Donald Sterling’s Challenge Against NBA Discipline

Adam Silver, Donald Sterling

Ever since NBA Commissioner Adam Silver banned (now former) LA Clippers owner Donald Sterling for life, arguments have emerged for and against the decision. Dallas Mavericks owner Mark Cuban recently commented that the action is a ‘slippery slope’, likely out of fear that the same could happen to him or any of the other owners someday. Others have argued that the punishment fits the crime and have no problem with Silver banning Sterling. The inevitable issue that is raised however, is whether Silver and the NBA have the power to enforce such a punishment. Why not? Players, after all, are disciplined by the league all the time and rarely attempt to fight these punishments in court. It should follow then that owners can be disciplined the same way right? Let’s take a look at why disciplining an owner is different from disciplining a player and analyze some of the arguments Sterling and the league make:

Discipline: Owners vs. Players

Previous posts on this blog have explained the significance of Collective Bargaining Agreements (CBA’s) in professional sports. CBA’s govern the relationship between the players and the league including minimum and maximum salaries, length of practice times and player conduct policies among other issues. So when the league decides to fine or suspend players, it is done under the CBA and while players generally are allowed to appeal, it is done through the league, not through the courts. In contrast, an owners relationship with the league is governed by the NBA’s Constitution and By-Laws. The Constitution and By-Laws outline terms such as the rules to conduct the NBA draft, television and radio contract terms, and the authorities and duties of the Commissioner, among others. The document also outlines under what circumstances ownership of a team may be terminated in Article 13. Article 13 provides that “the Membership of a Member or the interest of any Owner may be terminated by a vote of three fourths (3/4) of the Board of Governors if the Member or Owner shall do or suffer any of the following…” The provisions that have been discussed and raised in Sterling’s response to the NBA’s punishment are 13(a) and 13(d).

Article 13(a) provides that a Member or Owner’s interest may be terminated by a 3/4′s vote if he “Willfully violate[s] any of the provisions of the Constitution and By-Laws, resolutions, or agreements of the Association”. Sterling rebuts the charge under 13(a) in his response stating in part that he could not have “willfully” violated a league document as the comments were made in a private conversation which was never intended to be made public. The league can argue against the rebuttal by asserting that the conversation was made very public and quickly harmed the NBA.

Article 13(d) provides that a Member or Owner’s interest may be terminated by a 3/4′s vote if he “Fail[s] or refuse[s] to fulfill its contractual obligations to the Association, its Members, Players, or any other third party in such a way as to affect he Association or Members adversely.” The obligations in this Article do not need to be contained in the NBA’s Constitution or By-Laws but may include other agreements including the franchise agreement to buy a team and the joint venture agreement in which owners agree to league authority which both contain covenants. The NBA will argue that Sterling agreed to abide by a certain ethical standard and breached that by making unethical comments in opposition of the NBA’s position. In response to this charge, Sterling asserts that 13(d) only applies to Owners who fail to meet financial obligations under contracts. The league will likely respond that the language in the article contains no such limitation. Sterling will also be hurt by his interview with Anderson Cooper on CNN in which he is charged by the NBA for “criticiz[ing] African Americans for not supporting their communities; and publicly disparag[ing] NBA legend Magic Johnson.” The NBA will likely use the CNN interview and Sterling’s comments to V. Stiviano to show that Sterling severely hindered the NBA’s efforts to enhance diversity and that his comments resulted in massive harm to the league.

Do the Commissioner and the league have the legal authority to enforce such a harsh punishment?

The standard that has been used by courts to determine whether a governing body in sports has overstepped its authority and failed to follow it’s own By-Laws is “arbitrary and capricious”. The standard is normally used in Administrative Law to determine whether regulations made by government agencies are appropriate. To prove that the NBA’s decision was “arbitrary and capricious” and that the league did not follow it’s own Constitution and By-Laws, Sterling would have to show that the NBA acted arbitrarily in handing out his punishment. To do so, Sterling will likely point to past transgressions by owners who may have received a “slap on the wrist” compared to his banishment from the league.

