Ballmer officially new Clippers owner, but what's next for Sterling, NBA?
According to the NBA, Steve Ballmer owns the Clippers. According to Donald Sterling, he still has a legal claim to the team. Who do Chris Paul and his teammates now play for? Who will be signing Doc Rivers' checks to coach the team?
Odds decidedly favor the NBA's interpretation, but a late court appeal by Sterling on Tuesday provides further evidence that he will not go down without a long and brutal fight.
Earlier on Tuesday, Ballmer, the former Microsoft CEO, became the official owner of the Clippers and the newest member of the NBA’s Board of Governors. Sterling, in contrast, was relegated to a mere former owner who, unlike any other former owner before him, is banned for life from involvement with the NBA and its teams. Sterling remains a plaintiff in multiple billion-dollar lawsuits against his wife of 59-years, Shelly Sterling, the NBA and NBA commissioner Adam Silver.
The NBA approved Ballmer, whose agreement to purchase the Clippers for $2 billion was finalized shortly after Los Angeles Superior Court Judge Michael Levanas signed his probate order on Monday authorizing Shelly Sterling to sell the team. The signed probate order memorialized Levanas’ oral order on July 28 in favor of Shelly Sterling.
The frenzy of moves follows an unusual set of legal filings last Friday, when Levanas signed his probate order, followed by Donald Sterling petitioning an appellate court to review Levanas’ order. Before the appellate court could review Levanas’ order, however, Levanas vacated it without explanation, which prompted the appellate court to deny Sterling’s petition on grounds that there was no order to review. In other words, the denial occurred not because Sterling’s petition lacked merit or persuasion, but rather because the order he was challenging was simply no longer in place. On Monday, Levanas filed a new order and minutes later and before Donald Sterling could appeal, Shelly Sterling and Ballmer finalized their deal, which received swift NBA approval.
Shelly Sterling to remain involved with the Clippers
Shelly Sterling, per her agreement with Ballmer, will remain connected to the Clippers through the ceremonial titles of "Owner Emeritus" and "Clippers No. 1 fan." For the rest of her life, Shelly Sterling will also be provided 12 tickets (2 courtside) for all Clippers games, 6 parking spaces, 12 VIP passes and three championship rings following any Clippers’ NBA championship. While her husband has been permanently exiled from the team he owned for more than three decades, Shelly Sterling isn’t going anywhere and seems poised to have a visible, if mainly symbolic, presence at the Staples Center for years to come.
NBA countersues Donald Sterling
In addition to welcoming Ballmer as the new owner of the Clippers, the NBA also answered Donald Sterling’s first lawsuit against the league and countersued him. In its countersuit, the league insists that Sterling violated his contractual relationship with the NBA and repeatedly damaged the league through his conduct. From the NBA’s perspective, Sterling’s recorded comments to V. Stiviano triggered an international crisis, with sponsors dropping the Clippers and players threatening a boycott. Sterling also arguably harmed the NBA through controversial statements Sterling made in an interview with CNN’s Anderson Cooper, as well as subsequent remarks, such as calling NBA officials "despicable monsters."
The NBA is represented by Skadden Arps attorney Jeffrey Mishkin, who served as the NBA’s general counsel during the 1990s and is undoubtedly familiar with Sterling and his legal strategies. This litigation could take years to play out and in no way threatens Ballmer’s ownership of the team, as Sterling’s claims only allege monetary damages. The NBA is also protected against a financial loss, as Shelly Sterling, on behalf of herself and the Sterling family trust, has indemnified the NBA from litigation costs associated with her husband. Donald Sterling’s motivation for suing is thus probably not the prospect of paying himself damages the NBA allegedly caused him. Instead, he likely seeks to expose league officials and owners as hypocritical should they be required to testify under oath during pretrial discovery.
Donald Sterling’s legal strategy for getting the Clippers back
At the outset, it is worth stressing that Donald Sterling’s chances of re-acquiring equity in the Clippers are extremely low. It could theoretically happen, but as a practical matter, it probably has a lower odds of occurring than the non-playoff team with the best record has at winning the NBA lottery.
With these low odds acknowledged, Sterling has two basic legal devices for trying to get the Clippers back: obtain a "stay" (an extraordinary remedy that would postpone completion of the $2 billion sale pending appellate review) or obtain an injunction (also an extraordinary remedy and one that would take the team away from Ballmer and return it to the Sterling family trust), or both.
Earlier this evening, Sterling petitioned California's Second District Court of Appeal for a stay. Sterling contends that losing the Clippers amounts to an irreparable harm because he'll never again own the team or any NBA team. Sterling also maintains Levanas subverted his appellate rights by invoking Section 1310(b) of the California Probate Code, a move that prevented Sterling from using the appeals process to hold onto the team. Under 1310(b), Sterling can only receive monetary damages -- and not ownership of the Clippers -- if he later wins an appeal over Levanas' decision.
