Bloomberg News

Long Shot for Sterlings to Stop a Forced Sale of the Clippers

May 17, 2014

Donald and Shelly Sterling

Los Angeles Clippers’ owner Donald Sterling and his wife Shelly. Photographer: by Andrew D. Bernstein/NBAE via Getty Images

Los Angeles Clippers’ owner Donald Sterling and his wife may have few options to block a forced sale of the National Basketball Association franchise amid an uproar over comments that led to his ban by the league.

NBA Commissioner Adam Silver has said he will urge team owners to take the Clippers away from Sterling, after recordings surfaced of him telling a friend he didn’t want her to bring black people to games, or post pictures of herself and Hall of Fame player Earvin “Magic” Johnson.

A forced sale of the Clippers, said to be worth more than a half billion dollars, requires approval of 75 percent of the owners, or 23 of the league’s 30 teams. Sterling, an 80-year-old real estate billionaire, hasn’t said whether he will sue, but antitrust and state franchise laws may provide a slim chance of success, and his wife’s claim of a 50 percent stake in the team may not give her much leverage.

“A lawsuit would only delay the inevitable,” said Daniel Lazaroff, director of the Sports Law Institute at Loyola Law School in Los Angeles. “He has become a real problem for the league and any intelligent court would be deferential to a vote by a three-quarter majority of the NBA’s board of governors.”

Silver banned Sterling from the game and fined him $2.5 million. The league appointed Dick Parsons, a former Citigroup Inc. chairman and Time Warner Inc. chief executive officer, to serve as interim CEO of the team.

Parsons said May 12 that “a prolonged legal battle is in no one’s interest.” The club lost some sponsors in the wake of Sterling’s comments, including Kia Motors (000270) Corp.

San Diego Clippers

Sterling bought the then-San Diego Clippers in 1981 for $12.5 million. The team is now worth more than the $550 million paid for the Milwaukee Bucks last month, according to Rob Tilliss, founder of Inner Circle Sports, which represented Apollo Global Management LLC (APO:US) co-founder Joshua Harris in his purchase of the NBA’s Philadelphia 76ers.

Potential bidders for what has been Los Angeles’s second-tier basketball team behind the Lakers include Oprah Winfrey together with fellow billionaires Larry Ellison, the Oracle Corp. CEO, and music executive David Geffen.

If Sterling sues, he may try to bring an antitrust claim, a strategy used in the past by other sports franchisees against their leagues, said Matthew Mitten, director of the National Sports Law Institute at Marquette University. In itself, a forced sale isn’t anti-competitive, Mitten said, and such antitrust claims are usually unsuccessful.

Oakland Raiders

Former Oakland Raiders owner Al Davis won an antitrust lawsuit in the 1980s when the National Football League tried to stop him from moving the team to Los Angeles. He may be the only professional sports franchise owner to prevail in such a case, Mitten said. In other instances, federal judges have rejected antitrust claims by owners, Mitten said.

Sterling might get further by arguing that a forced sale of the Clippers violates the California Franchise Relations Act, said Jonathan Solish, a lawyer with Bryan Cave LLP in Santa Monica, California.

“It’s certainly not a long shot that the Clippers are a franchise” under state law, Solish said in an interview.

Sterling could seek the same legal protection as owners of a 7-Eleven Inc. or McDonald’s Corp. store, including the right to “cure” any violation of his contractual obligations with the NBA before the league takes away his franchise, Solish said.

Sterling’s Statements

It isn’t clear that Sterling could fix his statements, according to Solish.

“You can’t unmake his statements,” Solish said.

Sterling couldn’t be immediately reached for comment.

Robert Platt, a lawyer for Sterling, declined to comment on chances of him holding on to the Clippers through legal action. ESPN reported Sterling had hired antitrust litigator Max Blecher, who the sports network said threatened to sue if the NBA doesn’t afford Sterling due process. Blecher didn’t respond to phone and e-mail messages from Bloomberg News seeking comment.

Pierce O’Donnell, a lawyer for Sterling’s wife Shelly Sterling, said in a telephone interview that her client owns 50 percent of the team through a family trust and will fight to hold on to her share if the NBA forces her husband to sell.

Under California’s community property law, which governs the division of marital assets, she may be entitled to half of the value of the team, but that doesn’t mean it can’t be sold without her consent, said Scott Altman, a law professor at the University of Southern California.

Family Trust

Even if the team is held by a family trust, it isn’t automatically community property, he said. That would depend on whether the funds used to buy it were community property.

“She’ll have a hard time stopping a forced sale,” said Altman.

O’Donnell declined to comment on her chances to keep her share of the team under California community property law.

Shelly and Donald Sterling have been more married for more than 50 years. She has been involved in managing their more than 100 real estate holdings and has been named as a co-defendant in housing discrimination lawsuits brought against her husband.

According to court filings, she was accused of telling employees that she couldn’t remodel a building the way she wanted because “Latinos are so filthy.”

She also allegedly got upset with the manager of an apartment building in Koreatown for renting units to a black man and to a woman with children, telling the manager she didn’t want them to live there, according to court papers.

Sexual Relationship

Shelly Sterling in March sued the woman to whom her husband made the comments about being photographed with black players. She alleges that her husband had a sexual relationship with the woman, who goes by the name of V. Stiviano, and that he has given her a $1.8 million duplex, two Bentleys, a Ferrari and a Range Rover as well as $240,000 for her upkeep, all of which came out of community property, according to court filings.

Stiviano’s lawyer alleged in a court request to throw out that case that Shelly Sterling was complicit in her husband’s extramarital affairs and couldn’t ask for a return of the valuables that her husband freely gave away.

“Ms. Stiviano was neither hidden, closeted, nor a clandestine ‘affair’ at any time,” according to the April 21 filing in Los Angeles Superior Court. “Mrs. Sterling absolutely tacitly if not openly approved of the relationship and the gifts.”

Discrimination Lawsuits

Donald Sterling, a former lawyer who owns more than 100 apartment buildings across Los Angeles County, has been accused in lawsuits of discriminating against black and Hispanic tenants.

In 2005, he settled a suit by the nonprofit Housing Rights Center over claims his former employees and tenants were fired or mistreated because they weren’t Korean. Sterling told his staff at buildings he bought in Koreatown, west of downtown Los Angeles, that he didn’t want black or Latino tenants, according to the complaint.

Sterling vehemently denied most of the claims in the case and said the tenants who brought it had “hidden agendas,” according to a court filing. The Sterlings appealed a judge’s order that they pay $4.9 million for the Housing Rights Center’s legal costs. The appeal was dismissed in February 2006.

In 2009, he agreed to pay $2.73 million to settle a U.S. government lawsuit that accused him of housing discrimination. After contesting the claims in court, the Sterling Family Trust denied any liability as part of the settlement.

Settlement Terms

Under the accord, the Sterlings agreed to display tenants’ rights posters at their property management offices, to send their employees to a fair housing training program and to let an independent auditor monitor their compliance with the Fair Housing Act.

In his first interview after his recorded comments, which drew condemnation from President Barack Obama as well as from other team owners, including Microsoft Corp. co-founder Paul Allen, Sterling made another comment about Johnson, the former Los Angeles Laker, questioning whether he should be seen as a role model for children.

Such comments will only hurt Sterling’s chances of holding on to the Clippers, said Lazaroff, the Loyola law professor.

“Every time he opens his mouth, he makes it worse,” Lazaroff said. “If he were my client, I would do anything to keep him from doing interviews.”

To contact the reporter on this story: Edvard Pettersson in Federal court in Los Angeles at

epettersson@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg


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