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Saturday, May 31, 2014

Donald Sterling v. NBA: Your new Civ Pro exam

Donald Sterling sued the NBA to stop his league-imposed punishment and the forced sale of his team. A $ 2 billion offer from Steve Ballmar was accepted by Sterling's wife, Shelly on behalf of the trust that owns the team, having had Donald declared mentally incompetent; the NBA has approved that deal and canceled a planned hearing of the Board of Governors (the other 29 owners) to strip Donald of ownership. The lawsuit, with Sterling and the trust as plaintiffs against the NBA, asserts claims for a violation of the state constitution, federal antitrust, and various breach of contract claims; it seeks damages and an injunction halting the NBA-imposed punishments (a $ 2.5 million fine and lifetime suspension from the NBA) and the hearing to terminate his ownership.

Oddly, these claims are either not ripe or about to become moot, depending on what happens with the sale. The NBA has not yet held the hearing to terminate his ownership, so he has not yet suffered any damages from it. And since the league will cancel the hearing if the sale goes through, that claim becomes moot. If the sale goes through, expect the league to rescind the fine, mooting that element of relief. It might even lift the lifetime suspension--what involvement will Sterling have with the league if he is no longer an owner?--mooting that claim. And assuming the sale goes through, what damage will Sterling have suffered? Two billion dollars will be more than double the sale price of any NBA franchise and likely more money than he would have earned from continued ownership of the team. So, at best, maybe he can get the non-economic value of being an NBA owner--except he is such a pariah now among NBA owners that it would be hard to put any real value on this.

What Sterling really wants is an injunction halting the sale of the team, at least pending outcome of the litigation. But to get that, Shelly Sterling needs to be involved in the case, since she claims an interest in controlling the trust and pushing through the sale. So either she has to be joined under FRCP 19 or she will try to intervene under FRCP 24. (Note: I don't do much more than lecture on these two rules, just to show other ways of bringing parties into cases But Rule 19 confuses students, who think it applies more broadly to cover simple joint-tortfeasor situations; having a nice clear example, purely involving injunctive relief, is helpful).

Jurisidction here hinges on the antitrust claim and § 1331; there is supplemental jurisdiction over the state law claims (although Sterling's lawyer--who in an ongoing media blitz has come across as the worst kind of slickster lawyer who does not actually care about things like law and procedure--did not mention that or any other basis for jurisdiction over the non-federal claims). But, here is where it gets fun. Antitrust experts generally agree that the antitrust claim is nonsense--Sterling signed a series of agreements and contracts to become owner of an NBA franchise and cannot claim harm if those contracts harm the public or competitors. Sterling really is arguing that, by violating its own Constitution and By-Laws in punishing him (arguments that are not entirely frivolous), the NBA has breached those agreements; in other words, this is really a state-law case. So perhaps the court declines supplemental jurisdiction under § 1367(c)(2) because the state claims predominate. Moreeover, the court is going to have to figure out who controls the trust (Donald or Shelly) and, perhaps, whether Donald is competent. Those sound like potentially complex issues of state law, warranting the court to decline jurisdiction under § 1367(c)(1). Finally, and most obviously, if the antitrust claim is that weak and the court dismisses it relatively early, it could decline jurisdiction simply for that reasons under § 1367(c)(3).

Update: An alert reader emails with another way Shelly Sterling could be brought into this case: She agreed to indemnify the NBA for any judgments arising from the sale of the team, including for lawsuits by her husband. So, having been sued, the NBA could now implead Shelly and the trust to enforce the indemnification agreement in the same action. Sterling then could assert claims against Shelly relating to any injunction of the sale.

Posted by Howard Wasserman on May 31, 2014 at 11:02 AM in Civil Procedure, Howard Wasserman, Law and Politics, Sports | Permalink

Comments

Hi.

This was very helpful!

But as you know, all one needs is a nonlaughable federal claim. If as you suggest the sanction of being expelled for what he did is outside the league constitution and by-laws, it could be construed as a boycott by the member teams against Sterling. That might be enough of an antitrust hook to hang the state claims on, no?

Kevin

Posted by: Kevin Clermont | May 31, 2014 2:30:29 PM

Thanks for the comment, Kevin. Just to clarify, I have no doubt the court has supplemental jurisdiction over the case as filed (other than not having included it in the jurisdictional statement). Even more so, given that I hate Bell v. Hood and would find § 1331 jurisdiction simply because Sterling asserts a claim in which the right and right of action are both created by federal law. I was trying to argue that the court might decline jurisdiction over the state claims down the line if the NBA successfully moves to dismiss the antitrust claim.

Posted by: Howard Wasserman | May 31, 2014 7:27:41 PM

Yes, indeed. I now see that you were just saying dismiss under 1367(c).

Posted by: Kevin Clermont | May 31, 2014 8:23:22 PM

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