The Lawsuit That Won’t Go Away: The Nats, O’s, and MASN

One can be excused for having lost track of the many twists and turns in the long-running broadcast-rights-fee dispute between the Baltimore Orioles and Washington Nationals. Over the past four years, the two teams have waged an extensive legal battle over how much the Mid-Atlantic Sports Network (MASN) ought to be paying the Nationals for the team’s local television rights, with both sides capable of pointing to various victories and defeats along the way.

For those interested in a longer recap of the many ins and outs of the dispute, we have previously covered all of the gory details here on a number of occasions over the last several years. In short, though, under the terms of the 2005 agreement in which Baltimore allowed the Nationals to move to Washington, D.C., the teams agreed that they would renegotiate the television rights fees that MASN — the vast majority of which is owned by the Orioles — would have to pay the Nationals every five years.

Unable to reach an accord on the Nationals’ rights fees for the 2012-2016 time period, the teams eventually took the dispute to an arbitration heard by Major League Baseball’s Revenue Sharing Definitions Committee (RSDC), which ultimately awarded the Nationals $60 million per year in broadcast rights fees from MASN. Dissatisfied with this outcome, MASN and Baltimore then took the matter to court, successfully persuading a New York state judge (Judge Lawrence Marks) to overturn the RSDC’s arbitration decision late last year. In particular, Judge Marks ruled that because the Nationals’ legal counsel in the dispute — the Proskauer Rose law firm — had previously represented several of the RSDC members’ teams, the firm’s participation in the arbitration created the appearance of potential bias by the RSDC in favor of Washington.

As I noted this past December, both sides then appealed Judge Marks’ ruling to the court of appeals. The Nationals argued that the trial court had erred by throwing out the arbitration award; MASN and the Orioles, conversely, have asserted that Judge Marks should have permanently disqualified the RSDC from rehearing the dispute. That appeal remains ongoing.

Washington, however, believing that MASN has been underpaying it for years, is not content to sit back and wait for the appellate process to run its course. Instead, the team is now asking Judge Marks to order the Orioles to re-arbitrate the matter before the RSDC, even while the appeal continues. MASN and the Orioles, meanwhile, have unsurprisingly opposed this request, countering last week by asking the trial court to postpone any future arbitration in the dispute pending the outcome of the appeal.

This latest tiff between Washington and Baltimore ultimately boils down to a disagreement over how to interpret a footnote from Judge Marks’ November 2015 decision tossing out the RSDC’s prior arbitration award. In particular, in footnote 21 the judge wrote:

[T]he Orioles argue that remand to the RSDC process would be futile, and therefore the matter should be referred to “a panel of neutral arbitrators that is not subject to Baseball’s corrupting influence, such as a panel convened under the auspices of the American Arbitration Association.” The Court, however, notes that re-writing the parties’ Agreement is outside of its authority.

The Court emphasizes that because it is ultimately the Nationals’ choice of counsel that created the conflict, the parties may wish to meet and confer as to whether the Nationals are willing and able to retain counsel who do not concurrently represent MLB or the individual arbitrators and their clubs, and thereby return to arbitration by the RSDC, however currently constituted, pursuant to the parties’ Agreement.

Washington believes that this footnote conclusively determined that the Orioles must return to the RSDC to re-arbitrate the matter. In particular, the Nationals contend that Judge Marks clearly — and in Washington’s view, correctly — concluded in the footnote that he lacked the authority to force the parties to arbitrate the matter before anyone but the RSDC. As a result, the Nationals assert, the judge effectively instructed the parties to return to the RSDC once Washington had retained new, conflict-free legal counsel (which the team has subsequently done).

The Nationals further argue that the fact that the appeal in the case has not yet been resolved does not warrant deferring the new arbitration. Indeed, as Washington has noted, losing parties are often forced to abide by a trial court’s decision while an appeal is pending, especially in cases in which the court believes that the appeal is either particularly unlikely to succeed or simply intended to delay a final resolution in the case (both of which the Nationals believe to be true here).

Thus, in January, Washington asked Judge Marks to order the Orioles to return to the RSDC to re-arbitrate the case in order to resolve the dispute as quickly as possible. In particular, the Nationals’ contend that MASN’s continued refusal to pay the team fair market value for its television rights has inflicted considerable harm on the franchise, forcing the club to unnecessarily borrow money while also preventing it from making necessary investments to improve its roster and stadium.

MASN and the Orioles countered this request last week by arguing that the footnote quoted above does not conclusively determine anything. Instead, Baltimore and the network believe that Judge Marks’ decision in November merely set aside the RSDC’s prior award without ever formally ordering the parties to re-arbitrate before the RSDC.

Along these lines, MASN and the Orioles contend that forcing the parties to return to the RSDC for a new arbitration before the pending appeal has run its course would be highly inefficient. Indeed, because both sides have appealed Judge Marks’ ruling, there are several scenarios under which a future arbitration before the RSDC could ultimately turn out to be moot. Should the appellate court rule in Baltimore and MASN’s favor, for instance, then any new arbitration would likely need to be heard by a third-party arbitrator independent from MLB. Meanwhile, if Washington prevails on its appeal, then the appellate court would likely reinstate the RSDC’s prior decision, eliminating the need for a new arbitration.

At the same time, the Orioles and the network also dispute the alleged harm that any delay in the case is inflicting on the Nationals. The team and network point out, for instance, that because Washington owns a portion of MASN, the team has been receiving tens of millions of dollars in profit distributions from the network throughout the dispute, separate from any broadcast rights fees the team may be owed.

Moreover, Baltimore and MASN note that the Nationals have been able to sign a number of free agents over the past two offseasons — most notably Max Scherzer and Daniel Murphy — despite the ongoing dispute. And to the extent Washington has failed to sign any free-agent targets in recent years, the Orioles and the network contended that that has not been the result of any delay in the litigation, but instead can be attributed to the Nationals’ “toxic” clubhouse atmosphere.

Ultimately, both Washington and Baltimore make some strong arguments in their latest spat. Considering that Judge Marks refused to disqualify the RSDC from rehearing the matter, it does seem pretty clear that he ultimately intended for the parties to return to the RSDC to resolve the case once Washington had retained new counsel.

At the same time, however, Baltimore’s contention that it would be inefficient to force the parties to re-arbitrate the case now, before their appeal has been resolved, is also pretty compelling. As a result, even if Judge Marks believes the case should eventually return to the RSDC, it would not be surprising if he ultimately sides with the Orioles and MASN in the latest quarrel by ruling that any new arbitration should be postponed until after the appellate process is complete.

Consequently, it doesn’t yet appear that the end of the MASN litigation is anywhere in sight.