SBJ/Aug. 25-31, 2014/Media

MLB on defensive after ruling in MASN case

Last week’s granting of a preliminary injunction by the New York State Supreme Court against MLB and the Washington Nationals in the Mid-Atlantic Sports Network media dispute puts the league and Washington club at a significant disadvantage ahead of a potential trial this fall.

Peter Angelos’ Baltimore Orioles control MASN, which carries Orioles and Nationals games.
Photo by: AP IMAGES
The Nationals, MLB and MASN this week are scheduled to hold a status conference with Justice Lawrence Marks to review scheduling and next steps in the case. But Marks’ firm rebuke of how MLB came to grant the Nationals an arbitration award boosting the club’s annual local TV rights fees from about $41 million to $60 million places the league squarely on the defensive.

The next several weeks could determine whether MLB will be more aggressive in seeking a settlement in the long-running battle, a move that likely would render moot MASN’s bid in court to vacate the arbitration award for the Nationals. Marks, ruling in favor of MASN last week for the injunction, said the Baltimore Orioles-controlled regional sports network prevailed on multiple legal grounds, including “questions of irreparable harm, likelihood of success on the merits, and the balance of equities.”

The judge took MLB to task in particular for its “multiple positions taken in opposition to the preliminary injunction,” suggesting frustration with a scattershot legal strategy. A recent letter sent by MLB Commissioner Bud Selig to the Nationals and Orioles called the arbitration decision for the Nationals from MLB’s Revenue Sharing Definitions Committee “final and binding,” only to have outside counsel for the league last week in court argue the RSDC ruling was instead an interim one still potentially subject to other internal MLB dispute resolution procedures.

“There is much clarity, as to process and forum, that will need to be decided,” Marks said.
Additionally, MASN prevailed on a key threshold issue of whether the court was the proper venue to argue the matter, given that the RSDC issued its decision in New York. MLB unsuccessfully argued the RSDC was not judicially reviewable.

Marks’ injunction is believed to represent the first time the league has ever been legally enjoined by an entity of one of its member clubs. The injunction will remain in effect for the duration of the case. If the case moves toward a trial, briefing in advance of that would likely begin in September.

MLB Commissioner-elect Rob Manfred, who has played an active role in the MASN dispute over the past three years, last week declined to outline the league’s next moves in the case.

“It’s a club dispute,” Manfred said. “We’ll get it resolved one way or another.”

Separate from the bid to vacate the arbitration award for the Nationals in the New York State Supreme Court, MASN also has an $800 million damages claim against MLB pending before the American Arbitration Association. Those proceedings are on hold while the case in New York continues.

The dispute over media rights fees between the Nationals and Orioles stems from a 2005 settlement agreement between the Orioles and MLB that helped pave the way for the Montreal Expos to relocate to the nation’s capital. That agreement stipulated the Nationals could have their media rights fee payments from MASN reset every five years to reach “fair market value” using a formula commonly employed by the league for teams with equity interests in their own networks. 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 $118 million a year.

The RSDC panel ruling on the case involved owners from the New York Mets, Tampa Bay Rays and Pittsburgh Pirates. MASN argued that the panel did not represent a neutral party for arbitration as the clubs along with the Nationals and MLB shared legal counsel from the Proskauer Rose law firm.

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