In his response, Sterling gave examples of “Speech-Related Conduct” including Kobe Bryant’s use of an extremely offensive  term for homosexuals towards a referee in which he received a suspension and $100,000 fine; Sterling also cites a former NBA player who referred to his legal counsel as “big-time Jew lawyers” and referred to Jewish people as “some crafty people” because “they are hated all over the world”. The problem with these examples is that they refer to players and former players rather than owners. As explained above, players are disciplined under the CBA, not the NBA’s Constitution and By-Laws. Sterling does give a more relevant example of Magic owner Rich Devos, who donated $100,000 to the National Organization of Marriage, an organization who advocates against marriage equality. Sterling states that despite LGBT groups advocating for a boycott, the NBA took no action in disciplining Devos for his support of the organization.

The issue of capital gains taxes owed by the Sterlings should the team be sold.

One issue which was raised at the end of Sterling’s response to the league’s charges stuck out to me; should the league force the sale of the team (which it essentially has now), the Sterlings would be subject to capital gains tax on the difference between the amount he bought the team for and the selling price. This issue stuck out because it seems to be a valid concern in that the team has now been sold for $2 billion; the capital gains tax the Sterlings would be subject to is calculated at 33%, which includes state and federal taxes. Sterling bought the team in 1981 for $12.5 million and so the tax would be calculated as 33% of nearly $1.9 billion which comes out to over $600 million. Although the Sterlings would come out ahead, that is a large amount of money even for a billionaire. 

As the narrative continues, it’s clear that Sterling is going to go down swinging even though Shelly Sterling reportedly reached a deal to sell the team to former Microsoft CEO Steve Ballmer. Despite the possible legal battle that lies ahead, it was in the best interest of the league to replace the Sterlings quickly, so as to put to rest any concerns the league’s players and other employees had of Sterling remaining in power.

 

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Trust Issues: Donald Sterling Ruled ‘Mentally Incapacitated’

Shelly and Donald Sterling, 2008 Clippers gameWith new stories emerging daily involving Donald Sterling and the Los Angeles Clippers, the latest twist in the plot is that Sterling had recently been declared ‘mentally incapacitated’ by experts, making him unfit to negotiate the sale of the team, leading his wife Shelly, to be declared the sole trustee of the family’s trust. This news is significant because according to ESPN.com’s Ramona Shelburne, The Sterling Family Trust had rules and guidelines about mental incapacitation that would leave Shelly Sterling to negotiate the sale of the team without needing her husbands approval. Although it is currently being reported that the Clippers have been sold to former Microsoft CEO, Steve Ballmer, for $2 billion, it’s likely that Donald Sterling will still challenge the sale of the team without his approval. Let’s take a look at why a trust can be an effective method of estate planning whether you are a billionaire like the Sterling’s or not.

What is a trust?

A Trust is a written expression of your desires regarding the management of assets during your lifetime, if you become incapacitated; and the distribution of your assets upon your death. A Trust is created during your lifetime, usually for your own benefit for as long as you live. At the time of your death, the Trustee will make the proper distributions of your trust according to the instructions left in the trust. – See more at: http://corporate.findlaw.com/law-library/planning-for-incapacity.html#sthash.SdlMKoEG.dpufA

In general, a trust is a written expression of your desires regarding the management of your assets during your lifetime, in the case that you become incapacitated. In addition, a trust may also include details involving the distribution of your assets upon your death, at which time a designated Trustee will make the proper distributions of your trust according to the instructions left in the trust. In the case of the Sterling’s, experts have deemed Donald Sterling mentally incapacitated therefore his wife, as the sole trustee, will take control of his assets, including the team.

What does it mean to be “mentally incapacitated”?

When entering into contracts, a basic rule is that both sides must possess a minimum required mental capacity to enter into a contract, which is known as contractual capacity. The same is true for people creating wills and trusts; this is known as testamentary capacity. Laws governing estate planning are governed by state law and in most states, testamentary capacity is generally held to a  lower standard than contractual capacity. California’s testamentary capacity standard is codified in Probate Code Section 6100.5 which provides that a testator has the capacity to make a will if he or she can:

  1. Understand the nature of the testamentary act;
  2. Understand and recollect the nature of his or her property; and
  3. Remember and understand the his or her relations to immediate family members and those whose interests are affected by the Will.

