Monday September 8th, 2014

Atlanta Hawks controlling owner Bruce Levenson’s pending exit from the NBA over a racially insensitive email is welcome news to Donald Sterling and his legal strategy against the NBA. The former Los Angeles Clippers owner, who has filed two multi-billion dollar lawsuits against the NBA, argues that the NBA and its officials were hypocritical in forcing him out for racially-insensitive comments. If other NBA owners have written emails similar to the one sent by Levenson, Sterling could use the litigation process to uncover them and damage the NBA. Below I break down the different legal issues at play and how Levenson and Sterling's situations may connect.

Levenson’s email is arguably worse than Sterling’s remarks

Levenson’s email was sent to Hawks president Danny Ferry (who has been separately disciplined by the Hawks) in 2012. In it, Levenson complained about what he viewed as an overly high percentage of African-Americans attending Hawks games and serving as cheerleaders. He also took issue with the prevalence of hip-hop music played during games. Levenson, who has owned the Hawks since 2004, also theorized that African-American fans scare away white fans and that this alleged phenomenon has cost the Hawks money. 

Owner Bruce Levenson to sell Hawks after revelation of racist email

An argument could be made that Levenson’s remarks were materially worse than those made by Sterling to his acquaintance, V. Stiviano. As you likely recall, Sterling told Stiviano, “It bothers me a lot that you want to broadcast that you’re associating with black people.” Sterling added, presumably in reference to Clippers players (most of whom are African-American), “I support them and give them food, and clothes, and cars, and houses. Who gives it to them? Does someone else give it to them?”

Keep in mind that Sterling made his remarks spontaneously and also while angered. Sterling had just seen an Instagram photo of Stiviano posing with not only another man but with Magic Johnson, an iconic and beloved figure associated with Los Angeles's more popular NBA team. Some have described Johnson as something of a nemesis to Sterling. Levenson, in contrast, made his remarks deliberately and as part of a lengthy work email about Hawks business affairs. To the extent making a mistake “in the heat of the moment” mitigates Sterling’s comments, Levenson gets no such break himself.

Sterling also had some expectation of privacy, as his remarks were made in Stiviano’s home. Whether Sterling knew his remarks were being recorded is a matter of debate, but even if he knew of their recording, he likely did not expect them to be shared with The setting of Sterling’s remarks was quite different than the one for Levenson. Like Sterling, Levenson is a law school graduate and presumably had the common sense and legal insight to know he enjoyed no such privacy with a work email. Yet Levenson still went ahead and hit “send,” apparently not realizing—or not caring—that complaining about African-Americans attending his games and asserting that they scare away white fans constitute racist remarks. Levenson’s words read like something we might see before the Civil Rights Movement 50 years ago.

Levenson leaves NBA voluntarily and likely for a great price, but NBA could have lawfully forced his exit

Levenson “voluntarily” shared the email with the NBA in July, and his disclosure spawned an NBA investigation into Levenson and other Hawks officials. On Sunday, Levenson acknowledged that his email was “offensive and insensitive” and that he informed Silver of his intent to sell his equity in the team.

While Levenson exits the NBA in a way designed to save face, he was undoubtedly aware that the NBA could have forced his ouster. As explained at length during the Sterling crisis, the NBA’s constitution affords the league broad discretion to remove owners. The league’s removal powers are mostly found in Articles 13 and 14. If Levenson had refused to leave, the league could have cited Article 13(d) as grounds to terminate his ownership. 13(d) bars owners from violating contractual covenants with the league, including the obligation that owners avoid both engaging in unethical conduct and championing positions adverse to the NBA. Levenson has signed a number of legal documents with the NBA that contain these covenants. The documents include Levenson’s franchise agreement to own the Hawks and the NBA’s joint venture agreement. The joint venture agreement is a contract that every owner must sign and it establishes that owners own businesses in a joint venture of other NBA teams and thus must act in ways that benefit the joint venture.

