The 10 Most Significant NBA Legal Controversies of the 2010s
The 2010s were an exciting decade in the NBA, but the league wasn't clear of some of the most notable legal controversies in sports.
The 2010s were an exciting decade for the NBA, but the league and its players encountered major legal controversies along the way. Sports Illustrated legal analyst and writer Michael McCann breaks down his list of the 10 most significant NBA legal controversies of the 2010s.
10. The sexual assault trial of Derrick Rose
The 2010s were a turbulent period for Derrick Rose, the No. 1 overall pick in the 2008 NBA draft and the youngest player to win the league’s MVP award. The former Memphis star began the decade by starring for the Chicago Bulls. He will end it as a solid sixth man for the Detroit Pistons.
In between were rocky times.
In 2012, Rose tore the ACL in his left knee, an injury that would cost him a season and altered the way he would play. Later in the decade Rose went AWOL while on the New York Knicks. He also abruptly left the Cleveland Cavaliers for a couple of weeks in order to ponder his future.
The most serious matter for Rose was an accusation that he and two of his associates broke into the Los Angeles apartment of a woman whom he had previously dated and then took turns raping her. The alleged incident occurred in August 2013. The Los Angeles Police Department investigated, interviewed witnesses and compiled evidence. Rose wasn’t charged and the applicable statute of limitations expired this past August.
The accuser, who insisted that she was intoxicated and thus could not have offered consent, sued Rose for $21.5 million. Many athletes in that situation would have negotiated an out-of-court settlement. Rose certainly had reasons to avoid a high-profile trial. Most significantly, he could have been found liable, which would have meant that jurors believed it was more likely than not that Rose had committed sexual assault. A court would have then ordered him to pay millions of dollars, perhaps tens of millions of dollars. The NBA would have been more likely to suspend him. too. Meanwhile, Adidas, who had signed Rose to a
14-year, $190 million endorsement deal, would have become more inclined to invoke that deal’s morals clause and void the contract.Despite those risks, Rose went to trial. He and his accuser faced off in a Los Angeles federal courthouse in October 2016. Over the course of nine days, Rose’s attorneys aggressively challenged the accuser’s recollection and intentions. The accuser acknowledged on the witness stand that some of her alleged facts were exaggerations or misstatements. A jury of six women and two men held for Rose. The U.S. Court of Appeals for the Ninth Circuit affirmed the verdict on appeal.
Timing and context matter in public controversies. Rose’s trial occurred about a year before the #metoo movement would gain substantial traction in the United States. Had the trial been scheduled for a later date, the strategy for Rose and his attorneys probably would have been different. His advisors and sponsors would have more emphatically urged him to avoid a trial and reach a settlement with his accuser. Rose’s inexplicable and offensive responses during the litigation—such as not knowing the meaning of the word “consent” and describing his intentions on the evening in question with the statement “I said we men, you can assume”—would have also been much more damning.
9. Police incidents with Thabo Sefolosha and Sterling Brown
During the 2010s, two NBA players alleged that they were victims of racially motivated police brutality.
Thabo Sefolosha suffered a broken fibula and ligament damage to his ankle in an altercation outside a Manhattan nightclub in 2015. Allegedly, Sefolosha called a 5’6 police officer a “midget” and officers jumped on and beat him. Pero Antić was with Sefolosha at the time. Sefolosha, who played for the Atlanta Hawks and now plays for the Houston Rockets, was found not guilty of resisting arrest and obstructing justice. The City of New York later agreed to pay him $4 million in an out-of-court settlement, though the city insisted that the settlement was not an admission of any wrongdoing.
In 2018, Milwaukee Bucks guard Sterling Brown suffered puncture wounds in his back and facial cuts and bruises after an incident with Milwaukee police officers. Brown had illegally parking his car across two handicap spaces outside of a Walmart. As Brown left the Walmart, one officer, later joined by seven other officers, forced him to the ground and used a Taser on him. The officers also directed racially insensitive comments at Brown, including one asking, “What is wrong with these people, man?” One officer later posted racist memes about Brown and black NBA players on social media. Brown is currently suing the city.
