Sources: NBA unfazed by Sterling's lawsuit, could countersue
Donald Sterling's legal team scored a victory this week, but it is unlikely that it will stop the eventual sale of the Los Angeles Clippers. Los Angeles Superior Court Judge Michael Levanas ruled that Sterling is entitled to a hearing to determine his mental competence. Sterling's mental competence has become a crucial legal issue in the Clippers sale. When Sterling's wife and co-owner, Shelly Sterling, reached an agreement to sell the team to former Microsoft CEO Steve Ballmer, she did so on the belief that she was the sole trustee of the family trust. Shelly Sterling made this determination based on language in the trust agreement indicating that she would become the sole trustee if her husband was mentally incompetent. Shelly Sterling allegedly possesses medical reports establishing that her husband was mentally incompetent. Donald Sterling, through his legal team, categorically disagrees with Shelly Sterling's conclusion and insists that his mind is fine. If Donald Sterling's attorneys are correct, then Shelly Sterling never had the legal authority to represent the trust and thus her deal with Ballmer would become void.
As explained below, Ballmer would still likely be able to purchase the Clippers even if Donald Sterling is ruled mentally incapacitated. This is mainly because the NBA constitution empowers the league to remove Donald Sterling and sell the team. Nonetheless, a court declaration in Donald Sterling's favor would delay any transfer of team ownership. Such a delay could invite labor relations problems for the NBA, as a number of players could refuse to play if Sterling remains an owner.
Judging Donald Sterling's mental competence
From July 7-10, Judge Levanas will hold a hearing to determine Donald Sterling's mental competence and control of the Sterling family trust. Both Sterlings will have medical experts testify, and neurological results from PET-CT and CT scans of Sterling's brain will be introduced. Other evidence will likely include discussion of Sterling's abrupt change of mind as to whether to sue the NBA, and his dramatic use of all caps and hyperbolic language (for example, calling league officials "despicable monsters") in statements explaining his position. It will be an intensely personal and perhaps uncomfortable experience for Donald Sterling, as it will center on others debating his cognitive abilities and limitations.
Best interest of the Sterling family trust
In addition to the discussion of Donald Sterling's neurological capacities, we can expect arguments to address the best interest of the Sterling family trust. If Donald Sterling remains owner of the Clippers, the franchise's value could be adversely impacted. NBA players, including LeBron James, have pledged to boycott games if he remains involved in the NBA. Sterling's involvement might also deter free agent players from signing with the Clippers this offseason. Clippers players who are currently free agents might be less inclined to remain with the team. Clippers fans, as a result, may become less interested in their team and less willing to spend money to attend games and buy merchandise. Sponsors could again drop their association with the team should Sterling remain. An argument can be made that the Sterling family trust would suffer financially if Donald Sterling remains connected to the team, even as an owner banned from the NBA for life.
If Sterling ruled competent the NBA will seek to oust him again
The league hopes that Judge Levanas will determine that Shelly Sterling lawfully took control of the trust. In that case, Shelly Sterling possessed the legal right to sell the team, contingent upon approval by the NBA's Board of Governors. The NBA's Board of Governors would surely approve Ballmer's record-setting purchase, thereby making Ballmer the owner and giving him total control of the franchise. It would be a new day for the Clippers and a fresh start. Shelly Sterling would preserve involvement with the Clippers through a team charity, for which she would project to donate about $200 million of her own money.
If Donald Sterling defeats his wife and regains control of the trust, the NBA would not approve the Ballmer purchase, since the underlying contract would be void. Shelly Sterling could appeal the probate court's ruling, although appeals generally take weeks and often fail.
The NBA would not wait around for an appeal, sources familiar with the NBA's legal strategy told SI.com. The league wants the Clippers ownership resolved before the start of the 2014-15 season. To accomplish that goal, the league would resume its initial strategy: hold a termination hearing where the Board of Governors would decide whether to oust Donald Sterling. The hearing would not occur immediately. Sources say that Sterling would be given additional time to respond to the charges but the termination hearing would occur, likely this summer. Under Article 14(g) of the NBA's constitution, if at least 22 of the 29 owners sustain the charges against Donald Sterling for violating Article 13 of the league's constitution, the Clippers' membership in the NBA would be terminated.
"Membership termination" might sound like the Clippers would need to find a new pro basketball league or perhaps Chris Paul and other Clippers would be subject to a dispersal draft. But additional language in the NBA constitution would prevent such dramatic outcomes. First, under Article 14(g), 19 of the 29 owners could cast a second vote in favor of only ending Donald Sterling's ownership of the Clippers. If the owners elected this option, the Clippers membership in the NBA would not be terminated and Shelly Sterling would become controlling owner of the Clippers. Owners would only exercise this option if they were certain Shelly Sterling would immediately re-negotiate a sale of the team to Ballmer. Assuming Shelly Sterling and Ballmer reach another purchase agreement, the Board of Governors would be poised to approve it, thereby making Ballmer owner of the Clippers. Sources tell SI.com, however, that "there is no appetite" for Shelly Sterling to become controlling owner under any circumstances, meaning it is unlikely that owners would exercise the second vote option. Adam Silver echoed the same sentiment in his press conference before Game 2 of the NBA Finals.