Had the NBA concluded Levenson was in violation of Article 13, Silver would have referred charges to the NBA’s Board of Governors, which consists of the 29 other controlling owners. Article 14 establishes termination proceedings, which include a hearing in which the league would have presented evidence against Levenson before those 29 other owners. If at least 22 of them had voted to sustain Levenson’s removal, he would have been kicked out, and the office of commissioner Adam Silver would have then taken over Levenson’s equity in the Hawks and eventually sold it.

The NBA, of course, would prefer not to terminate any owner's interest. To do so would require NBA owners to vote out a fellow member of their exclusive club. Also, while the NBA has made clear that charges to terminate Sterling's ownership reflected extraordinary conduct—and would have required a decisive three-quarters majority vote of NBA owners—recall Mark Cuban's fear about a "slippery slope." Cuban openly wondered about whether other NBA owners would be forced out for unpopular views. Had the NBA pursued termination charges against Levenson, the league might have met resistance from NBA owners. Some owners might have been concerned about how their own conduct would be judged under a more scrutinizing light.

What's Bruce Levenson's real motivation for selling the Hawks?

 Levenson and the NBA avoided this divisive outcome by Levenson cooperating, apologizing and agreeing to leave quietly and quickly. Levenson will now control the sale of his team, as opposed to the sale being dictated by the NBA. Levenson may have also reasoned that now is a good time to sell an NBA team. After all, the Clippers were sold last month for $2 billion to former Microsoft CEO Steve Ballmer. To be sure, Atlanta is a smaller TV market than Los Angeles. Nielsen ranks Los Angeles the 2nd largest in the U.S., while Atlanta is 9th. This is an important statistic because while NBA owners share national TV revenue and other forms of revenue, they mostly keep their own local TV revenue, which is a major contributor to a team’s profitability. As a result, the Hawks may not fetch the same price tag as the Clippers.

Still, there are many wealthy individuals and groups who badly want to own an NBA team. These persons include Seattle's Chris Hanson, who a couple of years ago offered a record-breaking bid for the Sacramento Kings. Levenson, whose Spirit group bought the Hawks for $208 million in 2004, will have no shortage of bidders and will probably attract bids in excess of a $1 billion. As with Sterling, Levenson will be financially rewarded for conduct that led to his ouster from the league.

NBA controls timing of public learning of Levenson’s email to diminish uproar and threat of players boycott

News of Levenson’s email, which the NBA had in its possession since July, emerging on this particular Sunday was not a random occurrence. Just the opposite, the timing appears designed to elicit the least amount of notice by NBA fans, sponsors and, perhaps most importantly, players.

As every sports fan knows, the sports news cycle for the first Sunday of the NFL’s regular season is completely dominated by NFL discussion. There are also secondary storylines of significant interest, including the start of the college football season and baseball playoff races in many cities. The NBA, in contrast, is in the background during the month of September, a “dead time” between free agency highlights and the start of training camp. Also, many NBA players are currently home, away on vacation or spending time with family who they don’t see much during the season. These players are thus not in an ideal position to commiserate or plan a boycott in response to Levenson’s remarks. Similarly, many sponsors of NBA games are devoted to other sponsorships until the NBA starts up in October. If the NBA wanted to diminish the attendant outrage of Levenson’s comments, Sunday, September 7 may have been the ideal day to reveal those comments. Intense media reporting on the Ray Rice saga and the NCAA lifting its penalties on Penn State is also fortuitous for the NBA.

The NBA also had the luxury of controlling the timing of the public becoming aware Levenson’s email. This is in sharp contrast to Sterling’s recorded remarks, which were in TMZ’s possession and which were made public at a time of heightened public interest in the NBA: the playoffs, which this year included the Clippers.

NBA also controls timing to limit use of Levenson’s email by Sterling to seize control of the Clippers

The timing of the public learning of Levenson’s email is also noteworthy because it occurred after Sterling lost his hearing against his wife, Shelly Sterling, over the Sterling Family Trust’s ownership of the team. Less obviously but more importantly, the NBA likely waited for the public to find out about Levenson's email until after Sterling declined to file a timely appeal with the California Supreme Court. Put differently, the NBA waited until Sterling lost any shot, however remote, of reacquiring the Clippers through a court order. Had they known of Levenson’s email, Sterling’s attorneys clearly would have cited it in an appeal, even if the email’s legal relevance to California probate law would have been questionable, at best.

