AUGUST 18: The presiding judge has awarded MASN a preliminary injunction that will prevent the Nationals from acting to enforce the arbitration award for the time being, according to a tweet from James Wagner of the Washington Post. The immediate effect is that Washington will not be able to demand the increased rights fees while the litigation plays out.
More broadly, the order would appear to be a promising development for the Orioles’ side of the dispute, indicating that the court could be inclined to allow the case challenging the arbitration award to move forward. (See the last paragraph of this post for further explanation.) But even that still must be briefed and argued before the sides engage in any discovery or reach the merits of the immediate dispute — which is, itself, a step removed from the ultimate question of the rights fee amount.
JULY 29: The Orioles and Nationals have a long-running dispute over the distribution of broadcast fees from the jointly-owned Mid-Atlantic Sports Network. (Wendy Thurm of Fangraphs detailed the background of the dispute here; James Wagner of the Washington Post did the same here.) The sides have been unable to agree to terms on the broadcast fees to be paid to the Nationals, who own a minority share in MASN. According to a report from The Hollywood Reporter, that the disagreement has escalated to the point that it is now in open court.
While the fact that the parties have now filed competing complaints in New York is noteworthy, the real news probably consists in the precursor to those actions. An arbitration hearing occurred in April, with Mets COO Jeff Wilpon, Pirates president Frank Coonelly, and Rays owner Stuart Sternberg composing the panel. The decision was made on June 30, according to THR, with the result landing in the Nationals’ favor. (Details are not known, but the Nationals were said to be seeking somewhere in the realm of $100MM to $120MM annually.)
In a letter, MLB Commissioner Bud Selig issued warnings to the teams’ owners (Peter Angelos of the Orioles and Ted Lerner of the Nationals) to avoid litigation, saying he would impose “the strongest sanctions available” if that occurred. He had strong words for both men, saying that neither “has approached this negotiation with the best interest of the game at heart” and charging the pair with an “unfathomable inability to agree on a fair division of [the rights fee’s] value.”
The legal battle began (or, really, continued) thereafter. Orioles representatives claimed that the arbitral proceeding lacked in procedural fairness. The club has also claimed that MLB was not disinterested because it stood to recoup a cash stipend paid to the club. As Jonah Keri of Grantland reported, a payment was made to help account for the Washington franchise’s lagging revenue as the dispute carried on. According to the Orioles letter cited in the THR piece, at least one $25MM payment was made by MLB to the Nationals.
Attorneys for the Nationals, meanwhile, countered that MASN (which, remember, is majority-owned by the Orioles) was required to begin paying the newly-escalated rights fee, per the arbitration award. The Nationals presented the network with formal notice of defaults, and later petitioned the MLB Commissioner’s Office to confirm and enforce the panel’s decision. (It appears from the report that no action was taken on that request.)
At this point, MASN initiated a legal proceeding in New York state court seeking to modify or vacate the arbitration award, which is the common cause of action in such circumstances. On July 24, the Nationals responded and apparently filed their own petition (presumably, including a counterclaim to enforce the arbitration award).
MLB issued the following comment: “Although certain legal maneuvering has taken place, Commissioner Selig remains hopeful that the parties can reach an agreement in an amicable manner.” As Adam Kilgore of the Washington Post tweets, the Nationals declined comment, the Orioles said that “contracts are meant to be honored,” and MASN declared that there would be “no impact on the telecast of games.”
The actual legal dispute will of course be governed by standard arbitration law (albeit with all the wrinkles of baseball’s unique circumstances). Arbitration awards are routinely upheld by courts except in limited circumstances such as procedural unfairness, and parties seeking to overturn awards face an uphill battle to plead and prove a claim. Barring settlement, it is likely that the parties to this dispute (as any other) will exchange legal briefs regarding whether a court should hear the complaint at all, with the Nationals arguing that the award should be upheld even if everything alleged by the opposition were to be proved. If the dispute is allowed to proceed (if, in other words, it survives a motion to dismiss), then MLB would be faced with the prospect of an open court battle. That would risk the public disclosure of court filings and, potentially, sensitive documents and depositions.