The Sefolosha and Brown incidents occurred during a decade when there were a number of high-profile killings of unarmed black men. These men died during questionable encounters with police and their deaths sparked public protests. In July 2014, Eric Garner died as a result of a chokehold during an arrest in Staten Island. A month later, Michael Brown was shot at least six times—twice in the head—by an officer in Ferguson, Missouri. In April 2015, Freddie Gray suffered fatal injuries to his spinal cord while in the custody of Baltimore police. These killings and subsequent protests brought greater attention towards the Black Lives Matters movement and also propelled Colin Kaepernick to kneel during the playing of the national anthem.
While neither Sefolosha nor Brown suffered permanent injuries and while both have continued in their NBA careers, the players’ incidents occurred during a decade of higher tensions related to law enforcement’s treatment of minorities.
8. The in-season tournament
By most metrics, the NBA is doing extremely well. The average player salary ($7.7 million, per Basketball Reference) and median player salary ($3.5 million) are the highest in league history. NBA revenues are also at their highest point, with the league netting about $8 million in revenue according to the most recent annual figure (2018). Meanwhile, the average NBA franchise is worth about $1.9 billion, also the highest in league history.
Despite these indicia of success, there are concerns for the league. TV ratings for nationally aired games on ESPN and TNT were down 16% during the first month of the 2019-20 season (though mitigating that decline is the fact that many of those games were missing injured stars). The league also doesn’t want to myopically rest on its laurels; what works in the 2010s might not work in the 2020s and beyond.
To that end, commissioner Adam Silver is interested in making a major change to the NBA’s calendar: reducing the regular season from 82 games to 78 games and adding an in-season tournament that would impact playoff seeding. The plan, which will be reviewed by the league’s Board of Governors in April, would go into effect on a trial basis during the 2021-20 season. As the plan is currently understood, players on the tournament’s winning team would split $15 million and coaches would split $1.5 million. The proposed in-season tournament is inspired by the success of this format in other leagues, including the Premier League.
The in-season tournament concept has elicited a wide range of opinions. San Antonio Spurs coach Gregg Popovich signaled support for the tournament in the context of reducing the total number of games. Dallas Mavericks owner Mark Cuban, in contrast, ridicules the tournament idea as a gimmick. He contends that if the winning team was awarded an extra first-round pick, some teams would tank due to adverse salary cap considerations of adding another drafted player.
If the Board of Governors approves the plan, the National Basketball Players’ Association would also need to provide consent in order for it to happen. As detailed on The Crossover, the plan could necessitate changes to the CBA since players’ wages, hours and other working conditions are implicated.
It stands to reason that many players would welcome the chance to earn an additional $1 million, along with the satisfaction of winning a tournament. From that lens, many players would be incentivized to take the tournament seriously. Conversely, the prospect of a team netting an additional first round pick might deter players to perform well since that pick could take the job of a veteran player.
The current CBA between the NBA and NPBA runs through the 2023-24 season, with a mutual opt-out clause after the 2022-23 season. If the NBA declines to pursue these calendar changes in 2021 or 22, there’s a good chance the plan could re-surface in labor discussions with the union.
7. Rise of the G League as a true developmental league that could compete with NCAA
For much of its 19-year existence, the G League (previously called the “NBDL” and “NBA D-League”) was mainly populated by banished draft picks and players not good enough for higher paying jobs in Europe—let alone NBA roster spots. Many NBA teams lacked affiliations with NBDL teams, games were seldom broadcast on television, and national media largely ignored what took place. Few players would seriously entertain leaving college early, or skipping college altogether, to play in this league.
Those days are over. The NBA has invested considerable resources into transforming the G League into an attractive league for players and fans. NBA teams now frequently use the G League to develop talented players. These players are mentored by coaches who utilize NBA playbooks and who coordinate with the coaching staff of their affiliated NBA team. Of the 30 NBA franchises, 28 have G League affiliate teams, almost all of which are owned by their parent NBA team. Games are also aired nationally on Facebook Live, NBA TV, ESPN+ ESPNU and Twitch. The G League is also international, with franchises in the U.S., Canada and, beginning in 2020, Mexico. The stigma of a first-round pick playing in the G League has largely eroded.
