ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Thursday, September 28, 2023

Baltimore Orioles Strike Out in Appeal of Arbitral Decision in the New York Court of Appeals

The playoffs are on their way.  In the context of this case, I have only one thought.  Go Cubs!

CubsIn 2001, the Baltimore Orioles and  TCR Sports Broadcasting, LLC (TCR) established the Orioles’ Television Network, which had the exclusive right to broadcast Orioles games in the region, covering seven states and the District of Columbia.  When Major League Baseball (MLB) decided to move the Montreal Expos to Washington D.C., where they became the Nationals, the Orioles chirped a bit, but the Orioles, MLB, and TCR entered into a settlement agreement, converting the Orioles' Television Network into the MidAtlantic Sports Network (MASN), a two-team regional sports network. 

OriolesThis was a sweet deal for the Orioles, because they got to keep the majority of the revenues from the network.  That was intentional and intended to compensate the Orioles for the revenues they would lose, having to share the market with the upstart Nationals.  The structure is also a bit unwieldy.  MASN was to pay both teams equally for the right to broadcast their games, but given that the Orioles got the lions share of MASN's profits, it was incentivized to sell its rights rather cheaply in order to reap benefits from the Nationals' television revenues.  

Washington NationalsThe first time the parties tried to negotiate telecast rights fee, they failed to reach agreement.  The parties chose not to avail themselves of the mediation process provided for in their agreement, and so they opted for arbitration through a body provided for in the agreement consisting of the three members of the MLB revenue-sharing committee.  There were complications, but the arbitral body eventually determined that each teams' revenues should be set at $53 million for 2012, rising to $67 million for 2016.  MASN and the Orioles objected and, despite MLB's insistence that the parties avoid litigation, the Orioles filed suit in New York.  They claimed that MLB was biased in favor of the Nationals.  

The New York court vacated the arbitral award on the ground that the Nationals' attorneys, Proskauer, also represented MLB in various matters.  This ruling was affirmed on appeal, and so the case was sent back for a new arbitration, this time with a different panel and without Proskauer.  The result of the second arbitration was pretty similar to the first, and the Nationals moved in a New York state court to have the second decision enforced.  The Orioles still called foul, but the New York trial court affirmed the arbitral award, entering a judgment of $105 million, including pre-judgment interest.  New York's Appellate Division affirmed, and the Orioles appealed both the 2017 and the 2020 decisions.

Still think arbitration is a fastball?  Seems more like a knuckler.

In Matter of TCR Sports Broadcasting Holding, LLP v WN Partner, LLC , New York's highest court affirmed the arbitral award and yet still condemned the parties to "extra innings."  Baseball puns?  So unprofessional!

The Court of Appeals found no impropriety in the trial court's decision to return the matter to the original arbitral body, and it agreed with the lower courts that the second proceeding was free from the taint of partiality.  While the lower courts thus properly affirmed the second arbitral award, they erred in awarding the Nationals prejudgment interest and rendering a money judgment in the Nationals’ favor.  As the Court of Appeals explains:

The settlement agreement grants the RSDC the power only to determine “the fair market value” of the telecast rights fees. The parties did not agree that the RSDC could resolve disputes over nonpayment of such fees. Instead, remedies for MASN’s nonpayment of those fees are governed by a different provision of the settlement agreement, which sets forth certain requirements, including a cure period. Only after that cure period expires do the Nationals “have a right to seek money damages.” Further, disputes over nonpayment of the fees appear to be governed by the settlement agreement’s more general dispute resolution provisions. Now that our courts have confirmed the RSDC’s determination of the fair market value of the telecast rights, the parties must resolve any disputes over nonpayment of those fees in accordance with their agreement. 

Cubs WinOne hopes that these court-ordered "extra innings" will be quickly completed.  After all, with so many legal matters sorted out after over ten years of adjudication, it's almost like having a runner on second base at the start of an inning.  

Go, Cubs, Go.

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