What's next for NBA in Donald Sterling case from a legal standpoint?

Saturday April 26th, 2014

This is not the first time Clippers owner Donald Sterling has been accused of racism.
Mark J. Terrill/AP/SI

A recording purportedly of Los Angeles Clippers owner Donald Sterling making racist remarks about Magic Johnson and African-Americans, including those who attend Clippers games, has been made public by TMZ. The remarks purportedly occurred during a recent argument between Sterling and his girlfriend, V. Stiviano. The NBA is investigating. Below I break down how the NBA's investigation may play out and potential legal ramifications for Sterling, the NBA and Clippers players.

Step 1 for NBA: Confirming the authenticity of the recording

The league's first step is to confirm that the recording is in fact of Sterling and was not doctored in any way. This is an important step because the league has a fiduciary duty to conduct its investigations fairly and consistent with internal rules of procedure. If Sterling were to later sue the NBA, the league would want to establish that it responded responsibly to the allegations before taking any corrective action. In a statement released to TMZ, Clippers president Andy Roeser raises the possibility the recording may have been altered and emphasizes Stiviano "is the defendant in a lawsuit brought by the Sterling family alleging that she embezzled more than $1.8 million..."

Confirming the authenticity of the recording could prove difficult. The original recording is presumably in the possession of TMZ. The NBA, as a private business, has no subpoena power to force TMZ or any other entity to turn it over. TMZ may be reluctant to share the original recording, especially if it was obtained on the condition that it would not be shared. TMZ may also be reluctant to share the recording because the recording itself could be unlawful.

Under California penal law, it is a crime to intentionally record a confidential conversation without the consent of the person or persons being recorded. This type of eavesdropping also empowers victims of the unlawful recording to sue for money damages. TMZ's own exposure to liability is far less than the person or persons who made the recording. TMZ is a media company with broad First Amendment rights, especially on matters that are newsworthy. Still, media companies can be sued for publication of private facts, and Sterling, an attorney by trade, could consider legal action.

TAYLOR: Time for Silver to do Stern's dirty work with Sterling

Without possession of the original recording, the NBA would attempt to confirm the authenticity of the version of the recording that has been made available on TMZ.com. A voice recognition specialist who can compare Sterling's voice with that of the male on the recording would likely be used. The NBA would also want audio specialists to ensure there are no unusual breaks or pauses in the recording that would suggest the placement of words had been altered.

Step 2: Interview Sterling and compile evidence

If the NBA confirms that the recording is of Sterling and has not been doctored, it would ask him to meet as soon as possible with Silver and the NBA's top lawyer, Rick Buchanan. They would ask Sterling questions ranging from why he made racist remarks to whether his attitudes about race have in any way impacted the Clippers business model. The NBA's primary interest is ensuring that no team conducts itself in ways that violates discrimination laws, whether it be in the hiring and retention of team staff to the sales of tickets and merchandise. Also, federal and state civil rights laws prohibit privately owned businesses that offer entertainment from discriminating on the basis of race.

At this point, there is no reason to believe that the Clippers as a team discriminate on the basis of race. Along those lines, Sterling's personal views about African-Americans and even African-Americans at Clippers games do not prove that his business acts in racist ways. It is worth noting, however, that in former Clippers general manager Elgin Baylor's original wrongful termination lawsuit against the team, he claimed he was treated worse by the team because of his race. The racism claim was dropped from Baylor's case and a jury would later side for the Clippers.

Sterling, as an NBA owner, cannot as a practical matter be uncooperative with the NBA. He is obligated to comply with league investigations. The franchise agreement between NBA team owners and the NBA makes clear that owners will follow the league's constitution and bylaws.

SI VAULT: Sterling, owner of the worst franchise in sports history

Among Adam Silver's powers as commissioner is to ensure that the "best interests" of the game are preserved. Part of that power includes conducting investigations and, if necessary, levying sanctions on teams, owners, employees and players. The NBA has fined owners in the past, including $500,000 fines for Mark Cuban (criticizing officials) and Micky Arison (tweeting on the NBA lockout). If Sterling chooses not to comply with an NBA investigation, the league would have the legal authority to levy substantial fines and suspend him.

In addition to interviewing Sterling, the NBA would likely also ask to meet with Stiviano. She may be reluctant to meet with the NBA, however, especially if she recorded the conversation. If she recorded the conversation, Stiviano may be concerned about the possibility of criminal charges or Sterling suing her. Also, her conversations with the NBA could be subpoenaed by law enforcement, even if the NBA agreed to speak with her confidentially. Stiviano is under no legal obligation to meet with the NBA.

GALLERY: Owners behaving badly

The NBA would also likely interview Clippers employees and players, as well as former employees and players, about their interactions with Sterling. The National Basketball Players' Association would surely ask to be involved in those discussions, as it has an interest in ensuring a non-hostile work environment for NBA players.

