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Sterling family trust hearing nearing its completion

Sterling family trust hearing nearing its completion Photo:

Testimony in the Sterling family trust hearing concluded today before Los Angeles County Superior Court Judge Michael Levanas, who will hear closing arguments from Donald Sterling and Shelly Sterling’s attorneys next Monday. The final day of testimony was brief and featured only one witness: neurologist Jeffrey Cummings.  Cummings, who directs the Cleveland Clinic Lou Ruvo Center for Brain Health, favorably examined Donald Sterling’s mental competency in June.  Cummings’ testimony was sharply limited by a pretrial agreement between Donald and Shelly Sterling that Donald Sterling’s mental competency -- seemingly the subtext of the entire case -- would not be litigated.  As a result, Cummings’ testimony related only to whether Shelly Sterling properly interpreted the trust in reasoning that her husband was unfit to continue as a trustee. 

In his testimony, Cummings implied that Donald Sterling was not lawfully removed as a trustee.  A lawful removal required that two independent physicians credibly declare Donald Sterling mentally incapacitated and thus unable to meet his obligations as a trustee.  Crucially, if Donald Sterling was not lawfully removed, then Shelly Sterling probably lacked the legal authority to negotiate the $2 billion agreement with Steve Ballmer to purchase the Los Angeles Clippers.  The NBA would then be forced to terminate the Clippers membership and sell the team, a process that would take several months and potentially lead to the Sterlings still owning the Clippers at the start of the 2014-15 season.   

Cummings took issue with the circumstances and procedures used by the physicians retained by Shelly Sterling to examine Donald Sterling in May.  Shelly Sterling retained neurologist Meril Platzer and psychiatrist James Edward Spar, both of whom concluded that Donald Sterling suffered cognitive impairment and possibly Alzheimer’s.

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 In particular, Cummings criticized the informal circumstances of Platzer’s examination, which was conducted at the Sterling’s Beverly Hills residence.  Cummings opined that Shelly Sterling’s presence during at least part of the examination may have distracted her husband and led to erroneous and unreliable results.  This condemnation corroborated Donald Sterling’s earlier critique of Platzer.  While on the stand on July 8, Sterling portrayed Platzer as tricking him into believing their conversation was informal.  Sterling also found it peculiar that he would have drinks with Platzer and Shelly Sterling later in the evening.  Shelly Sterling, it should be noted, offered a very different account of Plazter’s examination and the circumstances that led to them having drinks.

It remains to be seen whether Cummings raised sufficient concern in Levanas’ mind to conclude that Shelly Sterling mismanaged the trust.  Unfortunately for Donald Sterling, Levanas remarked he was unsure how Cummings’ testimony would help him decide the case.  Keep in mind, if Levanas does not find significant fault in Shelly Sterling’s management of the trust, he would be inclined to rule for her.  Such a decision would likely enable her and Ballmer to submit a final deal to the NBA, which would swiftly approve Ballmer as the new Clippers owner.

Next steps

Attorneys for both Sterlings will submit dueling advocacy briefs on Thursday.  In these post-trial briefs, each side will highlight testimony and evidence from the trial that reflects most favorably on their arguments, while attempting to diminish trial developments that favored the other side.  The attorneys will then present closing arguments before Levanas next Monday at 10 a.m. local time.  While Levanas could issue a decision on Monday, he is more likely to wait several days or longer.  To be sure, Levanas is aware that time is of the essence.  The closing date of the binding term sheet signed by Ballmer and Shelly Sterling is August 15.  Ballmer, with NBA approval, could extend the closing date, but any extension would face a second and more crucial deadline: the NBA has set a date of September 15 for completion of the Clippers sale.  If no deal is set by September 15, the NBA plans to terminate the Clippers ownership and sell the team without involvement from either Sterling.  Ballmer would not be assured of obtaining the team in that scenario.  At the same time, the NBA would not be assured that Ballmer will remain interested in spending $2 billion on the Clippers.

Lurking in the background of Levanas’ decision is his accompanying choice on how to handle an appeal.  As thoroughly analyzed on SI.com, Levanas has a crucial power under Section 1310(b) of the California Probate Code to effectively decide whether Ballmer will become the next Clippers owner.  This power would emerge should Levanas rule for Shelly Sterling.  In that scenario, Donald Sterling would surely appeal.  Normally his appeal would prevent Shelly Sterling and Ballmer from completing their deal until after an appeal. 

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An appeal may not be heard and decided for months, and perhaps well after September 15.   Donald Sterling could use this process to delay the sale of his team, a motivation -- as explained on SI.com by Robert Raiola -- consistent with his incentives under capital gains taxes to delay.  Shelly Sterling, however, has petitioned Levanas to invoke the 1310(b) exception.  Doing so would allow Shelly Sterling and Ballmer to complete a sale irrespective of an appeal by Donald Sterling.  The 1310(b) exception is only reserved for extraordinary circumstances, but Shelly Sterling has argued her unique situation warrants such intervention. 

Aside the from the probate hearing and potential appeal, Donald Sterling has filed two lawsuits against the NBA, the second of which was filed yesterday against the NBA, commissioner Adam Silver and Shelly Sterling.  These multibillion dollar lawsuits raise various claims under antitrust, contract and privacy laws, but they are of secondary concern to the NBA.  It would take years for Sterling to receive favorable decisions in these lawsuits and he would only be entitled to money damages.  By that point, the Clippers would be owned by someone else, probably for several years.  Shelly Sterling, moreover, has indemnified the NBA from litigation expenses connected to her husband.  While Donald Sterling could remain a litigation nuisance to the NBA for years to come, his ability to maintain ownership of the Clippers is far more consequential to the league. 

Michael McCann is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law. He is also the distinguished visiting Hall of Fame Professor of Law at Mississippi College School of Law.

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