On April 29, the National Basketball Association (NBA) banned Los Angeles Clippers owner Donald Sterling from the league for life and fined him $2.5 million in reaction to racist remarks he made during a phone call, which were made public. The NBA’s announcement, as reported by Scott Cacciola in the New York Times, set off a dizzying series of negotiations and legal battles that illustrate the challenges of dealing with an erratic partner.
To sue or to sell?
As Sterling considered suing the NBA to reverse the ban and fine, Rochelle Sterling, his estranged wife, and her lawyers tried to persuade him to sell the Clippers voluntarily. Mrs. Sterling convinced her husband—for the time being—that a lawsuit might strip them of the team.
The NBA Board of Governors could have voted to terminate the Sterlings’ ownership interests in the Clippers at a meeting scheduled for June 3. But, hoping to avoid a legal battle, the league provided Rochelle Sterling with a list of potential bidders for the team and encouraged her to make a deal before the meeting.
On May 13, after watching her husband give a disjointed television interview, Mrs. Sterling persuaded him to undergo neurological testing. Doctors concluded he had cognitive impairment that could lead to serious errors in judgment.
A law firm began organizing a private auction for a cash sale of the Clippers before the June 3 deadline. Quickly, star-studded groups of bidders stepped forward. One group included entertainment mogul David Geffen, Oprah Winfrey, and Oracle CEO Larry Ellison. Another included NBA player Grant Hill.
On May 25, Rochelle Sterling was awakened by a phone call from a friendly man telling her that he wanted to buy the Clippers. When he offered to fly from Seattle to meet with her that same day, she agreed, though she was confused about who this “Bomber” person was, Cacciola reports. Soon she figured out that she had been speaking to former Microsoft CEO Steve Ballmer.
That afternoon at Mrs. Sterling’s house, Ballmer described his passion for basketball. A statistician for Harvard’s team while a student there, Ballmer had sought to join the exclusive club of NBA team owners for years. When Mrs. Sterling expressed concern that he would relocate the Clippers, he assured her that a move would be a financial mistake.
From Ballmer, a full-court press
Three days later, on the bidding deadline, Rochelle Sterling received three final offers. Geffen’s group bid $1.6 billion. Hill’s group bid $1.2 billion. And Ballmer made a staggering $1.925 billion bid, which Mrs. Sterling’s legal team convinced him to nudge up to $2 billion. The offer dwarfed the next highest price paid for an NBA franchise, the $550 million sale of the Milwaukee Bucks in May 2014.
Why did Ballmer bid so high? The Clippers’ once dismal prospects are improving, and the team’s proceeds from TV rights will rise significantly in a few years. Moreover, Ballmer’s advisers convinced him that a bold bid was needed to set him apart from the pack.
Indeed, for Rochelle Sterling, the choice was clear. But just as she accepted Ballmer’s offer, her husband told her he’d changed his mind: Upset that the NBA wouldn’t revoke his lifetime ban and fine as part of the deal, he said he wouldn’t sell at any price.
The same day the impending sale to Ballmer was announced, Donald Sterling filed a $1 billion lawsuit against the NBA.
The playbook’s Plan B
To move the deal with Ballmer forward, Mrs. Sterling launched what her lawyer referred to as “Plan B”: removing Mr. Sterling as cotrustee of the Clippers because of his mental deficiencies.
On July 28, a California judge ruled that Rochelle Sterling had properly followed the stipulations in the trust the Sterlings held for the team and thus had the authority to sell the Clippers to Ballmer. The judge referenced Donald Sterling’s cognitive impairment and agreed with Rochelle Sterling’s lawyers’ argument that the team’s value would plummet if the sale to Ballmer were canceled.
The NBA officially approved the sale on August 12. Donald Sterling has vowed to contest the ruling and to continue to pursue his suit against the NBA, but his odds of blocking a sale appear slim. Like it or not, he is about to become much, much richer.
Coping with off-court antics
Seek wise counsel. As she faced the bewildering task of selling a sports franchise, Rochelle Sterling assembled a team that set up an efficient auction process and carefully followed relevant rules and laws.
Stay above the fray. It’s difficult not to react to erratic behavior, but Mrs. Sterling avoided being baited by her husband (who insulted her during the trial) and stayed focused on business.
Cultivate Plan B. Mrs. Sterling says that concern for her husband motivated her to encourage the neurological examination. But the results also proved useful when it came time for her to pursue her best alternative to a negotiated agreement with her husband.