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Legal Analysis: Yes, the NBA Can Force Sterling to Sell the Clippers

Over the past several days, there has been a great deal of debate regarding whether or not the NBA has the authority to force Donald Sterling to sell The Los Angeles Clippers. The answer: Probably.

First, there is the question of what Sterling did. Yes, we know that he had a phone call with his girlfriend in which he expressed racist views. But how do we package that as some sort of legally culpable conduct that amounts to a violation of his contractual obligations? This is where most commentators are short-sighted. In the instant situation, Sterling did not just express racist views, he instructed someone not to bring people of a particular race to an NBA arena. That already sounds far more compelling— His comments were about bringing black people to NBA games. That directly implicates the league not only because Sterling is an owner but also based on the substance of his statement. And that’s only one piece of the equation. Armed with this recent instance of discrimination by an NBA owner involving attendance at NBA games, the NBA has the authority to launch its own investigation and gather more evidence. The upshot of all this: Ultimately, when the NBA’s Board of Governor’s decides whether or not to terminate Sterling as an owner, they will not be voting to terminate him based solely on this isolated incident.

As we now know, Sterling has repeatedly been accused of racism in the past. He has been sued for employment discrimination and housing discrimination. In fact, the United States Department of Justice sued Sterling for housing discrimination in 2006. Now some people are quick to point out that Sterling has never been found guilty of discrimination— Elgin Baylor dropped his race discrimination claim before trial and Sterling settled with the DOJ for $2.7 million. But the fact that Sterling has not been found guilty of discrimination has little impact on the case that the NBA will mount. Bottom line: If I’m the NBA, I launch a full-scale investigation and bring in a parade of witnesses, all of whom will paint the picture that Sterling has engaged in a long-standing pattern of racist conduct, including everything from housing discrimination to this most recent instance of instructing someone not to bring black people into his arena.

Now that we have the factual predicate for the charges against Sterling – the culpable conduct at issue – we have to evaluate how to get from this conduct to termination. The NBA Constitution & Bylaws (“Constitution”) provide that an owner can be terminated by 3/4 majority vote of its Board of Governors if an owner commits any of ten enumerated offenses. (Article 13 – Termination). Only two of those ten offenses possibly apply here. Those are:

a) Willfully violating any of the provisions of the Constitution and By-Laws, resolutions, or agreements of the Association. 

 (d) Failing or refusing to fulfill its contractual obligations to the Association, its Members, Players, or any other third party in such a way as to affect the Association or its Members adversely. 

Based on the above provisions, can the NBA legally terminate Sterling as an owner? Probably. Here’s why:

  1. Other Agreements: An owner can be terminated not just for violating the Constitution, but also for violating any provision of any NBA resolution or any provision of any other agreements of the Association. At this point, every commentator and legal analyst has seen the Constitution. But the rest of this? Any other resolutions or agreements? This is a hole you can drive a truck through. Give the NBA some credit. Unlike many contracts, the NBA Constitution does not contain language indicating that this particular document – the Constitution – contains the complete terms of the agreement between the parties. Instead, at numerous points throughout the document, the NBA Constitution makes owners subject to other terms and conditions. Why is this relevant? I have no idea what resolutions the NBA has passed and what other agreements may exist. For instance, at some point in the past, the NBA could have passed a resolution indicating that the NBA and its members were committed to racial tolerance and non-discrimination. Suppose such a resolution exists. Well, the Constitution provides that Sterling could be terminated for violating that resolution. Bottom line: 13(a) and (d) have to be read broadly: An owner’s contractual obligations are not just limited to what is spelled out in the Constitution.
  1. Commissioner’s Authority: Article 24 of the Constitution deals with Authority and Duties of the Commissioner. In addition to giving the Commissioner the authority to indefinitely suspend any member, this provision also gives the Commissioner the following, fairly undefined power: “Where a situation arises which is not covered in the Constitution and By-Laws, the Commissioner shall have the authority to make such decision, including the imposition of a penalty, as in his judgment shall be in the best interests of the Association.” Although the provision goes on to list certain possible penalties, it is careful not to limit the range of penalties that the Commissioner can assess. It is entirely plausible to interpret this provision as meaning: If something happens that we didn’t anticipate in this Constitution, the Commissioner can punish you and do whatever is best for the NBA.
  1. Recourse: Here’s the kicker: Suppose the Commissioner moves forward with his promise to put Sterling’s termination to a vote of the Board of Governors (basically, all other owners). Suppose the owners vote him out. From there, Sterling has tremendous obstacles to overcome. First, the Constitution provides that any owner who is terminated pursuant to procedure laid out in Article 14 waives any right to challenge the decision in court. Remember, we have highly sophisticated parties (owners and the NBA). I’m pretty sure that waiver is enforceable. Second, the Constitution provides that any decisions rendered thereunder shall be “final, binding and conclusive as an award in arbitration.”   Bottom line: We have a waiver of legal recourse with respect to forced termination. For anything else that might actually get to court, the standard of review should be very deferential (e.g. clear error). Given these considerations, it is highly unlikely that Sterling could go to court and get the NBA’s decision overturned.

 

Jonathan Pollard is a trial lawyer and litigator based on Fort Lauderdale, Florida. He focuses his practice on defending non-compete and trade secret claims. Jonathan routinely represents doctors, corporate executives and other high level employees who are switching companies, or, who have started their own ventures. Beyond litigation, Jonathan advises employees, companies and business owners regarding restrictive covenant issues in connection with employment contracts, separation agreements, hiring decisions, the purchase or sale of business interests and the execution of commercial leases. Jonathan has been interviewed about non-compete issues by reporters from INC Magazine, the BBC and The Tampa Bay Times. He is licensed in all Florida federal and state courts and routinely represents clients in Miami, Fort Lauderdale, West Palm Beach, Fort Myers, Tampa, Orlando and Jacksonville.  His office can be reached at 954-332-2380.  For more information, please visit For more information, visit http://www.pollardllc.com.

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