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Nationals arbitration award in TV rights fight with Orioles has sticking power

Already in extra innings, the broadcast revenue dispute between the Nationals and Orioles went before New York’s high court for arguments.

ALBANY, N.Y. (CN) — The Baltimore Orioles could be facing strike three in a bid to overturn an arbitration award granting television rights to its Beltway adjacent rival, the Washington Nationals.

At the latest juncture in the decade-old spat, the Orioles claimed they experienced bias both from the law firm originally set up to help the Nationals arbitrate the case and from Major League Baseball Commissioner Rob Manfred.

The Nationals used to be known as the Montreal Expos before 2002 when they moved their franchise to Washington, D.C., only miles away from the Orioles. Believing their new neighbors would cut into their broadcast rights, the Orioles objected to the move.

Major League Baseball intervened, negotiating a deal in which Nationals games would be broadcast on the Mid-Atlantic Sports Network, a joint venture between the teams. Though managed by the Orioles, the network initially paid the Nationals 10% of the broadcasting revenue and later a greater share.

But telecast fees from 2012 through 2016 proved a sticking point, with the Nationals claiming their rights at $1110 million per year while the Orioles claimed it was just $34 million annually. After the teams failed to settle, MLB’s arbitration unit awarded the Nationals $53 million for 2012 and increased its shares by $3 million every year thereafter.

The matter was far from finished. The Orioles quickly filed to vacate the arbitration award based on claims the MLB unit was biased due to the law firm Proskauer Rose representing the Nationals in the dispute and having previously representing Major League Baseball.

A trial court agreed, finding “evident partiality” due to the firm’s dual representation. New York’s Appellate Division later vacated the award in a split decision, calling for the arbitration to be sent back to the MLB’s unit.

A second arbitration in that venue led to an award in roughly the same ballpark as the first, granting the Nationals $54.9 million for 2012’s broadcasting rights and eventually increasing to $62.4 million by 2016. This time, the Appellate Division upheld the award, but the Orioles again filed to vacate it.

During Tuesday’s hearing before the New York Court of Appeals, the attorney for the Orioles claimed the entire venue of the MLB unit, known as the Revenue Sharing Definitions Committee, had been poisoned by comments by baseball commissioner Rob Manfred that suggested the Orioles had no chance in the dispute.

“This is not a problem of a single arbitrator, this is a problem of MLB and the entire institution,” attorney Carter Phillips of Sidley Austin argued. “The problem of the poison is of the commissioner and MLB, and they are the ones who made a final determination that the Orioles should lose at all costs.”

Phillips asked the six-judge panel to send the case to another arbitrator instead of the committee, noting that “no other court that I know of has ever sent a proceeding back to the same forum that has already been declared to be evidently biased.”

Judge Michael Garcia wondered what discretion the Court of Appeals had in the case. “What are we reviewing? There’s really is no decision below on that issue,” Garcia said, pointing to the split decision on where the case should be heard. “So what do we do with the case?”

Of course, Phillips argued a third party should be given control of the party, but attorney Derek Shaffer, representing the Nationals, said the MLB’s arbitration unit should be viewed as an impartial body and has just as much integrity as a judge. If the case were taken away from the RSDC, “you would basically be invalidating everything that the RSDC does,” argued Shaffer, who is with Quinn Emanuel.

“What about the repeated statements by the commissioner in between the first and second arbitrations that suggest this is a foregone conclusion,” Judge Rowan Wilson asked. “You wouldn’t be too happy if Chief Judge [Anthony] Cannataro had been saying how this case was going to come out unfavorably to you for the last month or two I would assume.”

Shaffer dismissed those comments, stressing the arbitration unit is separate from the commissioner and that industry insider arbitration units are commonplace in sports leagues. “Who better than the RSDC to say what is its established methodology for valuing television rights among major league baseball clubs and what’s fair value for arms-length transactions?”

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Categories / Appeals, Media, Sports

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