New York’s highest court rules against MASN in Orioles-Nationals TV rights fee case

On Tuesday morning, the State of New York Court of Appeals issued a decision in the matter of TCR Sports Broadcasting Holding v. WN Partner. TCR Sports runs a couple of television channels under the banner of the Mid-Atlantic Sports Network. WN Partner is the entity that owns the Washington Nationals. Yes, friends, this is the MASN case, now nearly a decade into litigation. It may finally be mostly over. MASN, and in effect its majority owners the Orioles, have lost their years-long battle to get a court to agree that an MLB panel will be inherently biased against them in deciding on TV rights fees for the Nationals.

Those interested can view the decision issued in the case, 18 pages that have their share of legalese but also a fairly concise explanation of the long series of things that have gotten the case up to this point.

This whole series of lawsuits has all spawned resulting from television rights fees that would be paid to the Nationals by MASN for the five-year period from 2012 to 2016. The short version is that the Orioles believed the settlement agreement that secured their permission for the Expos to move to Washington demanded a particular means of deciding what Nationals TV rights are worth.

The MLB-controlled Revenue Sharing Decisions Committee, which by that same agreement governed the process, chose a different means to determine what the Nationals rights fee should be. The resulting decision led to the RSDC awarding the Nationals about $20 million per year more than MASN believed it should have to pay.

One of the other parts of the settlement agreement is that the Orioles must receive the same amount for television rights as the Nationals. The Orioles fought for this at the time because they knew the DC market was more lucrative. It is also the case that the settlement agreement establishes that the Orioles will be the majority owners of MASN, with the Nationals receiving an additional 1% of the network per year until 2032 when they’ll top out at 33%.

The structure of MLB’s revenue sharing means that it’s better for the Orioles if MASN pays out smaller rights fees, which are subject to revenue sharing. This lets MASN profit more, which profits do not have to be shared. The Nationals ownership stake in the network is not large enough for them to view the incentives this way. I feel there is probably also some strong beef between the Angelos family and the Lerner family, and as yet neither family has cashed out from its MLB franchise, so the whole dance continues. Even after today’s hearing, nothing changes that it’s an unhappy marriage that owns MASN.

From the get-go, this has seemed to this Orioles fan to be a case that resembles what Darth Vader said to Lando Calrissian on Cloud City: “I am altering the deal. Pray I don’t alter it any further.” The plain text of the agreement states that the committee must use “its established methodology;” MASN’s proposal that was rejected followed what at the time was the established methodology for the committee.

Ultimately, the RSDC decided its established methodology can be whatever it wants. Though the MASN/Orioles side of the case did manage to get the initial RSDC award tossed out - a decision now made eight years ago - this initial court decision hinged on largely insular lawyerly concerns that related to the Nationals lawyer’s in the case working for a firm that also represented MLB teams in salary arbitration hearings.

That first court decision did not accept any of the public statements by MLB commissioner Rob Manfred as inherently pre-judging the outcome of the RSDC’s decision, and did not require any future hearing to be held in a different forum away from the influence of MLB. MASN/the Orioles have tried to get any court higher up the chain to bite on the idea that Manfred must have influenced the RSDC, without success.

The Nationals brought different lawyers to the second arbitration hearing and that seems to have been sufficient, as far as the legal system is concerned, to settle the issues of bias. This writing has been on the wall for literally years, so much so that I feel it is quixotic of MASN to have taken the legal case as far as they have. It has seemed to me at times that the Orioles just really, really, really want someone other than Rob Manfred to be the final voice that tells them that they lost. Today they’ve got Judge Singas and five other members of the New York Court of Appeals, the highest court in the state, telling them so.

I think it seems self-evident that the commissioner of the league would influence a decision issued by a league committee whose members he chose, and that his public statements about the case show an inherent bias against the MASN/Orioles side of the case, but the only paper I’ve got in my corner is an undergraduate degree from the University of Baltimore, so my opinion isn’t worth very much.

The court today stated “a reasonable person could conclude Manfred’s public statements did not establish evident partiality because the RSDC, not Manfred, made the final decision, and the statements could not realistically be construed as a directive to RSDC panel members.” That’s a joke to me, especially after public statements where Manfred directly said that sooner or later, MASN was going to have to pay, but to the world it’s the law.

The practical effect of today’s decision is probably not actually much. Though there is now suddenly a bill due by MASN to the Nationals, there has been about $105 million held in escrow in case of this possibility for a number of years now. It is not going to bankrupt MASN today, nor should the Orioles need to scramble to keep the network they majority-own afloat. This escrow seems to be sufficient to cover the gap between what MASN had paid to the Nationals and what MLB’s RSDC has been trying to get them to pay.

Since this is the litigation that never ends, even today’s court decision does not close every door, as the court states that it “may send this protracted litigation into extra innings” by declining to take a stand on whether there should be any penalty or interest charged to MASN for nonpayment of fees up to this point.

The court wrote that the process to settle if nonpayment has occurred is an entirely separate thing in the original settlement agreement. The whole appeals process until now has revolved around whether an arbitration panel other than the RSDC should decide the rights fees. Late payment penalties are a different thing entirely. The real winners in this case are the appellate lawyers still billing those hours.