What Legal Recourse Does the NBA Have Against Donald Sterling?

I have been hearing from a lot of my loyal fans about the legal issues currently facing Clippers owner Donald Sterling. Although I am passingly familiar with the law, I thought it would be helpful to get an expert* to weigh in on the topic. To that end, here is my brother, for a first-ever guest post!

Hello LakHer fans! I’m very excited to have this opportunity to speak to you directly on several topics near and dear to my heart – basketball, legal analysis, and inappropriate comments from an employer! Actually, this article will focus on a somewhat narrow topic that has been generating a lot of commentary since TMZ released Donald Sterling’s remarks last week: assuming the comments are confirmed as Sterling’s, what legal tools does the NBA possess to punish Mr. Sterling for what is widely viewed as reprehensible conduct?

The short answer is that the NBA has three general tools: they can fine him, they can suspend him, and they can try and force him to sell the team. However, having a tool is not the same thing as being willing to use it, and for reasons I will explain in more detail below, I think the likely outcome is that the NBA will fine Sterling, and they will more than likely suspend him, but they will not force him to sell.

Initial Issues

The First Amendment: This is actually a non-issue, but I have heard several questions on the subject and it is a personal pet peeve of mine, so I want to put any concerns regarding freedom of speech to bed before we get to the real issues. The questions on this topic generally sound something like “how can the NBA punish Donald Sterling for speaking his mind? What ever happened to freedom of speech and the first amendment?” The answer is simple: the first amendment (go read the text here for yourself) protects individuals from GOVERNMENT infringement on speech. Basically, there is no such thing as a constitutional right to free speech – there is a constitutional right not to have the government infringe on your speech. Private parties in private dealings can infringe on each other’s speech all day long without running afoul of the constitution, subject of course to other laws not relevant in this case.

The NBA’s Constitution: Yes, the NBA has its own constitution, but it is not a public document, so knowledge of what it actually contains is limited. The ever-savvy media has been able to learn much of the contents of the document either from leaked sources or from inferences based on actions the NBA has taken in the past (ie. we know that the NBA constitution says the NBA can fine coaches and players because we have seen them do it without legal challenge). However, as the document itself has not been released for public consumption, the nitty gritty little details that are OH SO important for good legal analysis remain un-scrutinized by outsiders like yours truly. As a result, some portion of the following analysis is speculative, albeit based on information generally agreed on by the commentariat.

The Fine

Fines are commonly used by leagues like the NBA to punish players, coaches, and owners for poor conduct both on and off the court. Mark Cuban is the posterboy for NBA owner fines, having reportedly paid over $1.5 million in fines to date during his tenure as owner of the Dallas Mavericks. The record for the single largest fine in NBA history also belongs to Mr. Cuban, who in 2002 was required to pay $500,000 for complaining publicly about what he considered poor officiating regarding his star players.

As far as penalties go, fines generally work pretty well – they are hassle free, and the NBA constitution and by-laws clearly permit their use. The downside to fines, especially when it comes to team owners, is that even massive fines seem like a slap on the wrist. Sure, we can assume that if the NBA was willing to fine Mark Cuban half a million dollars for complaining about referees, they will be willing to fine Donald Sterling more than that for his alleged comments. But even assuming the NBA was willing to fine him, lets say, $5 million, Donald Sterling is reportedly worth almost $2 BILLION. As crazy as it is to say, to a guy like that $5 million is a rounding error. Furthermore, a $5 million fine would be 10 times more than the largest previous fine against an NBA owner – we may not know exactly what the NBA constitution says, but we can assume it has some limitations when it comes to fines, so in all likelihood it would be impossible for the NBA to fine Sterling an amount that would actually hurt his pocketbook and make fans happy.

The bottom line? If the comments are eventually attributed to Sterling the NBA will almost certainly fine him, but if a fine is all that happens people will not be pleased.

The Suspension

I feel fairly confident that if action is taken against Sterling it will include a suspension. Suspension of an owner, though rare, does happen: our own Jerry Buss was suspended in 2007 as a result of a drunk-driving conviction, and Glen Taylor of the Timberwolves was suspended for an entire season for messing around with salary caps when signing a free-agent. The public generally seems to react positively to suspensions – suspensions sound punitive, and we like the idea of people being “removed” from whatever they were doing as punishment.

