- Lester Munson, Legal Analyst
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Multiple media outlets on Friday reported that Donald Sterling and his wife, Shelly, have agreed that she has the authority to work with the NBA and to negotiate a forced sale of the Los Angeles Clippers. If so, the deal raises questions about the actual team's ownership, the possibility of a negotiated settlement between the NBA and the Sterlings, and the potential pitfalls of a negotiation between NBA commissioner Adam Silver and the Sterlings.
Q: After hiring lawyers, threatening litigation and refusing to pay a $2.5 million fine, why are the Sterlings now indicating an agreement to sell the Clippers?
A: The Sterlings' sudden willingness to consider a sale of the team could be a tactic to delay the termination of Donald Sterling's ownership. It could be a cynical attempt to entrap the NBA into recognition that Shelly shares ownership with Donald, a complication that the NBA wishes to avoid. Or it could be recognition by the Sterlings of the legal realities of their predicament.
The NBA and Silver already have said there will be no delays in the rapid-fire procedure for termination of ownership that is established in the NBA constitution. Silver and the NBA lawyers are too smart to fall into a Sterling trap. The most likely reason for the Sterlings' willingness to sell is that they, with help from their various lawyers, have now recognized that the NBA is holding all the cards. The league can and will terminate Donald's ownership at its meeting June 3, and Donald's legal recourse is, at best, problematic. Any lawsuit attempting to reverse the league's decision to terminate ownership is doomed to an early failure.
Q: How can the league negotiate with Shelly Sterling without admitting that she shares ownership with Donald?
A: In any settlement negotiation involving property of this magnitude, the people involved make an agreement that anything that is said at the bargaining table may not be used in any future arbitration or litigation.
The league has total power over Donald as owner and can terminate his ownership. If Shelly becomes a part of the ownership, it complicates the situation in a major way. Silver and his attorneys will open the conversation with the Sterlings by obtaining their agreement that talking with Shelly cannot be used as an admission of her ownership. It is likely to be in a simple, written document less than one page long, a document that both the Sterlings and the league lawyers have used in numerous previous negotiations.
Q: Is it possible for the league and the Sterlings to make an agreement that will bring the entire situation to a conclusion?
A: Yes. Silver will seek to make an agreement that will conclude all pending and all possible future issues with the Sterlings. Lawyers like to call these comprehensive agreements "global settlements."
The settlement could include everything from the sale price of the team to the final accounting for tax payments on tickets and players' salaries. If Silver were able to reach a global settlement with the Sterlings, it would be a happy and impressive ending to one of the most impressive performances by a sports commissioner in recent memory. It will not be easy.
The Sterlings are willing at the moment to talk about a sale, but they could adjust their thinking and could become difficult. Silver knows that he has the leverage and authority that he needs and must be able to show that it is in their interest to make a deal. It is entirely possible that Silver will have a settlement to present to the owners at their meeting June 3 instead of a nasty contest with a fellow owner.
Q: What prompted the Sterlings to signal the possibility of an agreement?
A: In addition to Donald Sterling's egregious misconduct, the factor that prompted the Sterlings' willingness to sell was likely the series of quick deadlines established in the NBA constitution for ownership termination.
Instead of a typical legal procedure that consumes weeks and months, the NBA deadline for a response by Sterling to the charges was only five days. The constitution provides for a decision from the owners in only 10 days. The Sterlings and their lawyers did not have much time to create obstacles and delays. Silver knew that the deadlines were important leverage for him, and when the Sterlings' lawyers asked for a delay, Silver immediately refused to consider it. The Sterlings faced an oncoming train, and there was nothing they could do to stop it.
Q: What difficulties will the commissioner and Shelly Sterling face as they discuss a settlement?
A: The most difficult issues will be the approval of any buyer, the price to be paid and the time allowed for the closing of the sale. Silver and the owners will insist that they must have final approval of the new owner. The league is not likely to consider or to approve any owners who might be interested in moving the team to, say, Seattle.
The Sterlings will insist that they must be able to obtain a market price for their franchise. It's a term of the agreement that will be negotiated in minute detail. It is the kind of thing that can produce a compromise that would work for both sides. Silver and the league will push for authority to sell to any legitimate bidder, and the Sterlings will try to sell to the highest bidder.
The league will want to close the sale as soon as possible to bring the situation to an end. The Sterlings will want to extend the process to gather more bidders. All of these issues can be negotiated. If the Sterlings agree to a settlement, it also will extinguish and release any claims they may think that they have against the NBA.
1dMarc Stein and Ramona Shelburne