one that can cause irreparable harm.”
Marks questioned the Nationals’ tactic of threatening to pull games from the broadcast because of default as potential “blackmail” and “extortion.”
The sides will reconvene Thursday to discuss the next step, which could include a trial. In order to keep things as they are, Marks ruled that MASN should post a $20 million bond, as the network offered, by Friday, the remaining amount owed to the Nationals under the MLB panel’s ruling. If the panel’s ruling is ultimately vacated and the Orioles don’t have to pay the higher rights fees, the Nationals would repay the $20 million with interest.
On June 30, a panel of major league executives from three teams, part of the MLB’s Revenue Sharing Definitions Committee (RSDC), determined that MASN owed the Nationals roughly $60 million in annual rights fees, a figure closer to the Orioles’ proposal than the $118 million the Nationals requested. The Nationals petitioned MLB Commissioner Bud Selig on July 7 to enforce the ruling.
Casting the ruling as threatening the financial livelihood of the network, MASN sought a temporary restraining order against the panel’s decision and the Nationals’ threat, and Marks granted one earlier this month. MASN’s initial legal victories mean both the Nationals and MLB have been enjoined, an usual move. It is believed to be the first time MLB has been enjoined by one of its teams.
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’ share tops out at 33 percent. Every five years, there would be a “reset” period allowing the Nationals to receive rights fees commensurate with the formula described 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, a disagreement that remains at the root of the current dispute. According to court filings, MASN owes the Nationals $40 million this year in rights fees.
Monday’s arguments revolved around several points of disagreements. MASN raised concerns about the impartiality of MLB’s three-team panel. Orioles attorney Arnold Weiner argued that MLB, the Nationals and the three teams on the panel — the Pittsburgh Pirates, Tampa Bay Rays and New York Mets — all used the same legal team, Proskauer Rose, and didn’t disclose it.
The Nationals didn’t dispute the connection between Proskauer Rose and the teams but argued it didn’t necessarily affect the committee’s outcome. Instead, Nationals attorney Stephen Neuwirth questioned that the Orioles and MASN didn’t know about the relationships and that they still proceeded with the arbitration process regardless.
“The fairness of the process is what concerns this court most of all,” Marks said. “The money and responsibilities of parties should not be dramatically changed while that is reviewed.”
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. In court, the Nationals argued the methodology used by the MLB panel was more comprehensive than the one MASN used.
Selig has badly wanted to keep the dispute behind closed doors and out of the legal system. According to a July 30 letter to both teams, he said both teams improperly filed litigation concerning the panel’s decision and threatened sanctions if MASN didn’t make interim payments to the Nationals.
MASN has said it would have difficulty meeting the panel’s ruling and it could threaten the viability of the network. Neuwirth referred to MASN’s viability claims as “outlandish.”
Meanwhile, MASN, the Orioles and Nationals also are in the early stages of having their dispute heard by an American Arbitration Association panel. Attorneys for both teams and MLB questioned which arbitration route was the proper one. “A pause in this process to look at how the parties should be proceeding is appropriate,” Marks said.
After Marks read his decision, all parties quickly departed, set to return later in the week for more in a long legal battle.
“MASN deserved a fair and impartial proceeding, particularly from [MLB],” MASN attorney Thomas Hall said in a prepared statement. “We made that case today in court. We continue to hope that, on reflection, all parties will redouble their efforts towards reaching an amicable resolution.”