Hawks CEO: Numerous billionaires lining up to buy team

On the other hand, sports litigator Alan Milstein of Sherman Silverstein raises the possibility that Sterling’s investigators may have uncovered the email. “Because we know this was a two-year old email,” Milstein tells, “it begs the question of why do the mea culpa now. We also know Donald Sterling threatened to expose other owners who he said had similar prejudices. Perhaps his investigators uncovered the email, and the NBA and Levenson needed to get it out there before Sterling did.” Interestingly, Sterling attorney Bobby Samini tells Nathan Fenno of the Los Angeles Times, "I know there are more [revelations about NBA owners] coming."

NBA fortunate Shelly Sterling won the probate case, as a loss may have required the NBA to force out Donald Sterling and address Levenson’s email earlier

If Los Angeles County Superior Court Judge Michael Levanas had ruled for Donald Sterling in the probate dispute, the ruling would have likely delayed, if not altogether prevented, Shelly Sterling from selling the Clippers to Ballmer. The NBA would have then resumed termination proceedings against Sterling and scheduled a hearing for a vote before the Board of Governors. Sterling would have demanded the NBA reveal any relevant information it contained about other owners’ issues with race. If the NBA failed to provide Levenson’s email and Sterling later found out about it, he would likely characterize the NBA as failing to give him a fair hearing. Sterling would have then been poised to pursue even more litigation against the league.

Donald Sterling’s best weapon against the NBA is pretrial discovery

To be clear, Donald Sterling will never again own the Clippers. His remaining litigation against the NBA centers on the possibility that the NBA, its officials and Shelly Sterling harmed him in a financial way. In a best case scenario for Sterling, he would win his litigation against the league and the league would owe him billions of dollars. The “best case” is certainly not the "likely" outcome, and even if it occurs, it would take years to materialize. Worse yet for Sterling, Shelly Sterling has indemnified the NBA from costs associated with her husband’s litigation. As a result, the NBA would pay Donald Sterling, and then Shelly Sterling would write a check to the NBA to reimburse the league for what it paid her husband.

Shelly Sterling talks Clippers sale, husband

The possibility that the NBA may pay Donald Sterling—already a billionaire—a lot of money that his wife would later send to the NBA is probably not Sterling's true motivation in suing the NBA. Instead, it is likely to embarrass the NBA, its officials and team owners through pretrial discovery. Pretrial discovery is the process where each side shares evidence, such as emails and memos, and deposes witnesses under oath before a trial. Pretrial discovery is not automatic, however. A judge is only persuaded to order it if he or she does not dismiss the lawsuit. If a judge reasons that Sterling’s claims have no merit, those claims would be tossed and pretrial discovery would never happen.

But if either of Sterling's lawsuits advance past the NBA's motion to dismiss, Sterling’s lawyers would be poised to depose the NBA. Therein lies the significance of Levenson’s email, Daniel Wallach, an appellate attorney with Becker & Poliakoff, P.A., tells “The discovery of this e-mail may be a 'momentum-changer' in Sterling's federal court lawsuit against the NBA," Wallach reasons. "While many have speculated that he would use the discovery process to uncover embarrassing information about other NBA owners, the league always stood poised to argue that such information was not relevant to any of Sterling's claims and constituted nothing more than an improper 'fishing expedition" designed to harass non-parties (for example, other NBA owners who were not named in the lawsuit). However, the very existence of this email undercuts such a potential argument and, together with other evidence obtained during the discovery process, could be used to show that Donald Sterling was being treated differently (and worse) than other owners, especially if the NBA had been aware of Levenson's email when it imposed its unprecedented discipline against Sterling.”

Milstein agrees. “We know the other NBA owners long tolerated what they knew was Sterling’s intolerant history before the TMZ public airing, so it's not surprising that some of these owners had racist skeletons in their own closets.”

Bottom line: the Sterling story, considered by most to be “over,” could have many intriguing chapters ahead.

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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