That point is bolstered by improved compensation for players. NBA teams can employ up to two players on “two-way” contracts. A two-way player can spend as many as 45 days with their NBA team and the remainder with their G League team. Two-way players can earn as much as $385,000, depending on the number of days they spend in the NBA.
As to players employed directly by G League teams, most earn the standard G League salary of $35,000 for the five-month season. They also receive health care benefits, in-season housing, travel day per diem, continuing education opportunities and life skills courses. A small number of G League players are also eligible for “select contracts.” These contracts pay $125,000 and are reserved for elite players who are too young to meet the NBA’s eligibility rule of being at least 19 years old and having at least one NBA season elapse since they finished high school. The NBPA is also interested in helping G League players unionize, a move that would amplify the link between NBA players and their G League brethren.
The NBA is careful not to describe the G League as a rival to NCAA men’s basketball, but they are increasingly competing in the same space. As the NCAA struggles to maintain an antiquated system of amateurism—which denies players pay for their labor or for the commercial use of their name, image and likeness—some young players might gravitate towards playing in the G League over spending a year or two in college.
While the G League will never be the NBA, it has morphed into a much more appealing home for professional basketball. Pay and workplace benefits are improving, and players are seen on national TV and can sign endorsements. The G League also provides its players with useful education, such as career planning and financial literacy. Players interested in pursuing a college education can also go back to school later in life. Alternatively, they can take college courses online or during the summer during their basketball careers—in the United States, college isn’t a “one-shot” deal. Many NBA executives also prefer to evaluate players in pro settings than in college.
6. Embracing sports betting after the U.S. Supreme Court rules against the leagues
The 2010s began and ended on very different notes for the NBA’s position on sports betting.
In 2012, the NBA, along with the NFL, NHL, MLB, NCAA and the U.S. Justice Department brought federal litigation to stop the State of New Jersey from legalizing sports betting. They argued that New Jersey’s plan violated the Professional and Amateur Sports Protection Act (PASPA)—a federal law that prohibited states from authorizing sports betting but that also exempted Nevada, Delaware, Oregon and Montana because those states had adopted sports betting practices by the time of PASPA’s enactment in 1992.
Over the years, the leagues have opposed sports betting on a number of grounds. A key reason was risk to the integrity of games if players, coaches or referees were bribed. The NBA was especially sensitive to that concern due to the Tim Donaghy scandal in the mid 2000s.
The leagues defeated New Jersey at the federal district and federal circuit court of appeals levels, but New Jersey—and former Governor Chris Christie—got the last laugh. In the 2018 U.S. Supreme Court decision Murphy v. NCAA, the Court held that PASPA was unconstitutional. PASPA, Justice Samuel Alito reasoned in his opinion, had unlawfully commandeered New Jersey to ban sports betting against its own interests. The decision enabled all 50 states to choose to legalize sports betting. Sports betting is currently available in 14 states, and a handful of other states will offer it over the next year.
Silver played a unique role in the sports betting legal debate. Although his league was a party to a lawsuit designed to stop New Jersey—and, by implication, other states—from legalizing sports betting, Silver authored an influential op-ed for The New York Times in 2014 titled “Legalize and Regulate Sports Betting.” He argued that the federal government should allow states to authorize sports betting so long as states adhere to strict compliance policies. Those policies would include minimum-age verification measures and methods to identify and exclude people with gambling problems. The op-ed made it clear that Silver and his leadership team viewed sports betting as a potential positive, particularly if every state agreed to play by the same policies. The NBA, like other businesses, would prefer to adapt to one set of rules across the country rather than comporting to potentially 50 different sets of rules.
Fast-forward to the close of 2019. The NBA has signed a multi-year partnership with the Las Vegas-based MGM Resorts to make it the official gaming partner of the NBA and WNBA. The league has also signed betting data partnerships with Sportradar and Genius Sports. The same league that eight years earlier waged a federal litigation against the legalization of sports betting now embraces this type of wagering. By signing partnerships, the NBA has also ensured that it generates revenue for owners and players.
