Law Updates

Interesting legal issues arising from Donald Sterling’s strife with the NBA
By: Ryan Perry

A recent article by Michael McCann identified the various legal issues involved in the current situation between the National Basketball Association and embattled Los Angeles Clippers owner Donald Sterling. As the current standoff between the NBA and Sterling continues over whether he will pay a $2.5 million fine assessed to him by NBA Commissioner Adam Silver, these legal issues will undoubtedly impact any litigation that will likely arise from this situation in the months and years to come.

For those not initiated into this hot button issue which has overshadowed the start of the NBA playoffs, on April 25, 2014, released a taped conversation between Sterling and his then girlfriend, V. Stiviano in which Sterling made various racist remarks. In light of the comments that spread like wildfire over the Internet, NBA Commissioner Silver issued Sterling a lifetime ban from the NBA along with the maximum allowable fine of $2.5 million. Further, Silver has scheduled a June 3, 2014 hearing after which NBA owners could vote to oust Sterling as owner of the Clippers.

As with any legal dispute, it is most important to first identify the rules that will control the discussion. Initially, it should be noted that the First Amendment is not implicated in this situation as the NBA is not a state actor and the government is not enforcing any civil or criminal sanctions against Sterling. As a voluntary owner of an NBA franchise, Sterling is bound by the league’s constitution and by-laws, which set forth the rules for not only his actions, but also those of NBA Commissioner Silver and the league as a whole. Interestingly, the by-laws set forth fact-finding rules that are less stringent than those that apply in a court of law. For instance, article 24(m) states that with all actions, hearings, or investigations conducted by the Commissioner, the rules of evidence shall not apply, and all relevant and material evidence can by considered.

Furthermore, article 24 of the NBA Constitution further gives Commissioner Silver the authority to punish Sterling based on the impact Sterling’s statements have on the league. The $2.5 million fine and the lifetime suspension issued by Silver is the highest fine and punishment Silver could have issued under the NBA rules. However, what is more important and less clear-cut is whether the NBA owners will be able to terminate Sterling’s ownership of the team.

Article 13 of the NBA Constitution permits the NBA Board of Governors to terminate the membership of any Owner under certain conditions, but only by a vote of three fourths (3/4) of all the owners. A quick reading of the conditions cited by article 13 shows they focus mainly on financial matters, such as an owner unable to meet payroll or an owner implicated in financial misgivings. However, article 13(d) allows termination of membership if an owner fails to fulfill his contractual obligations to the Association in such a way as to affect the Association or its Members adversely. Although this section is vague, it could provide the league a sufficient basis to terminate Sterling’s ownership.

According to the May 19, 2014 article by Michael McCann, the league has charged that Sterling engaged “in conduct that has damaged and continues to damage the NBA.” McCann’s article further states that the league has given Sterling until May 27, 2014 to respond to the charge. Based on an overview of the entire situation, it would appear that this charge is supported by the simple fact that many of the Clipper’s sponsors dropped deals with the team shortly after Sterling’s statements went public. Further, the outcry against Sterling by NBA players and the public alike (including President Obama) seems to solidify the league’s argument against Sterling. Although Sterling has yet to respond to the charge, McCann believes that any response by Sterling will likely attempt to somehow explain away the statements, minimize their effects or simply argue a failure of due process.

Since this is a situation of first impression in the NBA, the actions the Board of Governors takes against Sterling will naturally set precedent for how the league deals with any acts of impropriety by owners in the future. Although it is extremely unlikely that any of the owners will voice support for Sterling’s actions, they will undoubtedly be vigilantly examining the reasoning behind any actions it takes to avoid succumbing to a potential “slippery slope” in the future.

Further, a decision by the league to force Sterling to sell the team will likely spawn considerable litigation. Sterling could potentially sue on a number of grounds, including seeking a court injunction to prevent the NBA from taking actions to expel him and commencing actions for breach of contract and/or antitrust claims. If Sterling were to sue, he could seek pretrial discovery from the league and the various owners. This discovery could include communications and testimony that may attempt to paint the other owners in a negative light in order to compare their actions and any acts of impropriety in their past to the comments made by Sterling.

In this day and age as technology continues to impact the cultural norms of privacy, individuals in high profile positions, such as NBA owners, are faced with substantial concerns that did not exist until only recently. Private text messages, photos and emails that are years old are now readily accessible and easily searchable and may come back to haunt the sender years after they are drafted. Such materials can be taken out of context and can potentially be used to impact business decisions, public image, and even the outcome of litigation.

This new reality leads to an interesting question regarding the legality of the actual recording of Sterling’s conversation with Stiviano. Although the legality of the recording is of no consequence to Sterling’s issues with the NBA (he admitted to making the statements), it is an interesting topic considering California’s wiretapping law.

California’s wiretapping law is a “two-party consent” law, which makes it a crime to record or eavesdrop on any confidential communication, including a private conversation or telephone call, without the consent of all parties to the conversation. (See Cal. Penal Code § 632) In addition to criminal penalties, the law can expose a person to a civil lawsuit for damages by an injured party. (See Ca. Penal Code §637.2)

Interestingly, New York’s wiretapping law is a “one-party consent” law. (See N.Y. Penal Law §§ 250.00, 250.05) As such, if Stiviano knowingly recorded her conversation with Sterling in New York, the fact Sterling was not aware it was being recorded would be of no consequence; Stiviano would not likely face liability under the statute.

To establish a wiretapping violation under the California Penal Code, it must be shown that the recording was committed 1) intentionally, 2) without the consent of all parties, and 3) recorded a communication that was considered confidential. With regard to Sterling’s conversation, proving intent would likely be easy since Stiviano purposely recorded the conversation. It is unclear whether the Sterling consented to having the conversation recorded, but considering his advanced age, both the prosecution and defense would likely have compelling arguments either way. Finally, the determination of whether or not the conversation was confidential is less clear and would be made by the Court.

In deciding whether or not a conversation is confidential, Courts will examine, among other things, whether the conversation occurred in a private location; the subject matter of the conversation and whether it involved sensitive or private information; whether a special relationship existed between the parties; and whether there was notice that the conversation was being recorded.

At this point, there are no clear answers as to what circumstances the recording of Sterling’s conversation was made and whether California’s wiretapping law was violated. As the story continues to unfold and more information comes to light, it will determine what, if any legal recourse Sterling will have against Stiviano. In the meantime, Sterling’s attorneys will likely have their hands full dealing with issues regarding his dispute with NBA and his ownership of the Clippers.