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The Sterling Clippers: Ousting Ownership in the Face of Outrage

Published onJun 16, 2014
The Sterling Clippers: Ousting Ownership in the Face of Outrage

On April 9, Donald Sterling, owner of the Los Angeles Clippers, made certain racist comments to his companion, V. Stiviano.  Stiviano recorded these comments, and they were quickly publicized by TMZ.  This led to NBA Commissioner Adam Silver banning Sterling from the NBA for life, fining Sterling $2.5 million, and leading to a potential forced sale of Sterling’s ownership of the Clippers. 

How can the NBA force an owner to unwillingly relinquish that ownership?

When an individual or entity becomes an owner of an NBA team, that owner is subject to the rules set under the NBA Constitution.  The Constitution provides, under Article 13, for the termination of ownership if an owner willfully violates “any of the provisions of the Constitution and By-Laws, resolutions, or agreements” of the NBA, and subject to a vote of 3/4s of the Board of Governors.   Under Article 35A of the NBA Constitution, an owner may violate the Constitution if that owner “gives, makes, issues, authorizes or endorses any statement having . . . an effect prejudicial or detrimental to the best interests of basketball or of the Association or of a Member or its Team.” It is likely that Silver has determined that Sterling’s publicized comments to Stiviano violate Article 35A of the Constitution, and therefore Silver can terminate Sterling’s ownership and force a sale of the Clippers under Article 13.

Sterling, however, had expressed that he would fight the forced sale, and even filed a lawsuit against the NBA seeking damages of $1 billion.  Sterling defended against the forced sale by stating that, among other defenses, he did not violate the NBA Constitution, that the forced sale was a breach of contract by the NBA, and that the recording upon which the NBA rested its case is against California law.  Nevertheless, Sterling now appears to have agreed to sell the Clippers to Steve Ballmer, former CEO of Microsoft, for $2 billion.  In light of this news, Sterling’s attorneys state that Sterling’s suit against the NBA is likely to be withdrawn.

Why does the NBA care about Sterling’s personal beliefs?

The NBA, led by Commissioner Silver, an attorney, was quick to alert other owners that Silver intended to remove Sterling as owner of the Clippers.  The NBA took the position that Sterling was being ousted for the negative effects of his words on the NBA, and not because of his personal opinions.

These negative effects were seen when State Farm decided to, at least temporarily, suspend its sponsorship of the Clippers.  CarMax then took a more serious step and firmly stated that it was ending its sponsorship of the Clippers because Sterling’s comments “directly conflict with [its] culture of respect.”  Other brands followed in deciding to suspend their relationships with the Clippers, including Virgin America, Chumash Indians, Mercedes-Benz, AQUAhydrate, Corona, Yokohama Tire, LoanMart, Red Bull, Kia, Count Spring, and Lumber Liquidators.  Forbes reported that “the financial fallout stands to be much worse if the NBA does not take a swift and strong action to punish Donald Sterling.”  This is just what the NBA did.

Photo Credit: http://www.nba.com/clippers/

Shelly Sterling has stated that the Sterlings “have worked for 33 years to build the Clippers into a premiere NBA franchise,” and that she is confident that Ballmer “will take the team to new levels of success.”

 

* Anastasia E. Bond is a rising second year law student at Wake Forest University School of Law.  She focused her undergraduate studies at New York University on political economy, earning a Gold Certificate for her senior thesis from the NYU Alexander Hamilton Center for Political Economy, and graduating with a Bachelor of Arts in Politics, with a minor in Economics.  In the two years before attending law school, Anastasia worked in the Financial Services department of a large law firm in New York, and upon graduation, she intends to practice some form of transactional law (perhaps property, trusts and estates, corporate, or financial services) in North Carolina .

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