To that point, one source of frustration for leagues with sports betting is that others—be they gaming operators and casinos—can “free ride” by making money off games in which they expended no resources to produce. The NBA has demanded that it receive “sports betting right and integrity fees” from operators and sports books. These fees, which no state has yet to approve, would be shared with players and reflect both the derivative quality of sports betting (the NBA and its players provide the games upon which bets are made) and the increased costs for the NBA to monitor games and ensure that there aren’t illegal bribes to players, coaches and referees.
5. Adept and non-litigious handling of player and team conduct matters
During the 2010s, the NFL repeatedly attracted negative headlines and even multi-year federal litigations over commissioner Roger Goodell disciplining players for alleged misconduct.
The opposite was true in the NBA.
Silver, who is an attorney and is aided by the league’s highly regarded general counsel, Rick Buchanan, adeptly handled conduct controversies at every turn. There was no NBA equivalent of Deflategate, where the NFL postulated a theory of misconduct that neutral scientists debunked, nor was there inconsistency in how players were punished for similar acts or an instance of the NBA violating its own collective bargaining agreement by impermissibly suspending a player twice for the same act.
There were NBA player disciplinary matters, including NBA players found to have used drugs of abuse, performance-enhancing drugs and diuretics and even one player who unwisely consumed a THC-infused gummy. There were also alleged workplace misconduct matters involving the Dallas Mavericks and Luke Walton. Each situation was handled in a predictable and consistent way.
The NBA and NBPA also adopted a carefully configured joint policy on domestic violence, sexual assault and child abuse. The policy distinguishes these types of offenses and ascribes sensible rules to address them. A key rule is that a league can place an accused player on paid leave while the league investigates. The policy was useful to the Boston Celtics in the aftermath of domestic violence charges brought against Jabari Bird. Instead of the Celtics having to cut Bird and pay him his salary (which would have been a peculiar reward), the policy helped the Celtics keep Bird’s contract on the books until it could be traded while Bird remained away from the team.
It was unfortunate for the NBA that it had not negotiated a similar domestic violence policy for its partner league, the WNBA. This was apparent in 2019 when Los Angeles Sparks guard Riquna Williams and Seattle Storm forward Natasha Howard were accused of domestic violence.
4. The Tampering Epidemic and Salary Cap Circumvention Concerns
The NBA has long banned tampering on account of it undermining fair competition. Tampering refers to an owner, general manager, coach, scout, referee or player attempting to persuade, entice or induce a person who is under contract with another team to join the tampering team. The ban is contained in Articles 35 and 35A of the league constitution.
In theory, a team can face harsh punishments for tampering. Loss of draft picks, massive fines and long suspensions for offending employees are all possible. In reality, such punishments are rarely applied. The most significant punishment (of sorts) for tampering occurred in 1995, when the Miami Heat averted league discipline by agreeing to send a first-round pick and $1 million to the New York Knicks in exchange for the right to hire Pat Riley, whom the Heat had illicitly pursued while he still coached the Knicks.
During the 2010s, tampering penalties have been very modest. The NBA fined the Los Angeles Lakers for Magic Johnson’s tampering and the Los Angeles Clippers for Doc Rivers’s tampering. Without draft pick penalties, and with teams often owned by billionaires, league efforts to curb tampering through imposing five- or six-figure fines are likely ineffectual and not deterring. This was particularly evident in the summer of 2019, when teams openly defied NBA tampering rules by contacting soon-to-be free agents while those players were still under contract to other teams.
A related and worse problem is salary cap circumvention. It occurs when teams pay players or their representatives outside of players’ NBA contracts. Like tampering, salary cap circumvention is prohibited by league rules. Article XIII of the CBA contemplates severe penalties for circumvention, including forfeiture of draft picks and voidance of player contracts. In 2000, the Minnesota Twins were docked five first round picks for arranging a scheme whereby Joe Smith agreed to take less money in the short-term in exchange for the Timberwolves’ pledge to later sign him to a very lucrative, above-market-value contract.
