The Orioles have been locked in a financial battle with the Washington Nationals for nearly a dozen years. It started before Manny Machado played his first game for the Orioles in 2012 and has extended past when Trey Mancini played his last contest for the club in 2022.
Maybe it could end while Adley Rutschman — the team’s current star — remains in a Baltimore uniform.
The New York Court of Appeals ruled 6-0 Tuesday in favor of the Nationals in perhaps the most crucial decision yet in the saga that has pitted the Orioles and the Mid-Atlantic Sports Network (MASN) against the Nationals. The court ruled that an arbitration committee of MLB executives was adequate and not partial when it decided how much revenue each team should receive from MASN for the five-year period from 2012 to 2016.
The decision by New York’s highest court essentially closes the door on what the Orioles have argued for years: that MLB and its arbitration committee — the Revenue Sharing Definitions Committee — were biased against the Baltimore club and ill-suited to make decisions about a key revenue stream for the team.
The dispute, however, is not over.
While the court upheld the arbitration committee’s determination of the fair market value of the teams’ rights fees, there are complications. The committee overstepped its power and did not have the ability, the court found, to determine fees for nonpayment.
The arbitration committee had decided that the Nationals were owed roughly $100 million, money MASN set aside in escrow. Now, that number will have to be revisited and instead decided “by a different provision of the settlement agreement” between MLB, the Orioles and the Nationals, the court said.
“While it is unfortunate that our decision may send this protracted litigation into extra innings, that result is necessitated by the settlement agreement’s terms,” Justice Madeline Singas wrote in the opinion.
Kenneth Feinberg, a renowned mediator who filed an amicus brief in support of the Orioles, continued the baseball metaphor in an interview with The Baltimore Sun.
“The final play at home plate has not yet occurred. There is still a rather, I think, lengthy debate coming up about the nature of the award, the terms of the award, the amounts to be paid and when, under what circumstances,” said Feinberg, who is a friend of Peter Angelos, the longtime owner of the Orioles. “The last hitter has not yet stepped up to the plate.”
How exactly those “extra innings” will be played remains to be seen. MLB and the Orioles declined to comment and the Nationals, as well as attorneys for both clubs, did not reply to requests for comment.
This installment of the seemingly interminable dispute was pivotal enough that the city of Baltimore wrote in an amicus brief supporting the Orioles that the court’s decision likely would impact “the long-term viability of the Baltimore Orioles to remain in Baltimore City.” Nonetheless, Democratic Mayor Brandon Scott said at the time that he remained “fully confident” in the Orioles’ commitment to the city.
“The city is disappointed with the decision from the New York Court of Appeals,” a spokesperson for the mayor’s office wrote in a statement Tuesday, “but remains steadfast in its support for the Orioles and grateful for the team’s impact on the city.”
The court’s decision could make it easier for the Nationals — who have been for sale since last year — to be sold.
But it also has significant long-term effects on the Orioles. Money from regional television broadcasts is an essential revenue stream and Tuesday’s decision could affect not only the five-year period in question, but set a precedent that hurts the Orioles’ finances down the road.
“I think this decision will impact not just this year, but the next five years, and it sets up a precedent for the five years after that,” said Ellen Zavian, a sports law professor at the George Washington University Law School.
MASN was created in 2005 as a byproduct of the Montreal Expos moving to Washington. The Orioles and Nationals co-own the network, which airs both teams’ games, with the Orioles controlling a majority stake and receiving a majority of the profits as compensation for the Nationals relocating into what was their territory.
Before the Nationals’ move, the Orioles had been the only MLB team in the mid-Atlantic region since the Washington Senators became the Texas Rangers in 1972. The Expos’ move — bringing the Orioles a neighbor just 35 miles south — cut into the Baltimore club’s fan base and cost the club financially.
To ease the Orioles’ losses, MLB and the two teams came to a settlement agreement. The teams split rights fees paid out by MASN, but 90% of the network’s profits went to the Orioles initially (compared with 10% for the Nationals). The Orioles’ share began decreasing annually by 1% in 2010 and will ultimately settle in 2032 at 67% for the Orioles and 33% for the Nationals.
The revenue split is not as cut and dried as those simple percentages, though.
The teams have argued vehemently for years about how much revenue from MASN each should receive. In 2011, the teams could not agree how much they should receive for the five-year window from 2012 to 2016. MASN paid the Nationals $198 million for those five years, but the Washington club argued it should have been $475 million.
That huge disparity went before an arbitration committee of three MLB executives — the Revenue Sharing Definitions Committee forum that the clubs had agreed to. The committee decided in 2014 that the Nationals should have received $298 million, $100 million more than MASN paid them.
The Orioles appealed and that arbitration decision was thrown out by a New York judge based on “evident partiality” in the process because the Nationals’ law firm during the arbitration — Proskauer Rose — had represented MLB previously, as well as each team with an executive on the committee.
Then, a second panel, composed of three different MLB executives, decided upon almost the exact same number, $297 million, in 2019. The Orioles appealed that decision, too, saying MLB was biased against the Baltimore club. Attorneys for the Orioles and Nationals argued the case in March in Albany, New York, which led to the state high court’s recent decision.
“By affirming the confirmation of the second arbitration award and directing that the money judgment be vacated, we hold the highly sophisticated parties to the terms of their agreement,” Singas stated.
The Nationals’ attorneys have argued that MLB’s arbitration committee is “exactly what Baltimore signed up for” in the 2005 agreement and Singas seemed to agree. The Orioles “cannot now complain” about the arbitration forum they’d previously agreed to, she wrote.
The court essentially said: “Don’t cry to us,” said Mark Conrad, who directs the sports business concentration at Fordham University’s Gabelli School of Business.
The Orioles’ attorneys centered their arguments on evidence that MLB was biased against them and in favor of the Nationals. A $25 million loan from MLB to the Nationals paired with public comments by Commissioner Rob Manfred illustrated that the league was biased against the Baltimore club, the Orioles’ attorneys said, which would make the league’s arbitration committee (“hand-picked” by Manfred, they said) partial and incapable of ruling fairly.
The court did not find the Orioles’ argument convincing.
“There is no evidence that MLB or Manfred had any undisclosed influence on the panel members beyond that which the parties bargained for in the settlement agreement,” Singas wrote.
It is not easy for a court to overrule a previously agreed upon arbiter, Conrad said. He wasn’t surprised by the unanimous ruling.
“It’s not like it has to be pristine,” he said of the arbiter. “It has to be adequate.”
The Orioles could, in theory, appeal to the U.S. Supreme Court, but such a request would face steep odds. The nation’s high court hears only about 2% of the cases it is asked to review each year. The court generally focuses on cases with significant constitutional questions, others with national implications and those in which appeals courts have issued differing opinions on the same issue.
“I think the Supreme Court is busy enough,” Zavian said.
While the New York court’s unanimous decision — “There were no dissents; the court spoke with one voice,” Feinberg highlighted — likely quashes the Orioles’ recent legal argument, the Orioles and Nationals will quarrel now over the amount the Nationals are owed. The rights fees have been decided, but other monies, like prejudgment interests, have not.
The Orioles last week beat the Nationals twice (1-0 and then 4-0) but were not as successful against their Beltway rival in the courtroom this week. How much they lost by, however, has yet to be determined.
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