This article is part of our NBA Blog series.
As a man with a reputation for his steadfast business practices, Donald Sterling has become quite fickle in deciding how to handle the sale of the Los Angeles Clippers and the ensuing legal saga. After filing a civil lawsuit against Adam Silver and the NBA on May 30, Sterling did a 180 on June 4, when he agreed to sign off on the sale of the Clippers to former Microsoft CEO Steven Ballmer and drop his suit with the NBA. Then, just as it seemed the dust was beginning to settle, Sterling reneged on his promise to drop the suit. Not only will he press on, but according to L.A. Times Reporter James Rainey, Sterling has also hired four private investigator firms to dig up dirt on NBA owners and officials.
ESPN's Ramona Shelburne was one of the first to report statements made back on June 4 by Sterling's attorney Max Blecher, in which he surprisingly announced, "[Sterling] will not pursue further legal action. ...He agrees to sell and drop his lawsuit. In return, the NBA agrees to drop the charges and not sue him for anything."
This announcement came on the heels of a civil claim filed May 30th by Sterling against the NBA in District Court, in which Sterling alleged five separate claims for relief and a total damages of roughly $1 billion. These claims varied in range from breach of contract and fiduciary duties owed by the NBA to Sterling to claims of antitrust violations and denials of Sterling's constitutional rights. This claim also came just one day after Shelly and The Sterling Family Trust announced that they had agreed to the sale to Ballmer for a record-breaking $2 billion.
"I feel fabulous, I feel very good," Sterling said when asked how he felt about his estranged wife Shelly Sterling's sale of the team. Sterling went on to elaborate, "Everything is just the way it
should be, really. It may have worked out differently, but it's good. It's all good."
Yet, if we were to ask Sterling how he feels about the deal just a week later, I don't think that "Everything is just the way it should be," would be his response. Thus, it begs the question, what brought about Sterling's sudden change of heart… yet again?
While Sterling and Co. refuse to give us a straight answer, we can still paint a fairly clear picture of how each of Sterling's options are bound to play out, which in turn gives us some insight on his rationale (if there is any, which is in question according to his wife Shelly). We do this by looking at his options, the surrounding facts and circumstances, and then by throwing in a little legal analysis for good measure.
Very little information has been revealed to shed light on the reasoning behind Sterling's decisions. David Aldridge reported via Twitter that Blecher said Sterling's agreement to drop his lawsuit was, "Part of a broader deal," involving the NBA dropping its pending charge to terminate the Sterlings' ownership of the team. ESPN's Rachel Nichols elaborated further, stating that as part of the deal, Mrs. Sterling and The Family Trust agreed not to sue the NBA, and indemnify the NBA against lawsuits from others (a.k.a. Donald Sterling).
This sounded all fine and dandy in theory, but days passed, and Sterling's lawsuit had failed to be withdrawn. Blecher then told Reuters that no decision had been made on the lawsuit and all options were under consideration. Wait...what? Then in further contradiction to his June 4 claim to drop the lawsuit against the NBA, the Associated Press reported that Sterling had given private investigators a six-figure budget and one month to examine league officials and owners for previous discriminatory conduct. This investigation is being conducted in hopes of showing the NBA has taken a hypocritical stance against Sterling with the $2.5 million fine and lifetime bans.
With Sterling seemingly so close to stepping aside and allowing the sale of his ownership interest in the Clippers to be finalized, it leads one to wonder, what could have changed his mind? And will he actually go through with his lawsuit this time or is there some ulterior motive?
There is speculation that actions on behalf of the NBA this week antagonized Sterling into his decision to fight. The Associated Press reported that Sterling reluctantly hired private investigators after the NBA submitted a legal filing Wednesday in probate court, urging the judge to approve Shelly's authority to sell the team. Sterling has another hearing next month in probate court to appeal Shelly's right to unilaterally sell the team due to Donald's mental incapacity.