Circumvention is particularly problematic in a league with max salaries. If teams can’t outbid each other in recruiting superstar free agents, circumvention could enable a team to “sweeten the pot” in ways that evade the salary cap. As detailed by Sam Amick in The Athletic, there are allegations that Kawhi Leonard’s uncle and advisor, Dennis Robertson, requested from the Lakers that they engage in circumvention as a condition for Leonard to sign.
In September, the NBA announced new compliance measures to combat these and related threats to fair play. The measures include significantly higher fines for tampering and unauthorized agreements, as well as audits and record retention requirements. It remains to be seen if these measures will succeed in their purpose. What is clear is that the next team caught tampering or circumventing the cap will likely be made an example of by Silver. I expect the penalties to be draconian, including forfeiture of multiple first round picks. Woe is that team.
3. The Quandary in China
The expression “hindsight is 20/20” aptly captures the NBA’s problematic situation in China.
During the 2010s, the NBA made substantial investments—both financial and reputational—in building its brand in China. The league’s reasoning was sound. By 2018, the NBA was the most popular sports league in China. There are more people in China who watch NBA programming than there are people who reside in the United States. China’s market is obviously appealing. With 1.43 billion people, China is the most populated country on Earth. It also has the world’s second largest economy. One might argue that it would have been malpractice on the part of Silver to not pursue a foothold in China. After all, the NBA and its teams are private, for-profit entities, with fiduciary duties to investors. They aren’t governmental agencies or democracy-promoting organizations.
The NBA’s interest in China should also be viewed in context. It is hardly unique for a U.S. company to pursue business in China. Indeed, for decades, American companies have conducted substantial business in China. Boeing, Microsoft, General Motors, Apple and Nike are among many Fortune 500 companies with major undertakings there. This is true in spite of the China’s communist government as well as its questionable, many would say dubious, record on human rights and the lack of civil liberties for its citizens. It was thus not a surprise in the business world for the NBA to sign a $1.5 billion contract with Chinese tech giant Tencent nor was it a surprise for the NBA to sign lucrative deals with the CCTV Sports Channel and the smartphone company Vivo. These weren’t controversial moves until Oct. 4, 2019.
That was the date when Houston Rockets general manager Daryl Morey tweeted “Fight for freedom, stand with Hong Kong,” with an accompanying image of a logo associated with protesters in Hong Kong. The tweet contained no obscenities and merely advocated a political view. Considering the hostility often seen in political tweets, Morey’s tweet was mild.
It nonetheless sparked intense anger in China.
Morey had voiced a position adverse to the Chinese government on a very sensitive topic: protests in Hong Kong over the Fugitive Offenders amendment, a bill that would permit Hong Kong law enforcement to detain persons accused of crimes in China (and in other countries with whom Hong Kong lacks an extradition treaty). More broadly, the protests—which are still occurring—connect to the controversial “one country, two systems” model in Hong Kong, a territory that was transferred to China in 1997 pursuant to a 99-year lease agreement between China and the United Kingdom.
The fallout of the controversy quickly grew. Rockets owner Tilman Fertitta admonished Morey on Twitter. The NBA issued a statement in support of Morey’s right to voice a position, but that statement was altered after being translated first into Mandarin and then back into English. Silver made several attempts to stress that he found nothing wrong with Morey offering a viewpoint. The commissioner went so far as to claim that the Chinese government had asked him to fire Morey (even if Silver wanted to do that, he couldn’t since Morey works for the Rockets, not the NBA).
Several players added fuel to the fire. Rockets guard James Harden seemed to undermine Morey by telling media, “We apologize. You know, we love China. We love playing there.” Lakers forward LeBron James blasted Morey, saying he “wasn’t educated” about Hong Kong politics and that Morey voicing a controversial viewpoint could cause others to suffer “financially, physically, emotionally [and] spiritually.” Some NBA players had clear financial stakes in the Chinese government favorably viewing the NBA. This is true of Golden State Warriors forward Klay Thompson and Celtics forward Gordon Hayward. Both have signed lucrative endorsement deals with Chinese sneaker companies.
Meanwhile, back in the U.S., many Republican and Democratic politicians rallied behind Morey. They applauded him for defending democracy. In contrast, the NBA and James were often depicted as “selling out” to communists and valuing their own money over Western ideals. Yet the NBA was also sharply criticized in China for supporting Morey. China Central Television (CCTV), the state television broadcaster for mainland China, ominously warned Silver that he would “receive retribution sooner or later.”