The capacity for documents other than Wills in California is codified by Probate Code Section 812 and requires the that the individual be able to communicate, understand, and appreciate:

  1. The rights, duties, and responsibilities created or affected by his or her decision;
  2. The probable consequences of the decision; and
  3. The significant risks of, the benefits of, and reasonable alternatives to the decision.

Because selling the team requires contractual capacity as opposed to testamentary capacity, Donald Sterling would be held to the higher standard.

On what grounds can a trust be challenged?

It’s likely that Sterling will challenge the opinion of experts and possibly the validity of the trust. Without being able to read the trust, it is unclear under what circumstances it may be held invalid. Trusts may be challenged on a number of grounds including fraud, duress, mistake, or undue influence. Ironically, the trust may also be challenged on the grounds that that Sterling lacked the mental capacity at the time the trust was created. It’s likely however, that The Sterling Family Trust was created many years ago making it difficult to prove he lacked the mental capacity at that time. To do so would require evidence including medical reports and witness testimony that Sterling was in fact mentally incapacitated. Another possible challenge can be made if the trust had been amended anytime after it was created, especially if it was done recently. Sterling could argue that he was unfit to make those changes and therefore the trust document is invalid. The catch in that situation is that it’s likely a court would hold that only the amended portions will be declared invalid rather than the entire document.  Although these scenarios are unlikely, the saga of Sterling and the Clippers has shown that almost anything is possible.

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Don Jones’ Tweets and Regulating Social Media Use of Professional Athletes

Among the many stories surrounding the historical drafting of Michael Sam into the NFL, Dolphins safety Don Jones’ tweet was quickly and wisely squashed into the past through swift action by the team. Although Jones’ reaction was not to the actual drafting of the first openly gay player into the NFL, but rather to Sam kissing his boyfriend in front of ESPN’s cameras after receiving the phone call from the St. Louis Rams. Jones reportedly tweeted “OMG” and “Horrible” in response to the kiss but the tweets have since been deleted. Although Jones issued an apology, the story opens up an interesting and valid discussion on whether teams or leagues can and should regulate the comments made by players on social media.

Of all the teams in the league, the Dolphins did not need the publicity this story has brought taking into account their recent history with player conduct. So what’s the answer to the question of whether teams and leagues are able to regulate players tweets? One issue  that may come to everyone’s mind is the right to free speech. How is it possible for the NFL or NBA to tell a player he cannot  express his opinions? Isn’t this a free country? Let’s take a look at why leagues may in fact be able to monitor and limit what players are posting on social media.

Can Leagues Regulate Social Media Use?

For many people in the United States, the terms and conditions of employment are determined through an employment contract or employee handbook. Each employee is essentially responsible for negotiating the terms of their employment individually. The players in most professional sports leagues are unionized and so the terms and conditions of employment are collectively bargained for. This means that all players adhere to one set of terms and conditions negotiated by the union leaders and are set out in a Collective Bargaining Agreement (CBA). Under collective bargaining, leagues and players can negotiate a number of terms and conditions including minimum and maximum salaries, length and amount of practice time allowed, and player conduct policies, among others. Similarly, if leagues would like to monitor or regulate what players are posting on their personal social media accounts, the leagues would have to include language into the CBA.

Most CBA negotiations (and most negotiations in general) involve a give and take by both sides; for example if the NFL wants to add two regular season games, it’s likely the players will ask for something in return. While it seems unlikely that players would give up their freedom to tweet, Facebook, or post to Instagram freely, we have learned from past experience that strikes and lockouts in professional sports hinge on money more often than not. It follows that if players are given the choice of money versus freedom of social media, they will likely go for the extra money. Here is an example of a social media policy put in place by Major League Baseball in 2012.

Should Leagues Regulate Social Media Use?

