Nationals said Orioles-led MASN cut profit sharing in 2018
The Washington Nationals said the Baltimore Orioles had withheld distributions from their shared regional sports network, Mid-Atlantic Sports Network (MASN), since 2018 when the teams last dusted on the broadcaster.
The disclosure came from a Nationals attorney during a court hearing this week in the long-running lawsuit over the rights fee MASN is paying the Nationals.
“MASN is an entity wholly controlled and operated by the Orioles,” Stephen Neuwirth of Quinn Emanuel Urquhart & Sullivan, the outside attorney for the DC baseball team, said during the state Supreme Court session. from New York. “The Nationals have no say. … Since 2018, MASN has stopped all distributions of profits to parties, which is very important money for cash flow purposes for the Nationals.
The Nationals are already awaiting a $105 million judgment against MASN for understating what the network pays the team to air its games, a decision that is on hold while the Orioles appeal. The money is currently in an escrow account.
Earlier in the hearing, Orioles attorney Thomas Sosnowski of Boies Schiller Flexner defended the decision to suspend MASN distributions if necessary given the upheaval in the universe of the regional sports network, which has had to deal with cord cuts and increased duty fees.
“In light of the choppy waters in the RSN industry and due to the litigation, we have directed as Managing Partner MASN not to make any discretionary cash distributions,” said Sosnowski, who represents both the Orioles and MASN. “From 2018, we did. This enabled MASN to pay the amount of the receiver’s judgment. And we haven’t ordered MASN (to) make a discretionary cash flow distribution since, because we’re carefully managing the asset because we might pay the judgment. The Nationals actually sought a discretionary cash flow distribution in addition to asking MASN to put (more) money into the escrow account” to cover interest.
MASN is the byproduct of the Expos relocating from Montreal to DC in 2005 to become the Nationals. The Orioles at the time vehemently opposed the move to their adjacent geographic territory.
As part of the compromise forged by MLB, the two teams created MASN, 75% of which is owned by the Orioles and the rest by the Nationals. This deal included provisions that match broadcast rights would be the same for each club.
The original agreement set the rights fee for the first seven years, but stipulated that starting in 2012, a panel of three people appointed by the MLB commissioner would help set the fee. This Revenue Sharing Distribution Committee (RSDC) quickly emerged as a major bone of contention, leading to the 2014 litigation between the parties.
MASN had offered a fair fee of between $34 million and $45 million per year for 2012-16, but the Nats hit back with $120 million per year. The RSDC panel did not rule until 2014, so in the meantime MASN paid the lowest amounts.
The RSDC decided in 2014 that $60 million was a fair number. The Orioles and MASN filed a lawsuit to overturn the RSDC’s decision, arguing that the panel conflicted with side deals within MLB and overlapping legal representations.
A New York state court later overturned the RSDC’s decision, agreeing that there were legal conflicts, referring the dispute to a new RSDC panel. In the end, this second RSDC committee awarded similar amounts, prolonging the litigation.
A New York state judge in 2019 awarded the Nationals the $105 million in damages, but ordered the money to be placed in receivership while MASN and the Orioles appealed whether the MLB’s RSDC was an unfair umpire. They were dismissed at the first level of appeal. But surprisingly, New York’s highest court, the Court of Appeals, agreed last year to hear the case.
“What’s happening here, we think, is that the Nationals aren’t too happy that the Court of Appeals took the case,” Sosnowski said this week, suggesting the team insisted that MASN place tens of millions of additional dollars in escrow for this reason. .
“The question for this Court, I submit, is whether the Court should exercise its discretion to leave the receiver as it is or tie up approximately $20 million or more of MASN’s money in receivership for that the Court of Appeal hears the case. This will potentially destabilize the asset.
Clearly, no love is lost between the two sides, with the Nationals arguing that the Orioles and MASN should be forced to put more money into escrow because they can’t be trusted to pay interest if they don’t. they lose in the Court of Appeal.
“There is every reason to expect that in the event that the Court of Appeal decides for the national championships, action will be taken to try to delay or avoid the payment of what, at this time there will be about $30 million in post-judgment interest,” Neuwirth said.
“We don’t know what might happen next year to Major League Baseball, the Orioles, what might be done to tie up their assets. And there have been public reports of a potential sale of the Orioles. We just don’t know. Ironically, it was the Nats who publicly said they would consider selling the team.
Ultimately, Judge Joel Cohen ruled against having to pay the additional receiver, but warned the Orioles that if they lost in the Court of Appeals, he expected “he there is no game at the end of this affair”.
(Photo: Brett Davis/USA Today)