It was as if the NBA could do no right in the U.S. or China. The timing couldn’t have been worse, either. The league was in the midst of a promotional trip to Asia. China took advantage of that timing to make a point. In addition to suspending contractual relations, China refused to broadcast NBA preseason games played in China.
If the NBA hoped the dispute would dissipate with the passage of time and with a contemporary news cycle that quickly changes the topic, the league is probably pleased to see that the controversy is no longer in the headlines. Still, the NBA has likely become more sensitive to the fragility of doing business in a country where dissension isn’t allowed. This is particularly a challenge when any one of hundreds of people connected to the NBA—be they players, former players, coaches or general managers—could, at any time, say something that reignites the controversy.
2. Contentious Labor Crisis of 2011 spawns a decade of relative harmony and collaboration
Over the course of 161 days in 2011, the NBA and NBPA waged an intense and often embittered labor war. It led to a loss of regular season games, a major re-division of NBA wealth and labor stability for the next decade.
With the NBA and NBPA’s CBA set to expire on June 30, 2011, the league had demanded a steep reduction in the players’ percentage of basketball related income (BRI) in a new CBA. BRI includes revenue generated by NBA broadcasts, intellectual property (including video games), apparel, arena signage and other physical and digital properties. A higher BRI essentially means a higher salary cap, which in turn means higher player salaries.
Under the expiring CBA, players had received 57% of BRI. The league demanded this percentage be lowered to 47%. In dollars this would have been a major hit to players: BRI was $3.8 billion in 2010-11; the difference between 57% and 47% was nearly $400 million.
To justify this severe demand, the league maintained that 22 of its 30 teams were losing money. The NBA’s economic model, as the league and owners saw it, wasn’t working and would ultimately cost the players money. The NBPA disputed NBA’s math and accounting and refused to accept such a steep reduction in its share of revenue. The NBA then “locked out” the players, meaning the owners refused to allow the players to report for work. Locked out players aren’t paid.
For months, the two sides would remain far apart in negotiations. The situation became bleaker in November when the NBPA aggressively shifted its legal strategy. The NBPA issued a disclaimer of interest, which effectively ended the NBPA’s representation of NBA players.
The maneuver was designed to facilitate the filing of player antitrust lawsuits against the NBA. Various NBA rules that constrain competition, including the salary cap and maximum salaries, are exempt from antitrust scrutiny because they are collectively bargained with the NPBA. The NBPA reasoned that since the CBA had expired and since the NBPA no longer represented players, individual players could sue the NBA over rules that were no longer exempt. Soon thereafter players filed federal antitrust lawsuits in California and Minnesota. If those lawsuits had gone to trial months or years later and if the players had won, a court would have ordered NBA owners to pay treble (triple) damages of tens or even hundreds of millions of dollars.
NBA commissioner David Stern dismissed these tactics as reflecting bad faith on the part of the players and their union. Stern also warned the filing of two lawsuits marked the start of “the nuclear winter of the NBA.” Complicating matters further, the NBA filed an unfair labor practice charge with the National Labor Relations Board against the NBPA. The league maintained that the disclaimer of interest was illegitimate since players would immediately reclaim the NBPA’s representation once the labor crisis had ended.
The situation worsened as NBA owners were accused of racism. Jeffrey Kessler, the lead attorney for the players, insisted that owners (most of whom were white) were treating players like “plantation workers.” Sensing that the labor dispute would lead to a lost season, several players, including Deron Williams and Kenyon Martin, signed with teams overseas.
Cooler heads would eventually prevail, though at a steep financial cost. On Nov. 26, and right before a deadline to reach a deal or the 2011-12 season would be cancelled, the two sides agreed on a new CBA. By that point, the 2011-12 regular season schedule had to be reduced to 66 games. According to the U.S. Bureau of Labor Statistics, owners and players each forfeited about $400 million in would-be revenue due to the loss of games.
