Donald Sterling to Continue Antitrust Lawsuit Against NBA and Commissioner

On May 30, 2014, the lawyers representing Donald Sterling, the controversial ex-owner of the National Basketball Association (“NBA”) franchise, the Los Angeles Clippers (“Clippers”), filed a complaint before the U.S. District Court in the Central District of California to fight an order by the NBA that would force him to divest his ownership in the Clippers, be banned for life from the NBA, as well as pay a $2.5 million fine.

The lawsuit names the NBA and its commissioner, Adam Silver, as the defendants.  The NBA and Silver slapped the punishments on Donald Sterling after a tape containing racist remarks made by the latter was made public.

The complaint alleges that the NBA violated California’s constitution, the NBA’s own constitution, and the Sherman Antitrust Act through its proscribed punishments against Mr. Sterling.  The complaint hinges on the fact that the cause of the entire controversy—and the sole reason behind the NBA’s decision to penalize Mr. Sterling—is the tape containing Mr. Sterling’s remarks, which, as the complaint pointed out, was illegally recorded without Mr. Sterling’s knowledge, is inadmissible in court, and violates Mr. Sterling’s rights under California’s Constitution. The NBA, as a result, had no legal reason to penalize Mr. Sterling.  Moreover, the complaint points out that the NBA and Commissioner Silver are not authorized to levy any of its punishments on Mr. Sterling per the NBA constitution or its by-laws, since Mr. Sterling’s comments did not violate any part of the NBA’s constitution or its by-laws. The complaint also noted that many other NBA franchise owners or players who made similar controversial comments have not been punished as severely as Mr. Sterling; some have not even been punished at all by the Association.

Finally, the complaint accuses the NBA of violating antitrust laws because Mr. Sterling and the Clippers are a competitor in the market of NBA teams and the NBA’s action of forcing Mr. Sterling to sell the Clippers is tantamount to entrusting Mr. Sterling’s business decision “to the collective action of [his] competitors[,]” i.e. fellow NBA franchise owners who compete with the Clippers and Mr. Sterling.  The exclusion of Mr. Sterling from the market, according to the complaint, is to the financial advantage of the other NBA franchise owners.  Finally, complaint claims the NBA causes “irreparable harm” to Mr. Sterling by forcing him to sell the team at a short notice, which deprives him of future gains in the Clipper’s value.  The complaint is seeking $1 billion in damages.

It is important to note that Mr. Sterling’s wife, Shelley Sterling, who is the sole proprietor of the Sterling Family Trust that owns the Clippers, indemnified the NBA from damages resulting from lawsuits by Mr. Sterling in her agreement with the NBA, so Mr. Sterling is effectively seeking damages from his own family trust.

While Mr. Sterling allegedly decided to drop the suit last week when the NBA cancelled its plans to force the divestiture following his wife’s agreement to sell the Clippers to Microsoft’s ex-CEO Steven Ballmer for $2 billion, Mr. Sterling changed his mind when he found out that the NBA will not drop his lifetime ban and the $2.5 million fine.  The saga continues for now.

Mark Ye
202-589-1834
mye@dbmlawgroup.com