Assuming no second vote is cast, then under article 14A(a) the Clippers membership would be terminated. But instead of the Clippers entering basketball purgatory, Article 14A(a) instructs that the office of commissioner Silver simply takes over the team. The NBA has already taken steps to manage the Clippers. Following Donald Sterling's lifetime ban, the league appointed former Time Warner chairman Dick Parsons to run the franchise. The NBA would put the team up for sale and perhaps Ballmer would again agree to buy it, although sources tell SI.com that the league might invite other bids. During this transition time, neither Donald nor Shelly Sterling would have any involvement with the Clippers as the Sterling family's trust ownership would be terminated. The Sterlings would later receive proceeds from the sale of the team, less expenses incurred by the NBA.
Competent or incompetent, Sterling can challenge NBA
Donald Sterling has three potential legal cards to play against the NBA. None will likely allow him to hold onto the Clippers, but all could inflict some damage on the league.
1. Win the Board of Governors' vote
Assuming Sterling is declared mentally competent, the NBA would then seek the necessary votes to sustain the termination charges. While it's difficult to imagine Sterling staging a stunning upset, eight fellow owners could decline to throw him out. Mark Cuban, for instance, has expressed concerns about a "slippery slope" of ousting an owner for damage caused by private conduct. Perhaps other owners share this concern, or the related concern that Sterling suing the NBA could expose the proverbial "skeletons in the closet" during pretrial discovery.
The league is aware of these concerns and has emphasized that the 22-vote threshold -- a three/fourths supermajority -- is designed to prevent any slippery slope. The league also stresses that while Sterling's original conduct was private, it triggered massive harm to the NBA, which was an innocent bystander. Players nearly boycotted, sponsors dropped the Clippers and various leaders condemned Sterling and by extension the league. Sterling also purportedly harmed through the league through his interview with CNN's Anderson Cooper and he betrayed his promise to allow the sale of the team to Ballmer. As to Sterling embarrassing league officials and owners through pretrial discovery, there is no indication that he would drop his lawsuit even if he obtains eight or more votes. Keep in mind, Sterling's lawsuit is built around on three alleged harms: his pending ouster, a lifetime ban and a $2.5 million fine. Two of those harms would remain in play if he manages to stick around as the team's nominal -- but banished -- owner.
2. Obtain a temporary restraining order
Before Ballmer or someone else enters Clippers offices for the first time, it seems safe to expect that Donald Sterling would petition a judge to delay the coronation. Sterling would seek a temporary restraining order from a judge to enjoin transfer of ownership of the team to a new owner. The odds would be against Sterling obtaining such an order. Injunctive relief is considered an extraordinary measure, and Sterling would have the burden of establishing that he is favored on four factors: substantial likelihood of success on the merits in a future trial against the NBA; he would suffer an irreparable injury if he lost an NBA team; Sterling would be more helped by an injunction than the NBA would be more harmed; and the public's interests would be advanced if Sterling remains owner. As explained in a previous SI.com article, Sterling would likely struggle to establish these factors.
3. Continue with the $1 billion lawsuit against the NBA
Donald Sterling has sued the NBA for $1 billion under antitrust, contract and privacy law. The league, as explained previously on SI.com, is likely to prevail over Sterling's lawsuit, which in a best-case scenario for Sterling would still require several years of litigation. If, however, Sterling's complaint advances past a motion to dismiss, Sterling might use pretrial discovery to embarrass the NBA and depict the league as hypocritical. He would attempt to depose Silver, former NBA commissioner David Stern, owners and others on their personal conduct and how the NBA previously responded to owner misconduct. Sterling is already laying the groundwork to embarrass the NBA in court. On Friday morning the Associated Press reported that Sterling has hired four private investigation firms to dig up "dirt" on Silver, Stern and owners.
The league will answer Sterling's complaint by August 11, and sources tell SI.com there is a good chance the league will countersue Sterling. The NBA could raise a tortious interference with contractual relations claim, and contend that Sterling has interfered in the business relations of the NBA and one of its franchises by interfering with the sale of the team.
Keep in mind, if Sterling wins the lawsuit, he would only obtain money damages. He would not regain ownership of the Clippers. Sterling would also be effectively paying himself half of those damages. Sources tell SI.com that Shelly Sterling agreed to indemnify on behalf of three distinct parties: herself, the family trust and the Clippers (owned by the trust). Even if a court rules that Shelly Sterling lacked the legal capacity to indemnify the NBA on behalf of the trust and the Clippers, she still had legal standing to indemnify the league on behalf of herself. This is a problem for Donald Sterling because under California community property law, spouses each own 50 percent of assets and wealth accumulated during marriage.
Donald Sterling's new attorney and his controversial strategy
Donald Sterling initially retained antitrust attorney Max Blecher, who famously defeated the NFL in litigation over whether the Raiders must play in Los Angeles or Oakland, in responding to the NBA. Sterling recently expanded his legal team to include Bobby Samini, a real estate and business attorney. Samini has come out swinging, going so far as to tell The Today Show's Matt Lauer that the NBA has "a systematic problem with discriminatory conduct." Samini's evidence appears to be a handful of employment discrimination lawsuits filed against the NBA in the last decade that were either dismissed or settled before any finding of fault.
But a source tells SI.com that Samini's accusations are "completely wrong and thoroughly misleading." The NBA is a business with more than 1,200 employees. With any business of that size, there are occasional lawsuits brought by former employees who insist they were let go because of some form of discrimination, rather than because of performance or department restructuring. The NBA, the source says, is prepared to empirically argue it has an exceptionally strong record of diversity in hiring and promotion, and one "certainly better than Donald Sterling, whose record on diversity speaks for itself."
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.