Appeals Court Hands Down "Inside Baseball" Ruling in MLB Civil War Over TV Money

The Baltimore Orioles and Washington Nationals appear to be heading to arbitration once again — one controlled by MLB executives — over a quarrel about the "fair market value" of baseball telecasts.
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Two days after the American League prevailed over the National League at this year's All-Star Game, the NL's Washington Nationals have scored some revenge against the AL's Baltimore Orioles. An opinion out on Thursday from a New York appeals court gives all parties at least some room to crow, but as an interleague feud over TV money heads towards a rubber match, it's the Nationals that could have the advantage.

To back up for those unfamiliar with this inside baseball dispute, it emanates from the way the Nationals were relocated from Montreal to the nation's capital in 2005. That didn't make Orioles owner Peter Angelos happy, because he wanted to protect the local TV market. So the parties worked out a deal whereby the Orioles would hold a majority partnership profit interest in the Mid-Atlantic Sports Network (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."

An internal MLB arbitration panel comprised of three executives from professional baseball was tasked with figuring out the question of "fair market value." MASN wanted to pay $34 million each year for Nationals telecast rights. The Nationals valued their telecast rights at $110 million a year. The arbitrators settled on $53 million.

With the MLB Commissioner warning the teams about going public with this feud, the teams and the league nevertheless ended up in court. In a 2015 ruling, and a subsequent one the following year, the Orioles hit a grand slam. A judge ruled that the arbitration process was tainted by impartiality, specifically because the law firm representing the Nationals was also representing the MLB widely in other matters, including the New York Mets in the Bernie Madoff affair and the Tampa Bay Rays in salary disputes with players. (Executives for both teams were on the arbitration panel.) With the Nationals getting impatient, saying that the Orioles' refusal to submit to arbitration was hampering its ability to stay competitive on the field (the team is in fact in first place in the NL East by 9.5 games currently), the judge refused to compel the Orioles to rearbitrate the claims in the same "inside baseball" arbitration process.

On Thursday, a deeply divided New York appeals court affirms the decision to throw out the $53 million award over impartiality in the process, but concludes that the Orioles/MASN must indeed head back to what they see as a disfavorable forum for another game.

"[T]there has been no showing of bias or corruption on the part of the members of the reconstituted RSDC [Revenue Sharing Definitions Committee of Major League Baseball], and the Nationals will use new counsel at the second arbitration," writes associate justice Richard Andrias. "Speculation that MLB will dictate the outcome of the second arbitration by exerting pressure on the new members of the RSDC does not suffice to establish that they will not exercise their independent judgment or carry out their duties impartially, or that the proceedings will be fundamentally unfair."

Rolando Acosta offers up an eloquent dissent.

"Part of what makes baseball such a beloved sport is its rules, which preserve the integrity and popularity of the game," he writes. "Players take the field with the expectation that the umpires are not predisposed to apply those rules in favor of one team over the other. The players win or lose each game based on their own skills and the fair application of the rules — not the influence of some outside force, such as partial umpires or illegal betting. In short, the game is fundamentally fair, a concept that is equally important in arbitrations."

Acosta continues by addressing his concerns, including the league's secret $25 million payment to the Nationals to soothe its owner while the MASN dispute was pending.

"I cannot recall having previously encountered such a confluence of factors that call for judicial intervention in an arbitration," continues the justice. "Not only does the entity administering the arbitration (MLB) have significant influence over the arbitrators, including the power to marshal evidence and draft arbitral award decisions, but it also made a bet on the outcome of the arbitration by loaning one of the parties $25 million to be repaid after an award in that party's favor. And, more egregiously still, the Commissioner of Baseball who controls the arbitration process made public statements during post-award litigation indicating a position on the merits of the case. Under these unique circumstances, a rehearing by the same arbitral forum that conducted the initial arbitration under the purview of the Commissioner's office would be all but guaranteed to yield the same result."

The reasoning doesn't persuade the majority.

According to the opinion (read here in full) that carries the day, "While the dissent waxes poetic about the purity of the game of baseball, MLB is first and foremost a business, governed by its constitution and innumerable agreements and contracts. Because arbitration is a matter of contract, 'the parties to an arbitration can ask for no more impartiality than inheres in the method they have chosen and the [Federal Arbitration Act] permits parties to select arguably partial arbitrators, if doing so serves their interests.'"

An attorney for the Orioles is cheering confirmation that the original arbitration award won't stand while indicating the team's next step. As Yogi Berra said, it ain't over till it's over. Arnold Weiner of Rifkin Weiner Livingston, counsel to the Baltimore Orioles Limited Partnership, says, "We are gratified that the court unanimously affirmed vacatur of MLB's arbitration award and intend to pursue our right to further appellate review on the question of rehearing forum."