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Legal Look: Donald Sterling and the sale of the Clippers

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Eric Macramalla, TSN Legal Analyst
5/30/2014 12:32:20 PM
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It has been announced that the Los Angeles Clippers have been sold to former Microsoft CEO Steve Ballmer for $2 billion. Don Sterling purchased the San Diego Clippers in 1981 for $12 million before moving them to Los Angeles in 1984 (without the permission of the league, by the way).

The team had a number of suitors, including Oprah Winfrey, David Geffen, Larry Ellison, Magic Johnson (known to many for his show The Magic Hour), Grant Hill, Sean Combs, Floyd Mayweather Jr. and Matt Damon (but no Ben).

While a deal has been announced, the sale of the team is not finalized. The key issue that will need to be addressed before the team can be sold is the likelihood of Don Sterling objecting to the sale of the team by way of a court action.

Contrary to what you may have heard, the Clippers are not owned by Sterling personally. The team is actually owned by the Sterling family trust, which would include his wife Shelley. Assuming that Don Sterling has control over the trust, he would be the one with the sole authority to sign off on the sale.

However, ESPN's Ramona Shelburne has reported that Don Sterling has been declared by "medical experts" as "mentally incapacitated." As a result, his wife Shelly has obtained sole power over the trust. A court, though, will generally hold a competency hearing and make that ruling. Given the speed at which this sale has been handled, it would be a surprise to learn that such a hearing was held. Rather, it seems he may have undergone a psychological assessment.

As a result, should Sterling not agree to sell the team, he could turn around and sue the league. If he is indeed not mentally incapacitated, he would argue that his wife Shelley did not have the authority to unilaterally sign off on the sale of the team.

Sterling could also argue proportionality: the punishment doesn't fit the crime. While his comments were disturbing, he would argue that they were made in private, illegally recorded and nothing unlawful was said. As a result, compelling the disposition of the team is too severe a penalty.

As far as the NBA, it has reasonable arguments to make to strip the Sterling family trust of its ownership stake in the Clippers. Bottom line is that the NBA Constitution provides that an owner cannot do anything that "adversely" affects the league. With sponsors, players and fans all reacting negatively to Sterling's comments, the NBA is arguing that his comments adversely impacted the league's economics and reputation. Remember the focus is not on what Sterling said, but on the impact his comments had on the league. A fine distinction but a distinction nonetheless (and one that allows me to pay my mortgage).

I've also been asked whether Sterling could argue that he shouldn't be forced to sell the team because he was mentally incapacitated at the time he made the comments. This defence was not raised in his written submissions related to his June 3 hearing where the league will look to strip him of his ownership stake. However, that does not preclude the introduction of this defence at a later date.

That being said, such a defence would be difficult to make out. The NBA Constitution doesn't care if you intended to do something, but only that is was done. The NBA Constitution provides that an owner cannot do anything that will "affect" the league "adversely". The introduction of the term "affect" and the absence of language requiring intent or a certain mental state of mind make a mental incapacity defence challenging. So even if Sterling did not have the intention of making those comments on account of cognitive impairment, the league's rules focus on the impact or result of those comments.

On the other hand, if Sterling does not oppose the sale of the team, the NBA will want him to sign a release waiving all claims against the league arising from this case. Basically, the league will want his guarantee he won't sue. Since a lawsuit could be worth billions, this release is pretty important.

There has been some talk that Shelley may want to stay on as a part-owner. The NBA wants the Sterling name permanently disassociated from the team so that won't fly. The league will therefore want an assurance from Shelley that she is out.

The hearing to strip the Sterling family of its ownership of the team (or as the league calls it, its NBA "membership") is scheduled for Tuesday June 3. At the hearing, the league will need 22 of 29 owners to vote to remove Sterling. Assuming the league has the votes (a pretty safe assumption), Sterling would be removed as owner immediately following the vote and Commissioner Adam Silver would take over control of the team. It's that quick.

In light of the potential sale of the team to Ballmer, the league is likely to postpone the June 3 hearing if it has assurances from Sterling that he will not oppose the imminent sale the team. If, however, the indication is that Sterling is prepared to fight, then expect the hearing to proceed on June 3.

Donald Sterling  (Photo: Stephen Dunn/Getty Images Sport )

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(Photo: Stephen Dunn/Getty Images Sport )
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