Aside from the issue of whether leagues can regulate what players post to social media, the question of whether they should is more compelling. The Dolphins would likely have saved themselves a lot of trouble and embarrassment had someone been monitoring Jones’ tweets the night Sam was drafted. If a PR executive can be fired for tweeting a “joke” which was clearly insensitive, why can’t players who have the privilege of playing among the top competition in the world be disciplined for the same? When you are an employee of an organization, like it or not you represent that organization. If you do something to embarrass yourself or the organization, they deserve the right to discipline you. I would expect each league that does not already have a social media policy in place, to include one in their respective CBA’s when it’s time to negotiate.

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American University Washington College of Law Sports and Entertainment Law Blog

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I would like to direct readers to the AU Sports and Entertainment Law Blog that was launched yesterday. We will have articles on the latest stories in sports and entertainment law written by students at the law school. Many of the posts that would normally be featured on this blog will be posted on the school’s blog, so please visit that site regularly for updates. Also follow the Sports and Entertainment Law Society on Twitter @WCLSELS! Thank you for your support!

 

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Defending Richie Incognito

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This might come a few hours too late in light of the statement by Jonathan Martin’s attorney, David Cornwell, but in the event that Martin sues Incognito, there are a couple of ways to approach a defense. The first way to deflect the accusations by Martin is to go after Martin himself. We’ve already seen a little bit of this from the Dolphins players as well as head coach, Joe Philbin. There have been rumors of Martin having a mental illness, being too soft for football, and rumors questioning his sexual orientation.

The other, more reliable way to for Incognito to defend himself, is to say he was only doing what the coaching staff instructed him to. My previous post details why this would be effective, but the general idea is to say Incognito was only doing what he was told. Based on recent reports, the instructions to toughen Martin up didn’t just come from the Dolphins coaching staff, but reached as high as General Manager Jeff Ireland (Yes, the same Jeff Ireland that asked Dez Bryant if his mother was a prostitute). Ireland reportedly told Martin’s agent that Martin should “punch” Incognito to resolve the issue.

As expected, all sides have lawyered-up: Martin has hired David Cornwell and the NFL has hired Ted Wells, a prominent New York attorney, as an investigator. The Dolphins, by suspending Incognito and denying knowledge of the extent of Incognito’s actions, are distancing themselves from the situation to avoid liability. It’s not clear yet whether Incognito has hired an attorney but it would be a good idea for him. It’s only a matter of time until the first shot is fired and the legal battles begin.

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Vicarious Liability? Incognito Told by Coaches to ‘Toughen Up’ Martin

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New reports are emerging that Richie Incognito was told by his coaches to toughen Martin up. I’m not sure whether Incognito has spoken to an attorney or received legal advice from anyone but if he’s responsible for this information coming out, it was a good move on his part. In the case that Martin were ever to go after Incognito legally, Incognito could claim respondeat superior which could limit his liability under certain circumstances. Respondeat superior is a doctrine under which an employer is liable for the actions of an employee, if the actions were committed within the scope of employment.

To limit his liability if a suit is brought against him by Martin, Incognito could claim the he was only following the directions of his superiors (the coaches) when he left the reported messages for Martin. One problem Incognito could run into under this doctrine is whether his actions were within the scope of his employment with the Dolphins. Courts generally weigh a number of factors when deciding whether an employee was acting within the scope of his employment. Three common factors that are considered are:

  1. Whether the act was committed within the time and space limits of the employer
  2. Whether the offense was incidental to, or of the same general nature as, the responsibilities the employee is authorized to perform
  3. Whether the employee was motivated to any degree to benefit the employer by committing the act

While so far, the only evidence of hazing that we know of are texts and voicemails, hazing does not occur in dark corners and the incidents are generally not isolated; they happen during practice, in the locker room and at other times when other people are present. Also, up to this point, it doesn’t look like Incognito was trying to hide his behavior so it’s likely that teammates, coaches and other team personnel witnessed more acts by Incognito against Martin. The next element may be challenging to prove as well. The Dolphins would argue that when coaches told Incognito to toughen Martin up, they did not condone the use of racial slurs and threats. They would also argue that they wanted Incognito to do so on the field within the practice environment. However, an employer is generally not released of liability just because an employee did something he should not do. The third element may not be difficult to prove. Incognito and Martin were both apart of the offensive line and toughening Martin up, would have helped not only Incognito but the team as well.