Sterling will obviously end up in court on his claims against the NBA. (He is suing them in Federal District Court.) And as we are beginning to see, all of the proverbial skeletons will come out of the closet. For example, part of Sterling's breach of contract claim for relief states that he was undeserving of the $2.5 million fine and bans imposed. The claim also offers that, even if Sterling was in breach of contract, this punishment is, "capricious, arbitrary, unreasonable, and grossly discriminatory compared with similar `similar' speech offenses." In return, Silver and the NBA claim that the punishment is just, in part, because Sterling violated Article 13(d) of the NBA Constitution by breaking his contractual obligation to "avoid positions adverse to the NBA." Thus, the NBA will look to bolster its position by bringing forth the numerous reported and unreported incidents of racism and alleged sexual harassment throughout Sterling's past, which is just more bad news for Sterling's business reputation and financial well-being.
In return, Sterling has decided to take the offensive, and reveal incidents involving NBA officials and team owners use of discriminatory remarks and practices. "We're going to pull every case against the NBA. Then we'll demonstrate that the culture of racism and gender discrimination is born at the NBA, where Adam Silver has worked in a high-level position for a long time," said Sterling's attorney Bob Samini. Yet Samini fails to mention that no where in the NBA Constitution is Silver held to the standard of prior sanctions for what Sterling's attorney Blecher subjectively sees as "similar" offenses. There are outlined maximum and minimum sanction guidelines for Silver to work within, and regardless, it may just be that Silver feels these prior sanctions are simply not enough of a deterrent and repercussion to these actions. This six-figure debt incurred on investigative work seems unlikely to hold much legal muster other than to slightly strengthen Sterling's argument for excessive punishment, but not enough to negate the punishment entirely.
Lets not forget as it was mentioned, that in Shelly Sterling's agreement with the NBA to cancel their ownership termination proceeding, she agreed (on behalf of the Family Trust) to indemnify the NBA against Donald's lawsuit. Thus, were Sterling to somehow succeed in court, any damages paid would come from his own Family Trust. The only way to fight this indemnity agreement will be to contest the sale he said he would agree to mere days before.
For Sterling to contest the sale, he will have to battle his estranged wife Shelly in probate court to overturn his mental incompetence ruling made in May. Such an appeal will end up in a court or arbitration proceeding (depending on the terms of the trust), where most of Sterling's private medical records would become public knowledge. TMZ first reported that Sterling was diagnosed with Alzheimer's, which could have been developing as far back as three to five years. Sterling's attorney has responded that "Mr, Sterling is far from mentally incompetent," and results were, "grossly exaggerated."
Appealing this decision will bring the actual medical records and diagnosis to light, and not just the tests performed last month, but likely those done over the last several years. Results of this information becoming public could potentially make matters worse for Sterling, especially if his mental competence is as bad or worse than reported. Remember, Sterling is more than just owner of the Clippers; he is a long-time businessman with many other ventures, some of which could also be placed into jeopardy with this information. Let's not forget future business, as people may refrain from doing business with an 80-year-old with a public history of long-developed Alzheimer's.
Further, some savvy readers may believe Blecher's claim that the NBA's charges against Sterling are based upon illegal evidence produced in violation of Sterling's fourth amendment right to privacy. The problem with this argument is that the NBA did not make its ruling in a courtroom, and frankly, they didn't have to. The NBA constitution is clear that the Commissioner's office does not need to follow the rules of evidence in internal disciplinary matters. This claim is also based upon a violation of Cal. Penal Code 632(d). The problem with that is that the NBA's constitution was written according to New York law, not California. Accordingly, all parties to the contract agree to resolve all disputes pursuant to New York state law.
In another few days, who knows, maybe cooler heads will prevail and Sterling will take the $2 billion he just made for a team purchased in 1981 for $12.5 million. Moving the team to the Family Trust as he did will also save him significantly in taxes on this deal, but alas, that is a story for another day. Until then, we will have to assume that Sterling's high paid team of legal advisers will consider all of the possible angles and hopefully steer him down the most prudent path, whether that requires Sterling to have another change of heart or not.