The deal clearly favored the owners. The new division of BRI (essentially) called for a 50%-50% split. While dividing revenue evenly sounds fair, and perhaps is fair, remember that players had previously received 57% of BRI. They were giving up hundreds of millions of dollars in total money.
The CBA also attempted to help small market teams keep their star players. Specifically, teams that used the so called “Larry Bird exception,” which allows teams to sign their own free agents for more money than other teams, could offer “max” players higher annual increases (7.5% per year) than other teams (4.5%). In other words, a team with a superstar gained the ability to offer that superstar millions of dollars more than other franchises. As it has turned out, however, many free agent stars have declined more money to sign with new teams.
One highlight of the resolution to the 2011 labor crisis is that the league and NBPA became more collaborative. They avoided a potential second labor crisis in 2017 by negotiating a new CBA. Owners and players have also done extremely well financially in the 2010s. As detailed above, players are making more money than ever. The average NBA player salary far exceeds average player salaries in MLB, NFL and NHL. NBA franchise values have never been higher. Much of the revenue reflects nine-year TV deals signed by the NBA in 2014 with ESPN and TNT. These deals add $24 billion to the BRI pot.
1. Adam Silver outmaneuvers and ousts Donald Sterling (with an assist from Shelly Sterling)
It didn’t take very long for the NBA’s new commissioner in 2014 to make his mark. Adam Silver succeeded where his predecessor, David Stern, failed: removing Donald Sterling from the league.
Sterling was an insubordinate figure long before his infamously racist tirade. An attorney and real estate developer, Sterling had bailed out the NBA in 1981 by purchasing the San Diego Clippers for $12.5 million. The team was losing on the court and losing money off the court at a time when the NBA was an afterthought to many sports fans. This was an era before cable TV and ESPN took off and where NBA Finals games were shown on tape delay. Teams relied heavily on gate receipts for revenue. There was talk of league contraction, meaning franchises could have been terminated.
Sterling quickly became a thorn in the side of the NBA. He pledged to keep the Clippers in San Diego, but then, over league objections, moved the franchise to Los Angeles, which already had the Lakers. This prompted the NBA to sue Sterling for $25 million. Sterling countersued the NBA for $120 million. They settled. Given that the Clippers still play in Los Angeles it’s no mystery as to who won that settlement.
Sterling also managed his team in objectionable, if not illegal, ways. He refused to pay bills and bizarrely contemplated having home games played without a live audience in order to avoid having to pay for concession workers and security. Sterling also openly talked about tanking in hopes of landing the top pick in the 1982 NBA Draft. Years later he allegedly instructed scorekeepers to deflate players’ statistics so that the players could be paid less.
There were also sexual harassment lawsuits brought against Sterling, who along with his wife, Shelly Sterling, was sued by the U.S. Justice Department for discriminating on the basis of race and national origin in rental properties (the lawsuit led to Donald and Shelly Sterling paying a multi-million dollar fine). Former general manager Elgin Baylor also sued Donald Sterling for race discrimination, claiming that Sterling referred to his players as “poor black boys.”
Through it all, the NBA acted like a curious onlooker. The league took almost no action against Sterling, who was 80 years old in 2014. He clearly wasn’t afraid of David Stern or Sterling’s predecessor, Larry O’Brien. By all accounts, Sterling felt emboldened to do whatever he wanted.
That changed in April 2014, two months after Silver took over as commissioner. TMZ published a recording of an argument between Sterling and his girlfriend, V. Stiviano. Despite being married to Shelly Sterling for nearly 60 years by that point, Donald Sterling had a girlfriend. The recording included Sterling’s hostile reaction to seeing Stiviano in a photo with Magic Johnson, a longtime nemesis of Sterling. Sterling lost his temper and proceeded to engage in a shockingly racist rant. He demanded to know why Stiviano would “walk publicly with black people” and “take pictures with minorities.” He also ordered her to not accompany any African Americans to games.
The fallout was massive. While traveling in Malaysia, President Barack Obama addressed the controversy. He linked it to the “vestiges of discrimination” and “the legacy of race and slavery.” NBA players also expressed outrage. LeBron James and Stephen Curry threatened to organize a players’ boycott and sit out playoff games unless the NBA removed Sterling. Major sponsors to the league and Clippers—including CarMax, Virgin America and Mercedes-Benz—began the process of seeking to terminate those deals.
