[LA FEATURE]Sterling Firestorm

LA FEATURE

Coverage of the NBA's move to oust Clippers owner Donald Sterling

Sterling Family Trust Assumes Key Role in Battle Over Clippers

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    NEWSLETTERS

    For the Los Angeles Clippers, the big question this week is whether Donald Sterling will continue to fight the sale of the team to former Microsoft CEO Steve Ballmer. Patrick Healy reports from downtown LA for the NBC4 News at 5 p.m. on Monday, June 2, 2014.

    The battle for control of the Los Angeles Clippers revolves largely around the legal question of whether Donald Sterling remains a trustee of the Sterling Family Trust, or whether wife Shelly is now fully in charge, in the view of a USC law professor who reviewed Sterling's legal filing against the NBA at the request of NBC4.

    Last week, Shelly Sterling negotiated the sale of the Clippers baskeball corporation to former Microsoft CEO Steve Ballmer for $2 billion - a price unprecedented for a professional basketball team.
    "If she does not have the authority, I think all bets are off," said Ed McCaffery, a professor at the USC Gould School of Law and an authority on trusts.
     
    As her authority, Shelly Sterling cited a May 22 letter to the NBA from an attorney for her husband, and signed by him, in which he "agrees to the sale of his interest" and also "authorizes" his wife "regarding all issues in connection with a sale."  
     
    At the same time, the Sterling Family Trust, which owns the Clippers as LAC Basketball, Inc., has asserted that Donald Sterling is no longer a co-trustee and Shelly Sterling is now the sole trustee, a source close to the matter has confirmed to NBC4.

    Nevertheless, Donald Sterling's lawsuit against the NBA identifes him as "co-trustee" of the trust, and in fact, the suit is filed on behalf of both Sterling himself and the family trust.
     
    "This is a mess of Shakesperean proportions," said McCaffery. "Both a tragedy and a comedy."
     
    The contention that Donald Sterling lost his status as co-trustee first became public in news reports. Sterling was examined by two neurosurgeons who determined he is "mentally incapacitated," acccording to an anonymous source cited by the Associated Press.  Sterling attorney Bobby Samini told the AP that's "absurd."
     
    Shelly Sterling believes her husband suffers from "dementia," she said last month during an interview on NBC's Today Show, but has made no further public statements on the issue.
     
    The terms of family trusts are kept private, but invariably include clauses specifying that loss of mental competence is grounds to be removed as a trustee, McCaffery said.  The individual would retain any rights as a beneficiary.

    Named as defendants in Sterling's suit are the NBA, its commissioner Adam Silver and as many as 10 additional defendants to be identified later.  Shelly Sterling is not named.
     
    In another twist:  if Donald Sterling were to prevail in court, with the NBA ordered to pay a billion dollars in damages, the Sterling Family Trust might be on the hook for it.
     
    "Mrs. Sterling and the Trust also agreed not to sue the NBA and to indemnify the NBA against lawsuits from others, including Donald Sterling," according to an NBA written statement issued
    last Friday.
     
    There is a conflict between Shelly Sterling relying on both the May 22 letter and the assertions that Donald Sterling lost his trustee status because he was deemed mentally incompetent:  If
    so, his directive regarding the sale would not hold up, McAffery said .
     
    Sterling's lawsuit never mentions the competence issue, but does acknowledge the letter from Sterling lawyer Doug Walton authorizing Shelly Sterling to sell the team.
     
    This was done "in an attempt to comply with Commissioner Silver's May 20, 2014 directive."
     
    "What he seems to be saying is that he was coerced...by the NBA and Silver," McAffery said.
     
    Both Ballmer himself and the terms of his offer must be approved by the NBA before the sale can be finalized. The process of gathering and providing the information required by the NBA is underway.

    Donald Sterling's next step remains unclear.
     
    He appeared in public Sunday in South Los Angeles at a church service to which he had been invited by the pastor. 
     
    "I'm here to support this wonderful group," Sterling said, declining to discuss the issues swirling around him.
     
    Calls Monday to Donald Sterling attorneys Maxwell Blecher, Bobby Samini and Douglas
    Walton were not returned.  Nor did Shelly Sterling's attorney, Pierce O'Donnell, respond to a request for comment.
     
    Donald Sterling stands to gain hundreds of millions of dollars, even after taxes, from the sale negotiated by Shelly, from whom he is "estranged," the lawsuit states.
     
    McAffery could not resist another Shakespearean metaphor.
     
    "It may be that Shelly ends up being the Lady Macbeth, the mastermind of this," he said.

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