The twitterverse, Facebook, and news sites are buzzing about Donald Sterling’s contemplated lawsuit against the NBA. According to Michael McCann of Sports Illustrated, Sterling’s suit will include breach of contract claims as well as allegations that the league violated privacy and antitrust laws. Sterling seeks both monetary damages and an injunction prohibiting the sale of the Los Angeles Clippers. http://sportsillustrated.cnn.com/nba/news/20140531/donald-sterling-nba-legal-strategy-recording-antitrust/. Sterling and his possibly estranged wife Rochelle currently share ownership of the team which Rochelle has agreed to sell for the astronomical sum of $2 billion to former Microsoft CEO Steve Ballmer.
In my view, McCann correctly identifies the one possibly successful legal remedy for Sterling: an injunction stopping the sale to Ballmer based on a finding that the league owners are acting as a cartel in violation of federal and state antitrust laws. Before explaining why I believe the courts will ultimately reject this remedy, I explain why I think Sterling’s claims for monetary damages are wholly without merit.
I. STERLING HAS NO CLAIM AGAINST THE NBA FOR FINANCIAL LOSS, HARM TO REPUTATION, EMOTIONAL DAMAGES, OR PRIVACY VIOLATIONS.
Nothing the NBA did caused any diminution in the value of Donald Sterling’s primary asset – his stake in the LA Clippers. The NBA did not harm Donald Sterling’s reputation or unjustly inflict emotional damages upon him. Likewise, the NBA did not violate Donald Sterling’s privacy.
A. The NBA’s actions enhanced rather than diminished the value of the L.A. Clippers.
Donald Sterling’s remarkably boorish racist remarks to his girlfriend V. Stiviano coupled with his history of racist renting practices resulted in his lifetime banishment from the NBA and the owners’ vote to mandate that the Sterlings sell the Clippers. What neither Sterling nor the NBA did was reduce the value of the Clippers. In fact, they did the opposite. A franchise that was valued in January by Forbes at $575 million generated a bona fide offer of $2 billion four months later. http://www.forbes.com/teams/los-angeles-clippers/. Sterling’s publicized racist rant to Stiviano coupled with the actions of NBA Commissioner Adam Silver and the owners almost certainly helped cause the massive run-up in the value of the team. If Donald’s suit is rejected and the Clippers are sold, the Sterlings will realize a 15,900% return on their investment. http://www.nytimes.com/2014/05/31/upshot/donald-sterlings-remarkable-rate-of-return.html?hp&_r=1
There are several factors at work here. First, Sterling’s comments drew attention to the contrast between the NBA players, over 80% of whom are black, and the owners, who are overwhelmingly white men. In consequence, expressions of interest to purchase the Clippers came from several investor groups led by or prominently featuring a minority or minorities.
Second, the Clippers are a rising team with two very attractive, marketable, and reasonably young superstars. At the time when the controversy arose, they were involved in a compelling playoff match against NorCal rival the Golden State Warriors. The Clippers prevailed but were then quickly eliminated by the Oklahoma City Thunder.
Third, the Clippers may now be the most desirable professional sports franchise in the country’s second largest and second richest market. They are obviously better than the Lakers. There’s no NFL team in Los Angeles. The two major league baseball teams have struggled of late but those struggles did not prevent the Dodgers from selling for $2.15 billion in 2012. The Kings just missed making it to the Stanley Cup finals this year but hockey has never been profitable in L.A. and probably has less widespread appeal than the three other team sports
So, the NBA forced the Sterlings to sell at a remarkably good time for them. In addition, Donald Sterling’s actions leading to the forced sale enhanced the team’s value further. They led to an undeclared bidding war between various groups fronted by non-traditional NBA investors. African-Americans Oprah Winfrey, Magic Johnson, and Grant Hill all headed up groups that expressed interest in buying the Clippers as did David Geffen, a gay Los Angeles billionaire. NBA superstar Yao Ming was part of a Chinese investment group that considered a bid as well. Given the competition, Ballmer bid an astonishing amount to maximize the likelihood that his offer would be quickly acccpted.
Unfortunately, despite all the interest by minority and non-traditional investors, the team will likely be sold to a the most common type of NBA owner – the straight white technology billionaire. Regardless, Donald Sterling has no claim against the NBA for diminished value to the Clippers.
