Two professional baseball teams — the Washington Nationals and the Baltimore Orioles — were parties to a partnership agreement granting exclusive broadcast rights to their baseball games to a third entity. The agreement had a multistep dispute resolution process. After an unsuccessful mediation, the parties were required to arbitrate before the commissioner of Major League Baseball, unless MLB had an ownership or financial interest in one of the parties to the dispute when it arose. In that event, any dispute was required to be arbitrated before the American Arbitration Association (AAA), pursuant to AAA rules.

The question on appeal was whether the MLB commissioner, the AAA, or a court should decide the gateway issue of whether MLB had a financial interest at the time the dispute arose between the parties. The Appellate Division, First Department, acknowledged that AAA rules were expressly incorporated in the relevant agreement by reference. Under AAA rules, threshold arbitrability questions are clearly and unmistakably delegated to the arbitrator. For this reason, the court held that it possessed “no power” to override the arbitration agreement between the parties. It also emphasized that the arbitration clause here broadly encompassed “any dispute” and expressly stated that if MLB has a potential interest in a dispute, AAA rules shall apply, notwithstanding any powers MLB may ordinarily grant the commissioner in the dispute resolution process. The court therefore vacated an interim stay of arbitration instituted pending appeal and denied the Nationals’ motion for a preliminary injunction enjoining a AAA proceeding commenced by the Orioles.

In re WN Partner, LLC v. Baltimore Orioles Ltd. P’ship, No. 652052/2019 (N.Y. App. Div. Nov. 19, 2019).