The ongoing saga of Donald Sterling's attempts to regain, or retain, ownership of the Los Angeles Clippers continues. Last night, Donald filed a lawsuit against Shelly Sterling (his estranged wife), the Los Angeles Clippers, the NBA, and NBA Commissioner Adam Silver. This lawsuit alleges 12 causes of action, including:
This lawsuit is the third that Donald has filed in his attempt to regain, or retain, ownership of the Clippers. His original two lawsuits focused on the propriety of the NBA's sanctions against him and the propriety of Donald being declared mentally incompetent, resulting in his supposed loss of ownership of the team to Shelly.
Legal issues in this new case aside, what this does entail is that the ownership of the Clippers will not be a settled matter (according to the courts) for some time. Attorneys for Sterling have stated that this case may take several years to resolve. But what does that mean to the Clippers organization?
Dick Parsons, the interim CEO of the Clippers, testified in court yesterday that he fears if Donald were to remain owner of the team, it would plunge the organization into a "death spiral." He indicated that in the event Donald remains owner, Doc Rivers would not want to continue as head coach of the team. Further, Parsons testified that he has spoken with many of the team's players and sponsors who do not wish to remain with the Clippers should Donald remain Owner. Specifically, Parsons testified that sponsors who have yet to commit to the team for next year have indicated "We're in so long as Donald Sterling is out."
Sponsors generally have the ability to cancel their sponsorship agreements through the use of morals clauses in their contracts. Players don't have that option, although they can request to be released and/or traded.
Parsons testimony echoed the scenario that began when the Sterling audio tape was first released in April. In a few short weeks, sponsors canceled or paused their sponsorship agreements with the team. Further, rumors of a team-wide, and league-wide, boycott surfaced prior to Commissioner Silver banning Donald for life.
Parsons statements should not be taken lightly, as they are illustrative of the reality the Clippers will find itself in should Donald remain Owner. Unfortunately, Donald Sterling's three lawsuits can result substantial harm to the clippers. If the litigation is not voluntarily dismissed before the season commences, or if Donald manages to prevail in his litigation, then Parsons' "death spiral" comment will be realized. That is, unless the NBA takes action.
The NBA has yet to commence its formal proceeding to remove Donald Sterling as Owner from the Clippers and force the sale of the team. Pursuant to Article 13 of the NBA's Constitution and Bylaws, an Owner can be removed by a vote of three-fourths of the Board of Governors (made up of other team Owners) if an Owner commits any of the following:
Donald disputes in his first lawsuit against the NBA that he has not violated any of these provisions, although he has likely violated provisions numbered 1, 3 and 4 noted above. In particular, he has at least violated provision 4 by refusing to pay the $2.5 million fine. (Note: For a full analysis of the propriety of Sterling's sanctions, see my upcoming publication Not So Sterling: Assessing Donald Sterling's Breach of Contract Claims Against the NBA [Forthcoming Summer 2015])
The NBA had planned to have the Board of Governors vote to remove Donald's ownership of the Clippers on July 15, 2014. This date was set to be following the conclusion of the trial between Donald and Shelly Sterling about Donald's mental capacity. However, the trial has run long. The NBA intends to have Donald removed as owner prior to the start of next season, and has set a deadline of September 15 for any transfer of ownership through sale. Presumably, the NBA fears the "death spiral" that Parsons testified would occur should Donald remain Owner. However, if September 15, 2014, comes to pass and the team is not sold, the NBA will seek to remove ownership from Sterling and auction the team.
Although Donald Sterling's latest lawsuit delays the court's determination of ownership of the team, the NBA could move forward and remove Donald's ownership interest, even if the lawsuit about Donald's mental capacity is not resolved. Once the team is sold, the NBA could commence an action for interpleader, where Donald and Shelly can sort out who is entitled to the proceeds, or just await the determination of the suit between Donald and Shelly.
Donald Sterling's litigation tactics may be designed to delay the sale of the Clippers, but the NBA has the ability to initiate a proceeding to remove his ownership. Only time will tell if the NBA is able to accomplish its goal of removing Sterling prior to the start of next season. If the NBA fails to do so, we may see the "death spiral" of the Clippers that Parsons is warning about.
Quiles Law is an esports and sports law firm based in New York City.
60 Bay Street, Suite 700
Staten Island, New York 10301
(P) (917) 477-7942
(F) (917) 791-9782
Attorney Advertising. The information presented in this site should not be construed to be formal legal advice nor is it intended to form any attorney/client relationship. Our attorneys, collectively, are licensed to practice law in the States of New York, New Jersey, and Pennsylvania. Copyright Roger R. Quiles, Esq., 2018. All rights reserved.