There was obvious pressure for Silver to “do something.” But the situation wasn’t so simple. Silver knew that Sterling, a fellow attorney, wouldn’t hesitate to launch lawsuits against the league if Silver took any steps that could justify the filing of litigation. Silver also had to mindful of precedent. Whatever he did to Sterling would be precedent for other owners, some of whom may have also made insensitive remarks in private.
There were also serious difficulties with the evidence. California is a “two-party” state for purposes of recording others. This means everyone on a recording must consent or the recording is illegal. In fact, it’s a crime in a California to secretly record another person in many situations. The NBA also initially didn’t know how the recording was made, whether it was authentic and untampered, and how it landed with TMZ. As a private business, the NBA couldn’t compel Stiviano or TMZ to share any information—a league has no subpoena power.
Silver was undeterred. Aided by league general counsel Rick Buchanan, Silver quickly hatched a plan that boxed Sterling into a corner from which he could never escape. Among other steps, the NBA retained former Assistant U.S. Attorney David Anders to interview all relevant witnesses. This was important since witness statements provided a supplemental form of evidence to the recording (which, as noted above, may have been illegally produced). The NBA also reviewed all the key evidence and authenticated it.
Silver then stunned the world with his punishment of an owner who had operated without restraint for three decades.
“I am banning Mr. Silver,” Silver announced from a hotel conference room in Manhattan, “for life from any association with the Clippers organization or the NBA.”
Sterling, whom the NBA also fined $2.5 million, was banned from any owners’ meetings. He was banned from any league events. He was even banned from attending games played by the team he owned.
Silver then declared that he would recommend the Board of Governors terminate Sterling’s ownership in the Clippers.
Silver had gone to a place that no other commissioner had gone before. And he did it while only being on the job for two months.
The NBA’s legal argument to remove Sterling was found in Article 13(d) of the league constitution. It contemplates the possibility that an owner can be ousted if he or she violated a duty that caused the NBA to suffer financial harm. Sterling, like other owners, had a fiduciary duty to avoid advocacy of “positions that have a materially adverse effect on the league.” Here, Sterling’s racist comments brought about a potential boycott of NBA games and loss of corporate sponsorships. From that lens, Sterling’s racist behavior in 2014 was different from his previous bigotry since his prior acts didn’t threaten the NBA with a loss of revenue.
Would the owners have voted Sterling out? Under league rules, a super majority—22 of the 29 other owners—had to vote in favor of removal. Some owners privately worried about a slippery slope where if Sterling is ousted for comments then other owners could face the same fate. There was also concern that Sterling, who had been with the NBA for more than three decades and had attended numerous owners’ meetings, “knew where the bodies were buried” so-to-speak in terms of possible scandals involving other owners. They also knew he wouldn’t hesitate to share what he knew with media.
The vote never took place. Throughout this section I’ve referred to Donald Sterling as the Clippers’ owner. That is technically incorrect. The Sterling Family Trust, which he essentially controlled, owned the team. This became a massively important distinction. There were two trustees: Donald and Shelly. If either was deemed incapacitated by a court, then the other would gain complete authority.
Shelly Sterling then orchestrated a plot that culminated in the trust selling the team to former Microsoft CEO Steve Ballmer for $2 billion. Without her husband’s knowledge, let alone his consent, Shelly Sterling had a neurologist and psychiatrist evaluate her husband (under what Donald Sterling’s attorneys would later argue were false pretenses). They concluded that Donald Sterling’s reasoning and cognitive skills no longer permitted him to serve as a trustee. Shelly then went to court to have her husband declared incapacitated. She won.
Donald Sterling would file several lawsuits, including against Silver, the NBA and his wife, but none went anywhere. He lost his team and remains banished from the NBA. Of course, Donald Sterling was well-compensated for the loss: he and Shelly Sterling obtained $1.34 billion, post-tax, in sale proceeds.
But it was a decisive win for the new commissioner and one that engendered lasting trust from NBA players.
Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.