Alot of this analysis sounds very ‘nitpicky’ in the context of sports, however even if the legal analysis and jargon is removed, Incognito’s actions still crossed the line. In the past few days, a number of current and professional athletes have been making the rounds on national TV and radio shows. Most of their stories revealed that hazing was the norm on their teams but it was mostly in good fun. Funny haircuts, carrying bags, and paying for dinners are some acts that were mentioned, none of which raise red flags. Incognito went too far and he and the Dolphins may end up paying the price.

Posted in NFL, Rajiv Radia | Tagged , , , , | 1 Comment

Hostile Work Environment: Jonathan Martin, Richie Incognito and the Miami Dolphins

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By now most of us have heard about the story involving Miami Dolphin’s offensive linemen Richie Incognito and Jonathan Martin. In short, Martin left the team last week due to incidents of hazing and bullying by Incognito. According to multiple reports, Martin has turned over multiple text messages and voicemails sent to him by Incognito in which he uses racial slurs and threatens to kill Martin. The reports have most people defending Martin and questioning Incognito, but there are plenty of current and former NFL players and other personnel who are defending Incognito, while calling Martin soft. Although there is a tough-guy culture in the NFL and a tradition of hazing in almost all professional sports, the NFL and the Dolphins seem to be and should be navigating the issue carefully.

Fans love playing fantasy football and watching the NFL is apart of a relaxing Sunday. However, for players, coaches and others who work for the NFL, it’s a real job and real laws apply. The United States has laws against workplace harassment and discrimination and professional sports is no exception. Title VII of the Civil Rights Act of 1964 (“Title VII”) exists to prevent discrimination by employers on the basis of race, color, religion, sex or national origin. For a plaintiff to bring a suit under TItle VII, the employer must have fifteen or more employees. There are two types of work place harassment under Title VII, “quid pro quo” and “hostile work environment”. In this case it’s more likely that if Martin were to sue the Dolphins, it would be under hostile work environment.

In order for Martin to bring a suit under Title VII for a hostile work environment, he would have to prove five elements:

  1. He was subject to slurs, insults, jokes or other verbal comments or physical contact or intimidation of a racial nature;
  2. The conduct was unwelcome;
  3. The conduct was sufficiently severe or pervasive to alter the conditions of the his employment and create a racially abusive or hostile work environment;
  4. He perceived the work environment to be hostile or abusive; and
  5. A reasonable person in his circumstances would consider the environment to be abusive or hostile.

At first glance it seems like Martin would be able to hit each of the five elements very easily. In fact upon closer analysis it’s clear that he can. With text messages and voicemails from Incognito that he saved, Martin has made it easier for himself to prove element one. Incognito used racial slurs and threatened Martin in those messages which is evidence of racial discrimination. Elements two, three, and four may be met and demonstrated by Martin leaving the team last week. Element five would be in question only if a court took into account the culture of the NFL and required an NFL player as a “reasonable  person”. Otherwise any other person would likely find this an abusive or hostile environment.

This is the reason Dolphins coach Joe Philbin came out, and in my opinion, used very careful language when talking about the situation. Specifically, Philbin made clear that he had no idea the extent of what was going on. The one mistake Martin made if the reports are accurate, is not going to the coaching staff prior to leaving the team. Although “not knowing” may not save the Dolphins in a lawsuit, it would have helped Martin (in a lawsuit and maybe in the moment) to talk to the coaching staff.

There are much larger issues at stake here including and it will be interesting to see how things pan out. It will also be interesting to see which side the NFL Players Association (NFLPA) lands on. The NFLPA’s responsibility is to the players and but when larger social issues are at stake they will have to pick a side at some point. Their initial statement of wanting a “fair investigation” for all involved reflects the uncertainty of their stance.

Posted in NFL, Rajiv Radia | Tagged , , , , , | 6 Comments