While Sterling's odds of obtaining a stay are low, he was afforded very little time to react following Levanas signing his probate order. Notably, Shelly Sterling and Ballmer finalized their deal within minutes of Levanas signing the order, a short window which arguably denied Sterling adequate time. An appellate court might be sympathetic to Sterling on this narrow issue seeking a stay, especially given that Sterling tried to do so last Friday but was precluded by Levanas' curious decision to withdraw his order. Alan Milstein, a litigator with Sherman Silvestein, tells SI.com Levanas' decision was "very strange."
The problem for Sterling in seeking a stay is that there appears to be nothing to postpone. Shelly Sterling and Ballmer completed their $2 billion deal and it was approved by both a probate judge and the NBA. Ballmer now owns the Clippers. It would be an unusual form of a stay for an appellate court to effectively rescind the $2 billion deal, take the team away from Ballmer and place it back in NBA purgatory.
In fairness to Sterling, the appellate could tailor a stay that doesn't technically end the Ballmer deal but instead forces Levanas to reassess his legal options. Along those lines, the appellate court could issue a so-called "writ of supersedeas," which would preserve the status quo, however that is defined by the appellate court. That seems like an unlikely solution, however, especially since the appellate court would have to disturb a completed sale.
Sterling could also seek an injunction from California’s Second District Court of Appeal. Sterling’s petition for an injunction would likely be premised on alleged defects in Levanas’ order that authorized the sale and also Levanas’ decision to invoke Section 1310(b).
According to Daniel Wallach, an appellate attorney with Becker & Poliakoff, P.A., California’s Second District Court of Appeal, "may have the authority to issue an injunction to unwind the Ballmer deal in order to preserve the status quo for the duration of the appeal." Wallach reasons that "Section 923 of the California Code of Civil Procedure gives appellate courts the power to issue injunctive orders of their own when necessary to preserve the status quo, the effectiveness of the judgment subsequently to be entered, or otherwise in aid of its jurisdiction."
The key, Wallach stresses to SI.com, is that section 923 confers upon appellate courts the power "to make any order appropriate to preserve the status quo ... or otherwise in aid of its jurisdiction." This language, Wallach adds, is arguably broad enough to encompass mandatory injunctive relief, as recognized by several California appellate courts.
Wallach points out that Sterling's strongest argument in seeking an injunction would be that "he would be irreparably harmed by the transfer of ownership because it would completely subvert his appellate rights and render any victory on appeal a purely pyrrhic one since the trustee's actions would be inoculated by section 1310(b) of the California Probate Code."
Likely NBA and Shelly Sterling counterarguments to Donald Sterling
Both the NBA and Shelly Sterling will categorically reject Donald Sterling’s justifications to regain ownership. The league will contend that Sterling does not suffer an irreparable harm by losing the Clippers. This argument will reflect the unwillingness of courts to find irreparable harm when monetary damages could later prove a substitute for that harm. The NBA will likely assert that because NBA teams can be economically valued, monetary damages for losing an NBA team are obtainable, thereby eliminating the possibility that losing a team constitutes irreparable harm.
The league will also contend that Sterling re-obtaining equity in the team would cause the NBA more damage than it helps Sterling. In that vein, the NBA is poised to highlight that sponsors might again drop their association with team, players could boycott and Doc Rivers might quit as head coach if Donald Sterling returns in any capacity. It is notable that Clippers players, either through media statements or on Twitter, instantly welcomed Ballmer as the new owner Tuesday afternoon and embraced his arrival. These statements can be cited by NBA lawyers as evidence that everyone in the NBA has turned the page on Donald Sterling except him, and his return would therefore trigger serious disruption.
The NBA can also stress that the public’s interest in the NBA would be harmed if Donald Sterling returns. The league can allege that Sterling’s return would restore a controversy that arguably drove fans and consumers away from the Clippers and the NBA, as well as their business partners. The NBA might also cite President Obama’s sharp rebuke of Donald Sterling – Obama linked Sterling’s remarks to the "legacy of race, slavery and segregation" in the United States – as evidence of the public’s interest in separating Sterling from the league.
For her part, Shelly Sterling can maintain that an injunction for her husband would diminish the value of the Sterling family trust, as an injunction would likely have the effect of voiding the trust’s $2 billion agreement with Ballmer. The value of the trust would then become speculative and depend on what the Clippers might later fetch if the NBA auctions it. This is a significant concern for Shelly Sterling, who testified to debts owed by the trust to banks.
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.
(Post updated from original version)