11:37am PT by Eriq Gardner
Baltimore Orioles Triumph in MLB Civil War Over TV Money
The Kansas City Royals aren't the only professional baseball team that emerged victorious this week. Thanks to a long-awaited ruling on Wednesday, the Baltimore Orioles and its Mid-Atlantic Sports Network (MASN) have accomplished the rare feat of overturning an arbitration award in an interleague squabble over hundreds of millions of dollars in TV money.
As The Hollywood Reporter first revealed, Major League Baseball and two of its most prominent owners — Peter Angelos of the Baltimore Orioles and Ted Lerner of the Washington Nationals — have been engaged in a vicious legal fight that spilled into open court.
The dispute dates back to when the Nationals were relocated from Montreal in 2005 and Angelos sought to protect his home TV market. Back then, the parties worked out a deal whereby the Orioles would hold a majority partnership profit interest in MASN and get to telecast Nationals games at a substantial discount from 2005 to 2011. After that, MASN would be obligated to pay the Nationals "fair market value."
Thereafter, the parties went to arbitration to figure out that "fair market value." The Nationals thought they should be paid about $109 million starting in 2012 while the Orioles believed the better amount to be $34 million. On June 30, 2014, an MLB committee comprising the chief operating officer of the New York Mets, the president of the Pittsburgh Pirates and the owner of the Tampa Bay Rays decided that $53 million was the right sum for 2012, with bumps that would take fees to $66 million in 2016.
With the MLB commissioner threatening the teams for going public, and with the Baltimore Orioles estimating the lost asset value of its network to be $800 million, an attempt was made to vacate the arbitration award. Angelos' team complained of the league's secret $25 million payment to the Nationals and accused MLB of "corruption" and "fraud" in the arbitration process.
In the ruling today, New York Supreme Court Judge Lawrence Marks notes that arbitration awards are rarely vacated and rejects some of the arguments brought forth by the Orioles. For example, the judge isn't persuaded that MLB commissioner Rob Manfred behaved inappropriately and denied fairness in the proceeding. The MLB's $25 million loan to the Nationals during the pendency of the dispute also isn't enough to overturn the arbitration award as the judge notes it was "fully disclosed" to MASN and didn't raise an issue about fairness.
But the role of lawyers in the process is what gives the Orioles and MASN victory.
The law firm of Proskauer Rose represented the Nationals at the arbitration, but also represented the MLB in other matters including the antitrust lawsuit over TV deals primed to go to trial next year, the Mets in the Bernie Madoff affair and the Tampa Bay Rays in salary disputes with players.
"Here, there are objective facts that are unquestionably inconsistent with impartiality," writes Marks. "Had MLB, the arbitrators, the Nationals and/or Proskauer taken some reasonable step to address petitioners' concerns about the Nationals' choice of counsel in the arbitration — or indeed any step at all — the Court might well have been compelled to uphold the arbitral award under the FAA [Federal Arbitration Act]. But MASN and the Orioles have established that their well-documented concerns fell on entirely deaf ears. Under the circumstances, the Court concludes that this complete inaction objectively demonstrates an utter lack of concern for fairness of the proceeding that is 'so inconsistent with basic principles of justice' that the award must be vacated."
The Orioles and MASN are celebrating their big victory.
"While we are very pleased that the court vacated the award, and did so for good reason, it is unfortunate that we had to bring this matter to the courts in the first place," says Alan Rifkin, an attorney for the Orioles. "Contracts are meant to be honored, and that includes honoring the integrity of the rights fee-setting process. We look forward to a fair and neutral process before an objective decision-maker in the future.”