B. Any privacy violation claim against the NBA is unfounded.
The NBA did not violate Donald Sterling’s privacy. The NBA did not tape-record conversations involving Donald Sterling and the NBA did not publicize conversations involving Donald Sterling. To the extent that Sterling might have a lawsuit for violations of his right to privacy it would have to be against V. Stiviano since she recorded and publicized the telephone conversations with him. But, Stiviano sayss that Sterling asked her to keep records of his calls for posterity and Sterling has never disputed that claim so it appears that the recordings were made consensually and therefore legally. Moreover, Stiviano has no money except what Sterling has showered upon her in recent years so such a lawsuit is unlikely to be brought. In any case, a suit against the NBA for illegally recording Sterling fails because the NBA didn’t record him or release any such recording.
C. The NBA has acted reasonably and any emotional damages Sterling suffers are the result of his own actions.
Sterling will undoubtedly argue that, even if the NBA didn’t harm him economically, it will wrongly inflict a terrible emotional toil upon him by denying him the psychic satisfaction of owning a professional sports franchise. The problem for Sterling is that to prevail on this claim, he must prove the league’s actions are outrageous. He cannot do this.
Silver and the owners acted in response to the publication of anti-African American comments by Sterling in combination with his history of racist business practices. Silver was facing a possible players strike in the midst of the playoffs if he did not take decisive action. This would have been financially devastating to the NBA leading directly to millions of dollars in lost ticket and concession sales and television revenue, and concession sales.
On the other hand, the actions of Silver and the NBA owners resulted in the forced sale of the Clippers at a perfect time for the Sterlings to maximize the sales price. The notoriety that Donald Silver’s unwelcome actions brought to the franchise and himself ironically served to enrich him and his wife. Commissioner Adam Silver and then the owners acted reasonably throughout this situation and, moreover, did not cause Sterling financial injury.
II. STERLING PROBABLY WILL NOT GAIN INJUNCTIVE RELIEF.
As demonstrated above, Sterling cannot show financial harm from the NBA’s actions so he cannot recover damages for those actions. But, if he can show that the league acted illegally, he might be able to stop the team from being sold and thereby maintain control. For several reasons, I believe this is very unlikely.
A. Rochelle Sterling wants to sell.
Donald Sterling bought the L.A. Clippers when he was married to Rochelle Sterling. California is a community property state so any court will view the Clippers as jointly owned by husband and wife. Moreover, Donald Sterling has repeatedly said that Rochelle is a part-owner. In order to prevent the purchase by Ballmer of the Clippers, a judge would have to find that Donald’s ownership right to prevent the sale trumps Rochelle’s right to sell. I am unaware of any legal doctrine that elevates one joint owner’s right above that of another with an equal ownership stake. One possible option – if the Court finds that the NBA wrongly ordered the sale – is to appoint a mediator to decide whether Rochelle or Donald should prevail.
B. The NBA was within its contractual rights to force a sale.
As part of their 1981 purchase of the Clippers for $12.5 million, Donald and Rochelle Sterling agreed to various provisions in the NBA’s agreement with each of its teams. These provisions permit 3/4ths of the owners to force the sale of any team if an owner engages in conduct detrimental to the league. It’s hard to see how Donald Sterling’s remarks to V. Stiviano doesn’t rise to conduct detrimental to the league and even if, as appears unlikely, the Court finds that Stiviano shouldn’t have publicized what Sterling said, any available remedy would be against Stiviano not the NBA.
C. Sterling lacks standing to challenge the NBA on antitrust grounds.
Courts have generally deferred to sports leagues when antitrust claims are brought against them. So Sterling already faces an uphill road in challenging the league on this ground. Moreover, to bring an antitrust action, Sterling will have to show that he has been personally damaged by the league and its owners acting in restraint of trade.
For over 30 years, Donald Sterling has benefited directly from the anti-competitive actions of the NBA – including strict limits on the number of teams with significant authority over each team’s operations vested in a powerful commissioner. Sterling willingly agreed to the league’s terms when he bought the team and, as far as I know, has never complained about them before. The NBA’s bylaws, which are what Sterling will have to challenge to prevail, clearly are a major reason that the Clippers are worth as much as they are today.
An antitrust challenge brought by fans claiming unfairly high ticket prices or networks arguing that they lack the ability to negotiate in a competitive environment for the right to televise games or broadcast them on radio might have a chance. An owner whose franchise has increased in value 160-fold over the past 32 years cannot show injury and therefore will not be able to recover on antitrust grounds.
Any lawsuit filed by Donald Sterling against the NBA for monetary damages is most likely doomed to failure and the Clippers will be sold to Steve Ballmer shortly.