In his latest attempt to salvage ownership of the Los Angeles Clippers, Donald Sterling petitioned a California appellate court on Friday to prevent the NBA from approving the sale of the team to Steve Ballmer for $2 billion. The petition was premised on Sterling’s fear that the NBA is on the verge of approving Ballmer’s $2 billion purchase, a plausible worry given that on Thursday Los Angeles Superior Court Judge Michael Levanas signed his probate order authorizing Shelly Sterling to sell the team to Ballmer. The signed probate order essentially memorialized Levanas’ oral order on July 28 in favor of Shelly Sterling. In a surprising move, Levanas vacated the written order late Friday, leading the appellate court to deny Sterling’s petition on grounds that there is no order to review.
The vacated order and denial of Sterling’s petition essentially keep the Clippers in its continued state of limbo. Still, Levanas could issue a new written order at any time, which would likely lead to another immediate petition by Sterling to an appellate court. The NBA remains poised to prevail against Sterling, whose efforts to overcome Levanas’ order are the legal equivalency to a three-point shot from half court: unlikely to score. All that stands between Ballmer taking over the Clippers is NBA approval, which is a near certainty and could conceivably occur at any time once the NBA has certainty that Levanas’ order will be not stopped.
Legal Analysis of Sterling’s petition
Sterling’s petition asked the appeals court to stay (postpone) a sale. A stay would have allowed the appeals court time to review Levanas’ determination that Shelly Sterling reasonably interpreted the Sterling Family Trust in concluding that her husband was incapacitated, and that the $2 billion sale to Ballmer was in the trust’s best interests. Keep in mind, the moment Ballmer is approved as the Clippers owner, Donald Sterling will never again own the team. This is true even if Donald Sterling later prevails in one or in all of his various lawsuits against his wife, the NBA and NBA commissioner Adam Silver. All that Donald Sterling, who is reportedly worth around $2 billion, can obtain after losing the Clippers is more money -- perhaps a lot more money, but not the Clippers.
The odds of Sterling obtaining a stay were very low, and will continue to be. A stay is considered an extraordinary measure. Sterling nonetheless contends a stay was warranted, because the permanent loss of the Clippers would, in his view, constitute an irreparable harm and that his appellate rights were subverted by Levanas. Along those lines, Sterling highlighted that Levanas took the controversial step of exercising his authority under Section 1310(b) of the California Probate Code. Under 1310(b), Levanas ordered that the Clippers sale could be completed irrespective of whether Donald Sterling appeals and wins on appeal. In other words, once the NBA approves the Ballmer purchase, Sterling winning on appeal would only mean he would receive monetary damages.
As Daniel Wallach, an appellate attorney with Becker & Poliakoff, P.A. who has closely studied 1310(b), notes, “The California Supreme Court has made it clear that 1310(b) should only apply in rare cases.” Wallach previously noted, and as today's petition takes great pains to point out, that in virtually every case where a California court has applied the 1310(b) exception, assets were being dissipated or squandered in some pretty extreme situations, such as where a family member serving as a fiduciary was misusing and pilfering trust assets that were intended for the long-term care and extraordinary medical needs of a disabled or elderly person. In each of the cases, the goal of the section 1310(b) exception was to prevent a further dissipation of assets, and not protect a business opportunity or to “maximize value” to the estate.
Wallach explains that “maximizing value for the trust’s beneficiaries or obtaining the highest or best possible price is not the focus of the section 1310(b) exception. Section 1310(b) is not the probate equivalent of the business judgment rule from corporate law; rather, it is an extraordinary remedy (and exception) limited to rare cases, and its sole purpose is to prevent imminent injury or loss to a person or property of an estate. Thus, whether $2 billion is the best or highest price that can be obtained for the Clippers is a completely irrelevant consideration under section 1310(b).”
Nevertheless, in his oral order on July 28, Levanas reasoned that the Sterling dispute is unique, and he clearly believed Shelly Sterling that Donald Sterling’s continued association with the team might lead to a player boycott, Doc Rivers quitting, a loss of sponsors, a diminished fan based, lower television revenue and other harms absorbed by the trust. Levanas was also mindful of the NBA’s September 15 deadline for the Sterlings to sell the team, with the threat that it would terminate the Sterlings’ ownership and sell the team in an auction after that date.
The challenge for Donald Sterling is that a successful petition requires a showing that Levanas abused his discretion in issuing the 1310(b) order. It is a tall-order, given that Levanas would be accorded broad deference by an appellate court. The bottom-line: the NBA’s goal to approve the Ballmer purchase is ticking closer to reality, and it would instantly render Donald Sterling a mere “former owner” of the Los Angeles Clippers.
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.