How the NBA can keep both Sterlings away from the Clippers
Sometime after the 2013-14 NBA season ends, NBA owners will vote to end Donald Sterling's ownership of the Clippers. There is no timetable on the timing of this vote, although the league has indicated it wants to resolve this as quickly as possible. Expect there to be efforts to conduct a vote long before the 2014-15 season begins in November. The process of voting out Donald Sterling and also ending Shelly Sterling's stake in the team will require an intricate application of the NBA's constitution. I exchanged emails with Larry Coon, an expert in NBA governance and salary. Below is what we determined what will happen within the auspices of the NBA constitution. Here is how it will work:
Step 1: Board of Governors must assess whether Donald Sterling violated a provision contained in Article 13
The NBA Board of Governors consists of the controlling owner from each of the 30 teams. Sterling, as controlling owner of the Clippers, is the Clippers' representative to the board, but his lifetime ban precludes him from any involvement. As a practical matter, there are now 29 "governors." These remaining governors will decide whether to oust Sterling. Board subcommittees have already met to discuss Sterling and full board meetings are expected over the next several weeks. No action will likely be taken until after the season. This reflects the fact that some governors' teams are in the playoffs. It is also difficult to schedule times where all governors have availability to meet in person.
The NBA believes that Sterling violated Article 13(d), which centers on failure to meet contractual obligations. Sterling allegedly failed to avoid unethical conduct and taking positions that damage the NBA. This failure violated covenants contained in several contracts between Sterling and the NBA, including the franchise agreement and joint venture agreements. Sterling may be accused of violating other provisions contained in Article 13, but 13(d) is considered the leading rationale for his ouster.
Step 2: Under Article 14(a), Board of Governors charges Donald Sterling with violating Article 13
Article 14(a) of the constitution empowers either commissioner Adam Silver or any "member" (which refers to each team, as represented by its respective "governor") to charge an owner or a member with violating Article 13. It is nearly certain that Sterling will be charged as an owner, since it allegedly was Sterling himself and not the team that violated Article 13.
Step 3: Under Article 14(g), at least three-quarters of the Board of Governors votes to sustain the charge
After Sterling has been charged, the 29 governors will vote on whether to sustain or overrule the charge. Three-quarters of them—22—will need to vote to sustain the charge. If fewer than 22 vote in favor of the charge, Sterling would technically remain owner of the Clippers. Sterling's lifetime ban, however, would remain even if the board of governors does not oust him as owner. He would remain banned from the NBA—and the Clippers—and retention of ownership would likely be akin to silent ownership, without any control of the team. The logistics of a banned, but not ousted, owner sound daunting, to say the least.
Step 4: Also under Article 14(g), if charges sustained, Clippers' membership in NBA is terminated
Assuming at least 22 owners vote out Sterling, the Clippers' "membership" would then be terminated. "Membership" in this context refers to the legal relationship between the Los Angeles Clippers Basketball Club (owned by the Sterling family trust) and the NBA. "Membership" assigns rights, privileges and benefits granted to the Clippers by the NBA, including, without limitation, the right to organize and operate a professional basketball team to play in the league. This termination of membership is a crucial point for purposes of removing Shelly Sterling from Clippers' ownership.
There is an alternative scenario under 14(g), whereby after 22 owners vote out Donald Sterling, two-thirds (19) then vote to only terminate Donald Sterling's ownership interest in the Clippers. This step would be designed to not trigger termination of the membership. Don't expect this alternative scenario to happen: without terminating the Clippers' membership, Shelly Sterling would remain an owner of the Clippers.
Step 5: Per Article 14A(a), Silver takes over the Clippers and can sell the team
The "termination" of the Clippers' membership may sound like a dire and disruptive outcome. It might trigger concerns that the Clippers would exist without a pro basketball league, or that it might lead to a dispersal draft of Clippers players. Those concerns are misplaced because of other constitutional language that prevents the Clippers from losing its relationship with the NBA and makes Silver the team's de facto owner.
According to 14A(a), when the membership of an NBA team is terminated, the commissioner automatically takes over the team. Silver would thus take over the Clippers immediately following a vote to sustain the charge against Donald Sterling and terminate the Clippers' membership. The team would continue to play its games and conduct business. The Board of Governors would be empowered to instruct Silver to sell the team or liquidate its assets. Silver presumably would then be instructed to begin a process to sell the team, and proceeds of the sale would be paid to the Sterlings.
This illustrates how franchise rules work very differently in the NBA than they typically do in the business world. Normally when a franchise owner is disenfranchised, the owner keeps the underlying business. For example, if an owner of a Chevron gas station violated his franchise agreement with Chevron, he might lose his affiliation with Chevron, but he would not lose his gas station. The CEO of Chevron would not also take over this gas station. Unfortunately for the Sterlings, they own in the NBA, not Chevron. If Donald Sterling is disenfranchised, he and his wife lose the Clippers and Silver would take over the team.
Nor would any potential Sterling strategies to convolute the process make any difference. For example, disentangling the Sterlings from the family trust that actually owns the team would be unnecessary. Removing only Donald Sterling would be exceedingly difficult, because the team is owned by the trust, and the trust is jointly owned by the couple. However, the processes that are in place ensure that the entire ownership is transferred. The couple will continue to jointly own the trust, and the trust will no longer own the team. Likewise, any potential divorce proceedings likely would not affect the league's ability to transfer ownership of the team away from the trust.
The overwhelmingly likely result is that when at least 22 owners vote to sustain the charge levied at Donald Sterling, Donald and Shelly Sterling will lose the Clippers. A one-sided outcome, perhaps, but an outcome the NBA would argue the Sterlings contractually agreed to.
Larry Coon is an information technology director with the University of California, Irvine. He is also an NBA analyst and writer, and the author of the NBA Salary Cap FAQ.
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.