Two Major League Baseball Teams Back in Court With Each Other Over TV Money

The regional sports network owned by the Baltimore Orioles has stopped payouts to the Washington Nationals. The Orioles are now taking the position that MLB has an ownership or financial interest in its rival.
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What's the greatest rivalry in professional baseball? Some might say the New York Yankees and the Boston Red Sox. Others may be partial to the St. Louis Cardinals and the Chicago Cubs. For lawyers, however, the answer has got to be the Baltimore Orioles and the Washington Nationals, who again find themselves fighting in New York court after one team stopped making payouts for telecasts to the other.

The two clubs have been in court and in arbitration with each other for years — nearly since the Nationals were relocated from Montreal in 2005. After Orioles owner Peter Angelos objected to a new team moving into the local TV market, the clubs worked out a deal whereby the Orioles would hold a majority partnership profit interest in the Mid-Atlantic Sports Network (MASN) and get to telecast Nationals games at a substantial discount from 2005 to 2011. Thereafter, MASN would then be obligated to pay the Nationals "fair market value," which, of course, became the prelude to a nasty MLB civil war about what was fair.

In June 2017, an appeals court agreed with the Orioles that the arbitration process set up to figure out "fair market value" was tainted by partiality because the the law firm representing the Nationals was also representing the MLB widely in other matters. As such, a $53 million award was thrown out. However, the appeals court sided with the Nationals by sending the dispute back to the same internal MLB arbitration panel comprised of league executives that so upset the Orioles in the first place.

Now comes a new dispute with some stink from the last one — specifically, the $25 million that MLB secretly advanced to the Nationals to soothe team owner Ted Lerner's problems with being forced to license its games at a discount.

According to documents filed Monday in New York, MASN has made cash flow payments to both teams every year early in the season. By June 2018, though, the Nationals hadn't received their payout and accordingly inquired about the missing money. Thus began months of correspondence between the two clubs and the MLB Commissioner without resolution. The Nationals apparently went into this offseason without TV money, and if conspiracy theorists wish to partly attribute this to the loss of MLB superstar Bryce Harper to the Philadelphia Phillies, well, the Nationals did once tell a court that the Orioles power play was harming its ability to invest in free agents and improve its team.

In October, the Nationals submitted the cash flow dispute to MLB Commissioner Rob Manfred for arbitration. In response, the Orioles asked Manfred to determine arbitrability. Manfred wanted the clubs to mediate first. And they did, but couldn't come to a resolution.

Then, on March 22, with the new season about to begin, the Orioles made a pretty bold move by making a demand to play this new game over TV money before the American Arbitration Association — an outside body. According to the Nationals, the Orioles began "asserting for the first time that MLB purportedly had a financial interest in the Nationals because of a $25 million advance that MLB had made to the Nationals."

Previously, a New York appellate judge wrote in a minority opinion that the judicial intervention was warranted partly because of that $25 million payment, but the judge got outvoted. Nevertheless, the Orioles are evidently taking the position that this makes Major League Baseball a minority owner in the Nationals to the extent that any internal arbitration would be corrupted.

The Nationals are now seeking an emergency order to stop the arbitration before the AAA. The club contends it did not agree to arbitrate in this forum. The Nationals add, "Nor could MASN have made any legitimate argument that the advance created an interest in the Nationals themselves: the Nationals had no obligation to repay the advance, and MLB had no right to reach into the Nationals’ pocket to recover the money."