The NBA v. Donald Sterling: A Simple Contract Case
December 20, 2014
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What do we call the interplay between Donald Sterling, his wife Shelley, the NBA and all the lawyers? Is it a comedy of errors? Maybe, but it is also just a simple contract dispute, broken into three parts.

1)    When Commissioner Adam Silver announced the penalties he was imposing on Donald Sterling because of his racist comments, and that he would begin the process to force the sale of the LA Clippers, he wasn’t punishing Sterling arbitrarily.  The authority supporting him was the contractual provisions between the NBA and the LA Clippers, to which Donald Sterling became a party when he bought the team in 1981. No one can become the owner of an NBA team without being approved by the rest of the owners. The current dispute playing out in the press is not over an owner and the rights to his private property. That ownership is subject to a set of rules implemented by the NBA, primarily the NBA constitution. The constitution is merely a simple contract that determines what an owner must do not only to become a member of the “club”, but to remain a member of that club. Once Sterling’s racist comments were made public, the Commissioner determined Sterling’s actions were detrimental to the league. At that point, Sterling became subject to the remedies provided by the contractual rules governing his ownership of the Clippers. While Sterling is owed some form of due process, once he admitted that the statements on the recording were his, he had his due process. It was Adam Silver’s prerogative as Commissioner of the NBA to determine those statements were detrimental to the NBA and what penalties needed to be imposed.

2)    All of this has triggered another contract: the Sterling Family Trust. The contractual provisions of that trust provide that a trustee (aka: Sterling) can be declared mentally incompetent, and therefore unable to continue to serve as the trustee, if two physicians so certify. Sterling was examined on May 19th and 22nd by two physicians. Each certified in a report that he had a mild global cognitive impairment consistent with early Alzheimer’s but also with other brain disease.  This contract was triggered after Sterling reneged on his agreement to voluntarily sell the team. 


What does this mean? There will be a hearing next month to determine whether the contractual provisions of the Sterling Family Trust have been complied with, and if Sterling was properly removed as a trustee. If upheld, then presumably the sale of the Clippers will go through after additional legal haggling including appeals.  And remember: this sale is for the record amount of $2 billion.

3)    There is also the pending lawsuit filed by Sterling against the NBA. He argues that the contractual provisions he agreed to when he bought the Clippers somehow do not apply to him. While the NBA’s response is not due until August, they are considering filing a countersuit for tortious interference with contract. This means the NBA will sue Sterling saying he interfered with the contractual relationship between the NBA and the LA Clippers through all the antics he is conducting.

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          Hopefully this “simple contract” matter will be resolved quickly and the record $2 billion sale of the team will go through. All contract issues aside, what has been lost in the shuffle of all this is the team itself.  The players deserve to have a resolution of this so that they can focus on the upcoming season in peace.