NBA

Legal Look: Sterling loses and likely out as Clippers owner

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Eric Macramalla, Sports Legal Analyst
7/29/2014 1:30:52 PM
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Well that was a rout. Kinda like the Seahawks against the Broncos in the Super Bowl #TooSoon?.

In a ruling that was more shocking than the most dramatic Bachelor finale ever, Los Angeles County Superior Court Judge Michael Levanas not only ruled that Rochelle 'Shelley' Sterling could lawfully sell the Los Angeles Clippers, but that any appeal by Donald Sterling would not block the sale of the team.

If the NBA was looking for an ideal outcome, this was it. Impeccable legal execution by the lawyers. The team may now be sold to Steve Ballmer for $2 billion and Donald Sterling will likely be out as owner of the team by mid-August.

What was yesterday's ruling about?

Remember that Donald Sterling doesn't own the L.A. Clippers in his own personal capacity. The team is actually owned by the Sterling family trust. Inside that trust bucket is Donald and Rochelle Rochelle (Shelley's legal name is Rochelle according to the court documents). When the trust was created, though, Donald was given the decision making power. So if the team were ever to be sold, Donald would need to sign off on it.

However, Rochelle could seize control of the trust if she could have Donald declared mentally incompetent by two doctors. And that's precisely what she did at the end of May when neurologist Dr. Meril Platzer and psychiatrist Dr. James Edward Spar found Donald to be mentally incompetent on the basis that he was reportedly suffering from Alzheimer's disease. Donald has disputed this finding.

In any event, once Donald was declared mentally incompetent, Rochelle grabbed control of the family trust and agreed to sell the team to Ballmer.

So the trial in California probate court focused on this key issue: did Rochelle have the legal authority to sell the team?

Judge Levanas ruled she did. The Judge then went one step further with a very surprising ruling. The Judge invoked Section 1310(b) of the California Probate Code, which effectively bars Donald from blocking the sale of the team even if he is appealing the Court's decision. Typically when a losing party appeals a decision, the lower court decision is suspended (or stayed). However, in this case it won't be. So while Sterling's right to appeal the decision is preserved, the appeal itself won't block the sale of the team.

To see Section 1310(b) relied on by the Court was indeed unanticipated since it's rarely used. Courts will rely on it only in extraordinary circumstances clearly requiring direction of the Court for sole purpose of preventing imminent injury or loss to person or property. For example, you may see this type of order where the sale price of property could be adversely impacted by delays while someone with medical needs waits on those proceeds to pay for treatment.

This was not such a case. However, Rochelle was able to convince the Court that nobody else would pay close to the $2 billion that Ballmer is offering to pay, and if Donald was able to block the sale, a lot of money could be lost if Ballmer elected to walk away. While this is likely not the type of transaction generally contemplated by those who drafted Section 1310(b), the Court agreed that the sale needed to be preserved, thereby paving the way for the sale of the team.

Donald does have a couple of lawsuits pending against the NBA, Commissioner Adam Silver and Rochelle in different courts. However, even if he is successful in these lawsuits, he will only get a monetary award. He likely won't be getting his team back.

Donald could try and get an injunction blocking the sale of the team. He would need to show that he has a substantial likelihood of success on the merits of the case. Based upon the findings of the Court yesterday and the strong arguments the NBA has in favor of removing Sterling, securing an injunction doesn't seem likely. The NBA Constitution provides that punishments may be imposed on an owner who does anything that "adversely" impacts the league. While Donald engaged in a lawful conversation in provate, the NBA would argue that the impact of the conversation adversely impacted the league, with sponsors backing out, players considering boycotting games and fans not buying tickets.

Indeed, it looks like the Clippers are taking their talents to Steve Ballmer.



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