NBA Charging Document Reveals League Strategy

On Monday the NBA scheduled the official hearing on Donald Sterling’s future as Los Angeles Clippers owner for June 3, 2014. More notably, the “Summary of Sterling Termination Charge” released by the league reveals a number of interesting facets to the league’s strategy. The first confirms what was said in this space a few days ago, namely that Sterling was foolish to refuse to pay his $2.5 million fine. That refusal, as the league points out, provides clear and unequivocal grounds for franchise termination under Article 13(c). Sterling has not-and has stated that he will not-pay the fine, and the league’s release correctly points out that “[a]n NBA membership may be terminated upon the failure of a member or owner to pay any indebtedness owing to the league.”

Of all the charges levied against Sterling, this is by far the most obvious. The rest of the charges against Sterling, though they are likely true, are not nearly so cut and dried.  In particular, the league has argued that Mr. Sterling triggered Article 13(d) by violating agreements preventing him from:

• Taking or supporting a position or action which may have a material adverse impact on the league or its teams.
• Failing to use best efforts to see to it that the sport of professional basketball is conducted according to the highest moral and ethical standards.
• The contractual duty of loyalty to support the league in the attainment of its proper purposes, which include among other things the league’s commitment to diversity and inclusion.

“Adverse impact”, “best efforts,” “highest moral and ethical standards,” and “attainment of proper purposes” is apparently terminology agreed to in contracts signed by Sterling. The definition of such terms is in the eye of the beholder, however.  Sterling’s certainly violated these standards by any layperson’s definition, and the Board of Governors’ nearly fait accompli decision that he did would be very difficult to overturn in court. However, Sterling can at least argue that he did not violate these agreements because they are rather nebulous. On the other hand, he has no argument that he shouldn’t pay the $2.5 million.  This further illustrates why the failure to pay the fine was such a mistake.

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Two New Strategies Emerge

Perhaps the biggest bombshell in the league’s release is the allegation that “relevant evidence was destroyed, false and misleading evidence was provided to the NBA’s investigator, and LAC (the Sterlings’ corporation) issued a false and misleading press statement regarding this matter.”  More details will surely come to light concerning precisely what was done in this alleged cover up.

Sterling’s original press release, sent out with the approval of now-deposed Team President Andy Rosner, was rather ridiculous even at the time. It was utterly disingenuous, claiming that Sterling didn’t know whether the tape was altered.  This put the idea that the tape might have been altered in the public’s mind, while falling short of outright lying and stating that Sterling did not in fact say those things. That was further exacerbated by mentioning the lawsuit against Ms. Stiviano and her supposed vow to “get even,” another clear attempt to imply that somehow the tape was not legitimate without actually lying and saying so.

The league contends that these misleading and untruthful acts violated Article 13(A), constituting a willful violation of “various provisions of the Constitution.”  However, a perusal* of the Constitution did not reveal precisely what provisions were willfully violated by these acts.  I expected to find a clause requiring members and their personnel to cooperate truthfully with any league investigation; the CBA is replete with such clauses regarding players’ duties of truthfulness in certain scenarios, such as when submitting to a physical. However, I did not find one applying to owners. Given the specificity elsewhere in the summary, it is surprising that the league did not delineate exactly what provisions were violated. Perhaps this is an indication that the league’s lawyers had as much trouble finding them as I did, but still wanted a vehicle to reveal the evidence of Mr. Sterling’s obfuscations to the court of public opinion.

*I did not have time on short notice to re-read every word of the Constitution, but I did review every section that might logically have applied and did not find anything that jumped out at me.

The second newly revealed strategy is the charge that “[u]nder New York law*, all member teams of the NBA owe each other a duty of loyalty to support the League in the attainment of its proper purposes.” The league contends that LAC breached this duty “through the acts described above, which were injurious, harmful, and disruptive to the NBA.”

*The league’s Constitution, which Sterling of course agreed to, states that it is to be interpreted under New York law. Such clauses are common in contracts, and almost always enforceable.

Practicing in California, I do not profess to be an expert in New York law on the duty of loyalty. But on this point, the summary again returns to the same type of less definite terms, such as “proper purposes”, “harmful,” and “injurious.”

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Fortunately for the league, the Constitution Sterling agreed to mandates that the other 29 Governors of the the league’s franchises are his judge and jury.  And those Governors, who have lived first-hand through this saga, are likely to agree that Sterling’s actions have been “harmful,” “injurious,” and whatever other adjective the league rightfully wants to throw at Sterling.  Even if they did not, the negative publicity that would accompany a vote against termination and the players’ sure outrage if the league did not do all it could to remove him will ensure that Sterling is in fact voted out. Moreover, the obstinate refusal to pay his fine gives any Governor who might have been on the fence for procedural reasons an easy justification to vote in favor of termination.

Once the Board of Governors makes the finding that he violated the Constitution and votes to remove him, Sterling’s power to seek court review of that decision is very limited.  But if he ever gets in a courtroom, he may well regret his decision not to pay the fine or express contrition in the aftermath of his comments.