Business & Economy

Clippers: Donald Sterling files $1B lawsuit against NBA; Shelly Sterling agrees to sell team to former Microsoft CEO Steve Ballmer (updated)

Microsoft Chief Executive Steve Ballmer speaks at the opening of the Microsoft Center Berlin on Nov. 7, 2013, in Berlin.
Microsoft Chief Executive Steve Ballmer speaks at the opening of the Microsoft Center Berlin on Nov. 7, 2013, in Berlin.
Adam Berry/Getty Images

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Update 6:35 p.m.: The NBA has announced it will withdraw its charge to terminate the Sterling’s ownership and cancel the meeting that was to take place next week that would have stripped the Sterlings of their ownership.

Under the agreement, the NBA says the Clippers will be sold to former Microsoft CEO Steve Ballmer, pending approval by the NBA Board of Governors. That appears to be a foregone conclusion, but what’s not a foregone conclusion is how Donald Sterling tries to delay the process. 

On Friday afternoon, Sterling filed a $1 billion suit in federal court, accusing the NBA of violating his constitutional rights and alleging breach of contract, among other violations.

The suit says the NBA’s actions – fining Sterling and banning him from the league – happened as a result of an illegal recording. Sterling did not violate the NBA bylaws, according to the suit.

The suit says a forced sale created a lower value for the team than a non-forced sale.

As part of the NBA agreement with Shelly Sterling, the league says Sterling and her trust have agreed to indemnify the league against a lawsuit from her husband.

Donald Sterling’s attorney, Max Blecher, declined to comment on the NBA agreement.

In an interview with the Los Angeles Times, Steve Ballmer pointed out that he’s not a new face to the league since he was involved in trying to buy the Sacramento Kings last year. In that deal, he was trying to move the team to Seattle, something he reiterated he has no intention of doing with the Clippers.

"I’d love the Clippers to be the most vibrant team and name in professional sports,” Ballmer said.

Ballmer also defended paying $2 billion for the team, which is about four times the maximum that’s ever been paid for an NBA franchise, and one that is the second-most popular team in Los Angeles.

“When you buy a tech company you don’t say what is it, you say what can we turn it into,” Ballmer said.

It’s worth noting the Clippers had an operating profit of $15 million last year, according to Forbes. But Ballmer said this is one of the few companies he’s ever bought into that is actually making any profit.

“You could say relative to the profits it’s making, this is one of the cheapest companies I’ve bought,” Ballmer told The Times.

-- KPCC's Ben Bergman

Timeline of events leading to Sterling’s lawsuit, as reported in the document:

-- KPCC's Sharon McNary

Update 4:15 p.m.: The Clippers will be sold to Steve Ballmer pending approval by the NBA Board of Governors, the NBA confirmed in a statement Friday afternoon. The organization will also withdraw its pending charge to terminate the Sterlings’ ownership of the team. 

Due to the settlement, the NBA's June 3 special hearing has been canceled. Per the statement: 

Because of the binding agreement to sell the team, the NBA termination hearing that had been scheduled for June 3 in New York City has now been cancelled. Mrs. Sterling and the Trust also agreed not to sue the NBA and to indemnify the NBA against lawsuits from others, including from Donald Sterling.

Previously: The NBA says Shelly Sterling informed them Thursday night that former Microsoft CEO Steve Ballmer had reached an agreement to purchase the Los Angeles Clippers, but the league says it still needs proof that Shelly Sterling has the authority to make the deal.

"We await the submission of necessary documentation from Mrs. Sterling," Mike Bass, Executive Vice President, NBA Communications, said in a statement Friday.

The $2 billion sale Sterling agreed to with the former Microsoft CEO is potentially record-breaking, the Associated Press reported.

Shelly Sterling's attorney on Tuesday said her husband had signed over authority of the team, but Donald Sterling’s attorney has a different story, according to AP.

"Donald Sterling has authorized Shelly Sterling in writing to negotiate the sale of the Los Angeles Clippers, including his 50 percent ownership of the team," lawyer Pierce O’Donnell said in a statement. "Shelly is managing the sale of the Clippers."

USA TODAY and ESPN reported that Shelly Sterling became sole trustee when Donald Sterling was determined to be mentally unfit under the rules of the Sterling Family Trust, which owns the Clippers.

"Sterling is not selling the team," said his attorney, Bobby Samini, according to AP. "That's his position. He's not going to sell."

Donald Sterling's attorneys contend that he is a co-owner and therefore must give his assent for the deal to go through, AP reported. They also say he won't be giving it.

"It is common for trust documents to include a provision for incapacity of a trustee and who becomes trustee if that is the case," Ellen Aprill, a professor specializing in tax law at Loyola Law School told KPCC.

Aprill said trusts – unlike wills – are secretive, so it's difficult to know exactly what the Sterlings' trust stipulates. However, she said it is common for trusts to include a provision that allows for two physicians to be able to declare a trustee mentally unfit.

KPCC reached out to Donald Sterling's attorney, Max Blecher, but his office said he would have no comment. The Clippers also declined to comment.

Meanwhile, the NBA says a June 3 special meeting of the league's Board of Governors to strip Sterling of his ownership remains as scheduled.

Some background from AP about Ballmer:

This is not Ballmer's first foray into potential NBA ownership. Ballmer and investor Chris Hansen headed a group that agreed to a deal to buy the Kings from the Maloof family in January 2013 with the intention of moving the team to Seattle, where the SuperSonics played until 2008.

But Sacramento Mayor Kevin Johnson lobbied the NBA for time to put together a bid to keep the team in California, and though the Ballmer-Hansen group later increased its offer, owners voted to deny the bid for relocation and the Kings were sold to Ranadive.

The former Microsoft CEO helped Bill Gates transform the company from a startup with fewer than 40 employees and $12 million in annual revenue into the world's most valuable business. The pair met in 1973 while living down the hall from each other in a Harvard dorm.

During his tenure at Microsoft, Ballmer was known for his competitive drive and wild displays of emotion and hand-waving.

At his farewell address to Microsoft employees, he high-fived and hugged audience members, pumped his fists in the air, and even shed tears as the popular 1987 song "(I've Had) The Time of My Life" played on the sound system. In a video of the event widely viewed on YouTube, he screams: "You work for the greatest company in the world!"

Last 10 NBA teams to be sold

AP reporter Tami Abdollah and AP Basketball Writer Brian Mahoney contributed to this report.

This story has been updated.