A New York judge on Thursday enjoined the Washington Nationals from taking any action to enforce a $10 million arbitration award against the Mid-Atlantic Sports Network, at least until he can review the challenges MASN has raised against it.
The June 30 arbitration award followed the Nationals’ threat to terminate MASN’s broadcast license if it did not receive higher licensing fees. on July 2, the team again said it would terminate MASN’s broadcast license if the award was not paid.
New York Supreme Court Justice Lawrence Marks issued the temporary restraining order after MASN’s attorneys argued that the threatened termination of telecast rights would do “irreparable” harm to the network.
“MASN’s primary and essential programming — the telecast and distribution of the Nationals’ and Orioles’ games — cannot be replaced,” the filings stated.
“MASN immediately would be in breach of nearly 30 affiliate agreements for the distribution of Nationals’ games and with advertisers and sponsors who have bought time for their products during Nationals’ telecasts,” the filings added. “MASN’s exclusive right to telecast the games of two MLB clubs (the Orioles and the Nationals) within the same geographical television territory will be forever lost. MASN will lose the synergy of a unified two-club regional sports network and will no longer be viable as a partnership, its good will will be destroyed, and, in addition to other intangible losses, MASN will suffer losses to its credit-worthiness, markets and fan base.”
The injunction will remain in place until at least Aug. 18, when Marks will hear MASN’s motion to vacate the award by the Major League Baseball arbitration panel.
MASN is majority-owned by the Baltimore Orioles, while the Nationals are a minority owner.
MASN argues in court papers that the arbitration panel’s award violates an existing fee agreement with the Nationals, which was reached in part to placate Orioles’ owner Peter G. Angelos as part of the National’s MLB-approved move in 2005 to the Washington-Baltimore media market from Montreal, where the team was called the Expos.
MASN attorneys, who declined to comment on Thursday’s ruling beyond the court filings, wrote that the arbitration panel made its award based on “artificially inflated numbers” that diverted the networks profits to the Nationals.
The controversial arbitration occurred a month after the Nationals sent MASN a “notice of default,” alleging deficiency in the telecast rights fee payments since 2012. In that letter, the Nationals said they would seek termination of MASN’s telecast rights if the dispute was not resolved by July 2, according to MASN’s filing.
On that date, the Nationals renewed their threat to terminate the agreement if they were not paid the arbitration award of $10 million.
MASN then filed suit in New York Supreme Court, a trial court, where MLB is based, urging the trial court to vacate the award because the arbitration was “rife with procedural and substantive abuses and deficiencies.”
Specifically, MASN said MLB had a “direct and significant pecuniary interest” in the arbitration’s outcome, as did the three teams that sent representatives to serve on the arbitration panel: the Tampa Bay Rays, Pittsburgh Pirates and New York Mets.
MLB “had a clear financial interest in the outcome of the arbitration,” MASN stated. “MLB receives a share of any funds diverted into telecast rights fees through the revenue sharing tax.”
The Rays and Pirates belong to regional television stations, and thus may favor teams getting a bigger financial cut; the Mets received a sizeable loan from MLB after the team faced financial hardship after investing with fancier Bernard Madoff, who was later convicted of running an illegal Ponzi scheme, according to the filings.
MASN also argues that the arbitration panel did not follow the process laid out in the original 2005 agreement.
The network seeks arbitration with the Nationals under the auspices of the American Arbitration Association.
Major League Baseball has denied any claim of impropriety.
Stephen Neuwirth, an attorney for the Nationals, did not return telephone and email messages seeking comment. He is with Quinn Emanuel Urquhart & Sullivan LLP in New York.
Attorneys for MASN and the Orioles declined to comment on the case beyond the court filings.
MASN is represented by Chadbourne & Parke LLP in New York. Rifkin, Weiner, Livingston, Levitan & Silver LLC of Baltimore is representing the Orioles.