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Orioles strike out in long-running TV revenue spat with Nationals

New York’s top court upheld an arbitration award in favor of the Washington Nationals after the team’s neighbor in Maryland challenged its share of revenue from telecast rights.

(CN) — The New York Court of Appeals on Tuesday called strike three on most of the Baltimore Orioles’ arguments involving a long-running television spat with the neighboring Washington Nationals, but sent a small part of the case to extra innings.

The Empire State's high court, in an 18-page ruling, confirmed a second arbitration award over telecast rights to Orioles and Nationals games and also found that the Orioles failed to show bias by the arbitrator. But the court also ruled that prejudgment interest awarded to Nationals and the money judgment in Nationals’ favor must be vacated because the arbitration was solely to determine fair market value of telecast rights fees.

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 $110 million per year while the Orioles claimed it was just $34 million annually. After the teams failed to settle, MLB’s arbitration unit in New York awarded the Nationals $53 million for 2012 and increased its shares by $3 million every year thereafter.

The Orioles filed to vacate the arbitration award, with claims the MLB unit was biased due to the law firm Proskauer Rose representing the Nationals in the dispute and having previously representing the league.

A trial court agreed, finding “evident partiality” due to the firm’s dual representation. The New York Supreme Court’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.

But again, the Orioles struck out as the court found no bias in the decision, noting that MLB changed its representation and the membership of the league’s Revenue Sharing Definitions Committee, which determines the fair market value of telecast rights fees, since the first arbitration.

“MASN and the Orioles knew that MLB determined the makeup of the RSDC’s panel and also knew that the RSDC was composed of MLB insiders,” Judge Madaline Singas wrote in the opinion. “The parties also specifically agreed to arbitrate before the RSDC because it possessed specialized knowledge concerning the complex telecast rights valuations at issue here and an understanding of the ramifications of its decision.”

She continued, “The parties agreed to an industry insider controlled process with a full understanding of the commissioner’s involvement. MASN and the Orioles cannot now complain that they received something different than what they bargained for through the insider process they selected.”

But the high court ruled that the state Supreme Court's Appellate Division erred in awarding the Nationals prejudgment interest and by rendering a money judgment in the Nationals’ favor.

“The parties did not agree that the RSDC could resolve disputes over nonpayment of such fees,” Singas wrote. “Instead, remedies for MASN’s nonpayment of those fees are governed by a different provision of the settlement agreement, which sets forth certain requirements, including a cure period. Only after that cure period expires do the Nationals ‘have a right to seek money damages.’”

She added, “Now that our courts have confirmed the RSDC’s determination of the fair market value of the telecast rights, the parties must resolve any disputes over nonpayment of those fees in accordance with their agreement. While it is unfortunate that our decision may send this protracted litigation into extra innings, that result is necessitated by the settlement agreement’s terms.”

Attorneys for the Orioles and Nationals did not immediately respond to a request for comment.

Chief Judge Rowan Wilson and Judges Jenny Rivera, Michael Garcia, Anthony Cannataro and Shirley Troutman concurred. Judge Caitlin Halligan did not take part in the ruling.

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Categories / Appeals, Entertainment, Media, Sports

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