Judge Rules Against LA Clippers' Sterling That Team Can Be Sold

Monday, 28 Jul 2014 09:08 PM

 

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The record $2 billion sale of the Los Angeles Clippers to former Microsoft Corp. Chief Executive Officer Steve Ballmer is headed toward completion without the consent of Donald Sterling, capping three months of controversy over the billionaire owner’s racist comments.

California Superior Court Judge Michael Levanas in Los Angeles today issued a tentative decision that Shelly Sterling has sole authority to sell the National Basketball Association franchise to Ballmer. She had removed her husband of 58 years from control of the family assets based on the findings of two doctors that he’s mentally incapacitated.

The ruling brings Ballmer a step closer to taking ownership of what witnesses called a “trophy asset” at a three-week trial pitting the Sterlings against each other. For the team, thrown into turmoil after the publication in April of Sterling’s remarks to a girlfriend that he didn’t want her to bring black people to Clippers games, closing the Ballmer deal may avoid the defection of sponsors, the head coach, players and season ticket holders.

A ruling allowing the sale go to forward was required by Ballmer, who was the highest of three bidders for the team in May. Shelly Sterling accepted the bid days before the NBA was about to seize the team and sell it after the league had already banned Sterling, 80, for life and fined him $2.5 million over what he said in the secretly recorded conversation with his girlfriend.

In today’s provisional decision, Levanas found that Donald Sterling was properly removed as co-trustee of the Sterling Family Trust and that Shelly Sterling can conclude the sale to Ballmer notwithstanding any appeal by her husband. The deadline for the sale to close is Aug. 15.

Evasive, Inconsistent

Donald Sterling’s trial testimony had been evasive, inconsistent and not credible, the judge said, citing Sterling’s claims that the Clippers could be worth as much as $5 billion and that he would seek $9 billion in damages from the NBA in a federal antitrust lawsuit.

The judge also cited the “blatant” misrepresentation of Dean Bonham, an evaluation expert called by Sterling’s defense, who had told the judge he had been president of the Denver Nuggets. While under cross-examination he was forced to admit he had only been president of sales and marketing. Bonham had testified the Clippers could sell for more than $2 billion if the NBA auctioned the team.

“We look forward to the transaction closing as soon as possible,” Mike Bass, a spokesman for the NBA, said in an e- mail.

The NBA has said it may proceed with a forced sale if the Ballmer transaction still isn’t completed by Sept. 15.

‘Push On’

“We have to push on,” Donald Sterling’s lawyer, Bobby Samini, said his client told him in response to today’s ruling. Sterling sees the decision as “one stage in a long war,” Samini said. He said that after the judge issues a final written decision, which could be as soon as 11 days, Donald Sterling will appeal.

Sterling will also continue to fight the sale in a separate lawsuit he filed July 22 in California state court, challenging his wife’s authority to sell the team on the grounds that he’s the sole shareholder of the corporation that owns the team, Samini said.

“This is only half the battle,” the lawyer told reporters outside the courthouse.

Shelly Sterling, who attended today’s court proceeding, said after the judge issued the decision that her husband will be “very happy” with the ruling and that she absolutely hoped he would at some point attend Clippers games with her.

Tentative Ruling

The tentative ruling relies on a probate court provision that a judge can let his decision go into effect even if the other side appeals it. Adam Streisand, a lawyer for Ballmer, called it “extraordinary” and “precedent-setting.”

The price Ballmer agreed to pay for the Clippers shattered the previous record price for an NBA team of $550 million, paid in April for the Milwaukee Bucks.

Lawyers for Sterling argued that letting the sale go forward before a challenge to Levanas’s ruling has been reviewed by a higher court would make an appeal “hollow.”

Max Blecher, one of Sterling’s attorneys, asked Levanas today not to confirm Shelly Sterling’s authority to sell the team, saying she “feathered her nest in a sweetheart deal” with Ballmer that provides her with $200 million for a charitable foundation as well as perks at Clippers games.

Mental Health

Donald Sterling has argued his wife tricked him into taking two mental health exams in May without telling him they would be used to remove him as a co-trustee. Shelly Sterling knew her husband would never agree to sell the team and plotted with the doctors and her lawyers to strip him of control of the team, Blecher said.

“This is a man who never sold anything in his life,” Blecher said in his closing statement. “She was his wife -- she had a duty to be absolutely candid with him.”

The couple have been living separately for the past year, according to court filings.

Dick Parsons, the Clippers’ interim CEO, testified last week that if Donald Sterling remains as owner, the team’s biggest sponsors, including Kia Motors Corp., won’t come back and head coach Doc Rivers will leave.

Antitrust Suit

Sterling said at trial that he would never sell the Clippers, a team he bought in 1981 for $12 million, and that he will sue the NBA for as long as he lives. He filed a $1 billion antitrust suit against the league in federal court after his wife accepted Ballmer’s bid.

Sterling could face a $650 million capital-gains tax bill if the sale goes through, he said in a court filing.

Streisand said in his closing statement that Sterling had triggered a “death spiral” for the NBA franchise and that he was holding the Clippers and their fans hostage.

“Donald Sterling is on a mission to destroy the trust’s assets,” Streisand said.

The judge in his tentative decision agreed with Ballmer and Shelly Sterling that there was a significant risk that, if the NBA were to sell the team, it wouldn’t fetch the $2 billion that Ballmer bid because of the uncertainty created by Sterling’s lawsuits against the NBA.

“Uncertainty is the enemy of value,” the judge said, citing the testimony of Anwar Zakkour, a Bank of America Corp. investment banker who advised the Sterling Family Trust on the Clippers sale.

The case is In the Matter of the Sterling Family Trust, BP152858, California Superior Court, Los Angeles County (Los Angeles).

The probate case is In the Matter of the Sterling Family Trust, BP152858, California Superior Court, Los Angeles County (Los Angeles). The case against Shelly Sterling is Sterling v. Sterling, BC552470, Los Angeles County Superior Court.


© Copyright 2014 Bloomberg News. All rights reserved.

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