Orioles and Nationals’ MASN fight goes to New York Circuit Court of Appeals

Attorneys for the network and Nationals appeared before the New York Circuit Court of Appeals to present arguments that will help decide the payout of approximately $100 million in disputed television rights fees. Tuesday’s hearing could be crucial in bringing long-sought clarity about the value of the Nationals’ media rights as the Lerner family, who own the team, consider a sale. MASN is controlled by the Orioles and owns the rights to both Orioles and Nationals games.

While Tuesday’s hearing had broader implications, it narrowly focused on MLB’s impartiality after a revenue-sharing committee awarded the Nationals an additional $100 million in television rights fees from 2012-2016.

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MASN attorney Carter Phillips said MLB’s trial “reflected a lack of concern for fundamental fairness,” arguing that Commissioner Rob Manfred made comments about the Nationals’ inevitability in the dispute.

After the hearing, Phillips said the Nationals should want the case to go to a neutral arbitrator, as it would eliminate any future legal challenge by MASN or the Orioles.

“The bottom line is that if we try this in front of a neutral decision-maker, we will live with the result,” he said. “Once you have a neutral umpire, we’re done — unless MLB tried to bribe one of the umpires.”

He added, “Though it’s more likely the Nationals would do it.”

Prosecutor Derek Shaffer declined an interview request. A decision by the Court of Appeals is expected next month.

The case has slowly wormed its way through the courts for more than a decade. In 2012, the Nationals questioned the rights fee payments they should receive for the next five seasons — around $200 million, or $40 million per year. The team asked MASN for $475 million. An MLB Revenue Sharing Committee determined that the Nationals should be paid about $20 million more annually than MASN was willing to pay, or nearly $100 million in total.

But MASN sued, arguing that MLB is not an impartial arbitrator. The Orioles won their case in a New York court because MLB made a loan to the Nationals and the companies had common counsel. The dispute was sent back to MLB. The Nationals hired new attorneys, and another MLB committee made an identical decision in 2019.

But MASN questioned it again, arguing MLB wasn’t impartial. Two lower courts upheld MLB’s decision.

On Tuesday, the judges grilled the lawyers of both sides. One suggested to Phillips that untangling the representation’s conflict of interest was enough to restore the integrity of the MLB process. Another judge asked Shaffer about Manfred’s comments predicting that the results of the second MLB committee would mirror the results of the first.

A ruling in favor of the Nationals could help set the terms for future rights fee calculations and potentially lay the basis for awarding the team additional money from 2017 through 2022. But Phillips said MASN would challenge any future decisions made by the MLB — and not an independent arbitration board — in a Maryland court.

The relationship between the teams since baseball’s return to DC has been acrimonious and contentious, with MASN taking center stage. The Nationals say they want fair market value for their television rights, while the Orioles argue that the Nationals’ demands would undermine the original purpose of the agreement.

MASN was formed when the Nationals moved from Montreal in 2005 as payment to the Orioles for giving up geographic territory to another major league team. MASN wants to make sure the network makes enough profits from 2012 through 2016 to essentially compensate the Orioles for the Nationals’ existence.

“It’s a question of fair market value versus how you ensure the Orioles are compensated,” Phillips said.

The Baltimore Mayor and City Council filed an amicus letter in support of the Orioles, arguing the MASN situation was an existential crisis for the Orioles and the city. “The long-term viability of the team, and therefore an integral part of Baltimore’s character and identity, depends on a fair and impartial enforcement of the protections afforded to the Orioles by the agreement reached when Major League Baseball hosted the Montreal Expos.” relocated to Washington, DC in 2005,” the briefing said. The Nationals called this argument “far-fetched and contrary to all known facts.”

Another background to the hearing is the crisis troubling the ecosystem of the regional sports network, which was rocked ahead of an expected bankruptcy filing by Diamond Sports Group on Tuesday. This could affect millions of dollars in rights payments to MLB teams. Amid cable cutting, RSNs’ revenues have dwindled in recent years.

According to Kagan, the media research arm of S&P Global Market Intelligence, MASN was in 5.6 million homes in 2018, but only 3.6 million homes in 2022. MASN has responded by cutting costs: In this spring training session, the network is broadcasting just four Everyone plays Nationals and Orioles, but the fewest in baseball.

The Court of Appeal’s decision could be appealed to the Supreme Court, but the Supreme Court is unlikely to take the case.