SBD/August 19, 2014/Media

MASN Gains Injunction Against MLB, Nationals, Barring Nats' Increased Rights Fee

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MASN claims if the Nats' terminate the license, it poses a threat to its viability
MASN yesterday in Manhattan gained a preliminary injunction against MLB and the Nationals from the New York State Supreme Court, representing another significant legal victory for the Orioles-controlled RSN in its ongoing media rights battle with the Nationals. The injunction extends a temporary restraining order MASN gained on Aug. 7, prevents an internal MLB arbitration award in the matter favoring the Nationals from taking effect and is believed to represent the first time ever in baseball history the league has been legally enjoined by an entity of one of its own member clubs. Judge Lawrence Marks also barred the Nationals from threatening to terminate MASN’s license to broadcast its games if they don’t get money owed under the contested ruling from MLB’s Revenue Sharing Definitions Committee. That three-owner panel in June ruled to elevate the Nationals’ annual local rights fees from about $41M annually to $60M. MASN argues that decision arrived through a faulty process, and successfully argued to the court that the Nationals’ threats to terminate its broadcast license rendered a serious threat to the RSN’s viability. And with the injunction, that award is barred for now from happening. “The threat to terminate broadcasting rights virtually immediate is a credible threat and one that can cause irreparable harm,” Marks said, suggesting such threats could appear as “blackmail” or “extortion.” “The fairness of this process is what concerns this court most of all. The money and responsibilities of the parties should not be dramatically changed while that is reviewed,” he said. The dispute may still go to trial, and each side is planning to meet with Marks on Thursday to review next steps in the process. In the meantime, Marks also instructed MASN to post a $20M bond, essentially representing the differences between the current Nationals rights fees and the RSC award, pending a final outcome on the case.

CONFLICTS OF INTEREST? During more than three hours of arguments, MASN and Orioles attorneys successfully argued to Marks that the RSDC comprised of executives from the Mets, Rays and Pirates did not represent a truly neutral third-party to mediate the dispute. Marks was also troubled by the status of Proskauer Rose having legal counsel relationships with several involved parties, including MLB and the Nationals. Arnold Weiner, attorney for the Orioles, called the MASN decision favoring the Nationals “the ‘Bush v. Gore of the RSDC, a made-up decision.” “We are pleased by the court’s decision enjoining the RSDC’s decision, which we have asserted was fundamentally flawed in process and result,” Weiner said. “Hopefully during this standstill Baseball and the Nationals will join MASN’s and the Orioles’ efforts to reach an amicable resolution.” The media rights fees dispute between the Nationals and Orioles stems from an ’05 settlement agreement between the Orioles and MLB that helped paved the way for the Expos to relocate to the nation’s capital. That agreement stipulated the Nationals could have their media rights payments reset every five years to reach “fair market value,” using a formula commonly used by the league for teams with equity interests in their own RSNs. The Nationals, however, argued before the RSDC that marketplace conditions for live sports rights dictated a far greater level of payments, and the club sought an annual average of $118M per year.

HOW IT'S BEING COVERED: In DC, James Wagner reports the Orioles and Nationals "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" (WASHINGTON POST, 8/19). In N.Y., Richard Sandomir writes under the header, "The Market? Shared. The Network? Divided." The subhead reads, "MASN Pits Orioles Against Nationals After Years of Coexistence." The Nationals-Orioles fight "is the result of an unusual partnership that was bound to implode." But it "serves as one surrogate" for the state of the RSN business, which "has grown into an essential part of the financial ecosystem of sports" (N.Y. TIMES, 8/19).
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