However, it is fairly unclear to me what a suspension of an owner actually MEANS, practically speaking. If you are a player and you get suspended, you don’t get to play and you don’t get paid. Same thing goes if you are a coach. The problem is, owners don’t really “work” the same way – they don’t play games, and they usually don’t take a salary (or if they do it is a token amount) because their real investment is the equity value of the team. So, what would a Sterling suspension actually do? It might mean that he can’t participate in management activity (although he is literally an octogenarian, and it is debatable how involved he is in day-to-day) and it might mean that he can’t attend games (although if I was him I wouldn’t feel comfortable stepping into Staples right now without an army of bodyguards at my side anyway). When all is said and done though, he still owns the team, and at the end of the day isn’t that what being an owner is all about? A suspension might be a good solution in terms of making fans happy, but it’s hard to imagine that it will be an effective punishment for Sterling.

The Forced Sale

First, lets get a few definitional issues out of the way. A lot of people are wondering how the NBA could force Sterling to sell the Clippers – after all, if he owns the team, how can someone else force him to sell his property? The answer is that owning an NBA team isn’t like owning a computer or a cell phone – the team is not Sterling’s to do with as he will – the team is a franchise property.

To use fast food as an example, if I wanted to open a franchise of a hamburger restaurant (lets say for the purposes of avoiding any trademark issues that I wanted to open a McKobes) I would go to McKobes headquarters and sign a franchise agreement with them. Pursuant to this agreement, I would be required to do certain things (for example, I would secure a lease on a property and I would decorate it according to the guidelines of my agreement) and they would be required to do certain things (for example, they would let me use their branding and agree to sell me McKobe burger patties). If either of us broke any of the promises we made in our franchise contract, the aggrieved party could sue the breaching party. While I am sure the franchise agreement between Sterling and the NBA is much more complicated than the one I just described, the main thrust is the same: Sterling and the NBA have each made a complicated set of promises to each-other, and each side has already agreed upon certain remedies the aggrieved side can seek in the event that the other side breaks those promises.

Here is where it gets tricky. According to sources, the NBA constitution does contain a clause allowing the NBA to force an owner to sell. However, according to these sources, the clause is only triggered in very specific circumstances, limited to serious financial issues (basically, when an owner is unable to pay the team’s bills). Clearly, paying bills is not a problem for Sterling (see massive fortune, above). Without seeing the actual constitution’s language, it is impossible to know if there are any ways a creative legal mind could apply the language to the situation at hand, but based on what people in the know are saying, it seems unlikely.

This is not to say that the NBA couldn’t try and force Sterling to sell by indirect means. For example, the NBA and the other owners could do everything in their power to make the NBA an uncomfortable place for Sterling to be, such as suspending him indefinitely (see above) taking over management of the team, and directly “encouraging” him to sell. However, I think this is an unlikely scenario for two reasons. First, Sterling started his career as a trial lawyer, and reportedly LOVES litigation. If the NBA really puts pressure on Sterling to sell absent a breach of his franchise contract or the NBA constitution or by-laws, he would have a potential anti-trust case, which would be costly for the league to defend and would eat up years and millions of dollars, not to mention make headlines every few months. Plus, if Sterling actually litigates to the end and wins, any damages would be tripled because of anti-trust laws. Second, I think the owners are always worried about setting precedent when it comes to something as drastic as forcing an owner to sell a team. Sure, what Sterling is accused of is pretty egregious, but the owners will clearly be concerned that once the door to this sort of action is opened, there is no turning back.

 

To sum it all up, if the comments are Sterling’s and are not somehow taken out of context, I feel confident Sterling will be fined, I feel pretty confident he will be suspended, and I feel absolutely confident he won’t be forced (directly or indirectly) to sell. However, he is also a shrewd businessman, and I think the most likely outcome is that a third party will come in looking to buy the Clippers for a fair price and Sterling will recognize that this as a good time to get out before things get too heated (or more heated then they already are). That being said, I don’t expect Sterling to sell at a discount, so unless a buyer comes offering a good value, I think Sterling will be happy to ride this wave and dare the NBA to do anything to him that will actually hit him where it hurts.

 

*Adam Waks is a student at the New York University School of Law – he is not actually an expert in any legal field, nor is he licensed to practice law in any state as of April 29^th, 2014. He is however a lifetime Laker fan, and the kind of brother willing to spend 4 hours reading sports blogs instead of studying for his law school finals.