Two MLB Teams Locked in Escalating War With Each Other Over TV Money

Red Sox vs. Orioles MLB Sept. 28th - H 2011
Rob Carr/Getty Images

Red Sox vs. Orioles MLB Sept. 28th - H 2011

On Friday, the Washington Nationals were back in court, telling a judge that the Baltimore Orioles' refusal to submit to arbitration was harming its ability to invest in free agents and improve its team.

The dispute concerns the Mid-Atlantic Sports Network (MASN), which the Orioles own and is now worth more than $1 billion, according to court papers.

When the Nationals were relocated from Montreal in 2005, Orioles owner Peter 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."

The question of "fair market value" was sent to an internal MLB arbitration panel comprised of three executives from professional baseball. The Orioles didn't like the decision. They thought the Nationals should be paid $34 million each year for telecast rights, but after hearing the experts opine about the value of games, the arbitrators decided that fees would go as high as $66 million by 2016.

The Orioles alleged all sorts of shenanigans in the arbitration process, accusing the league of "corruption" and "fraud." In November, the Orioles and MASN won on one point: the conflict of lawyers. The law firm of Proskauer Rose represented the Nationals at the arbitration, but also represented the MLB in other matters.

Although the Orioles got the arbitration ruling overturned, it wasn't a complete win as the judge wouldn't order the parties to find new independent arbitrators or handle the case himself. Instead, the Orioles faced the prospect of having to submit to the same internal-MLB arbitration process. The Nationals would have to find new attorneys.

The decision is now being appealed three ways. The Nationals are appealing. The Orioles are appealing. MLB is appealing.

But the Nationals are impatient.

After retaining the law firm of Quinn Emanuel, they told the Orioles to arbitrate. Their legal adversary won't. And so, the Nationals have filed a motion to compel the Orioles to comply with the judge's November opinion. 

Now, the Nationals — owned by billionaire Ted Lerner — are crying about the immediate harm from the Orioles' refusal to play ball.

"MASN’s underpayment of rights fees has already required the Nationals to fund payroll and other expenses from its own reserves, and further delay could require the Nationals to seek new financing," says the team's memorandum. "This is not only burdensome in its own right, but it places the Nationals at a competitive disadvantage to other baseball clubs, which typically receive fair market value from their regional sports networks for their telecast rights. Without this added income, the Nationals are handicapped in their ability to invest in efforts to improve the team. For instance, without this added and steady income, the Nationals cannot bring full economic confidence to investments in multi-year player contracts to keep up with the fierce competition for top players — especially when such control over finances is in the hands of a neighboring club."

That's not all.

"Delay also hamstrings the Nationals’ ability to invest in stadium and related improvements which would generate additional income and help keep the Nationals competitive," the memo continues. "In other words, MASN’s refusal to pay the fair market value fees required under the contract forces the Nationals either to have to borrow more money to fund cash flow needs (which comes with its own costs) or to limit or to forego the sorts of investments the Nationals should be making to build the club’s business for the future."

A declaration from Nationals vice chairman Ed Cohen asserts that the Orioles are refusing to participate in the arbitration as a way to gain leverage in a negotiated resolution.

The fillings comes on the same day that the Nationals are said to be offering a five-year contract to MLB star outfielder Yoenis Cespedes.