Step 3: Fining or suspending Sterling

If the NBA concludes that Sterling acted irresponsibly and damaged the league's image, the NBA's most likely remedial action would be to fine Sterling. The problem for the NBA would be that even a record-breaking fine of an NBA owner -- say $1 million or $5 million -- may not feel like much of a punishment for Sterling. According to Forbes, Sterling is worth in the neighborhood of $1.9 billion. Also, at age 80 or 81 (his exact official birth date remains something of a mystery, but it was reportedly in 1933), a fine of relatively small magnitude may prove even less effectual. The fear is that Sterling would respond with something akin to, "I don't care." On the other hand, any fine paid by Sterling would be given to charity and millions of dollars donated to a cause such as fighting racism would serve a good purpose.

The NBA could levy a more significant punishment in the form of a suspension. The NBA has the authority to suspend an owner. While the league has not used that authority, it could here.

Other leagues have taken this step. Baseball twice suspended Cincinnati Reds owner Marge Schott, the first time for one-year and the second for two-years. Her suspensions arose from racist remarks about African-Americans and favorable comments about Adolph Hitler. MLB also suspended Yankees owner George Steinbrenner for hiring a private investigator to conduct negative research on Dave Winfield.

Some NBA owners may be uncomfortable with the league suspending an owner. Even if they find Sterling's alleged comments reprehensible, owners may worry about the precedent it would set. In that vein, if Silver can suspend an owner in this instance, might he use that power against them in other situations? Might he suspend an owner for criticizing referees or tweeting sensitive information, rather than merely fine him? Expect there to be significant resistance by NBA owners to suspending Sterling.

GOLLIVER: Players speak out against Sterling

Step 4: Expelling Sterling from the NBA and defending a possible lawsuit by Sterling

It is well known that some league officials and owners would like to see Sterling leave the NBA. Sterling has faced accusations of racism for years, including having to defend a housing lawsuit brought by the Department of Justice. The NBA also knows that wealthy NBA fans like Steve Ballmer and Chris Hansen—who sought to buy the Kings and relocate them to Seattle—would jump at the first chance to own an NBA team.

Forcibly removing Sterling from the NBA is unlikely to happen. The NBA's constitution, which is confidential, reportedly contains language permitting owners to authorize the league to sell a team without an owner's consent. The language, SI.com is told, only covers very limited circumstances and these circumstances concern team finances -- namely, when an owner can't pay his bills.

There is reportedly no language authorizing the NBA to sell a team because of an owner's hurtful remarks or embarrassing behavior. Even if constitutional language could be construed to authorize a forced sale of the Clippers, NBA owners would likely be reluctant to do so given the precedent it would set.

Removing Sterling from the NBA, however, may not be necessary to effectively remove him from the Clippers. The NBA could suspend Sterling indefinitely and encourage him to sell the team. The Sacramento Kings were sold last year for an amount that equates to $534 million. It stands to reason the Clippers—which Sterling purchased in 1981 for $12.5 million—would be worth well in excess of $700 million.

The NBA could take a bolder step and take over the day-to-day operations of the Clippers, much like Major League Baseball did with the Dodgers and its embattled owner, Frank McCourt. The Dodgers, however, were experiencing payroll problems; there is no reason to believe the Clippers are experiencing any financial troubles.

The NBA must also be concerned about the possibility of Sterling suing the NBA and owners, such as for breach of the Clippers franchise agreement or for violations of federal and state antitrust law. NBA franchise agreements contain language that limit the ability of owners to sue the NBA and other owners. This language is known as "waiver of recourse", which means that an owner, by virtue of owning an NBA team, voluntarily waives away legal recourses he or she might otherwise have against the NBA and owners.

The waiver would likely aid the NBA in regards to a contract breach claim, but courts are generally unwilling to extend waivers to antitrust claims. A potential antitrust claim by Sterling against the NBA would be that his competitors (other NBA owners) and the NBA have conspired to expel him. By doing so, the logic goes, Sterling would have to sell his team at less than market value because prospective buyers would know that Sterling "has to" sell. As a result, he would attract lower bids. Under federal antitrust law, any damages Sterling receives would be automatically multiplied by three. He may have additional claims under California antitrust law.

Clippers players boycotting games

Clippers players would send a powerful message to Sterling by boycotting a game. Such a maneuver, however, would be in direct violation of their employment contracts. The players would be suspended by the NBA and potentially face significant fines, especially since the NBA would have to refund money to those fans buying tickets. It is worth noting, however, that Title VII of the Civil Rights Act prohibits employers from fining individuals for opposing discrimination. NBA contracts can also not "contract around" civil rights protections, meaning NBA players who boycott games over an owners' racism may be protected under the law.

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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