Can This Clipper Ship Sail? Shelly Sterling And The Attempted Sale Of The LA Clippers

Recent media reports suggest that embattled LA Clippers owner Donald Sterling has given his wife, Shelly, permission to negotiate and reach an agreement to sell the Clippers franchise. This comes just days before the NBA Board of Governors is expected to strip Sterling of his franchise rights for racist comments he made in a private conversation that was secretly recorded. The fascinating question arising from this latest apparent development is whether the league—which has banned Sterling from any involvement with the team–will permit Shelly to try to find potential buyers.

I am dubious that the league will allow Shelly to be involved in trying to broker a sale of the team except under limited circumstances detailed below. The league wants new ownership in place as soon as possible, and would be concerned about a “backchannel” deal where any buyer might give the Sterlings “phantom” equity in the Clippers. The NBA customarily conducts thorough investigations of all potential franchise owners; this investigation includes analysis of the potential buyers’ financial stability, any connections to organized crime or gambling, and demonstrated commitment to community and charity. The league might not believe that Shelly can assemble, in a short period of time, an ownership group that could survive that kind of scrutiny.

There are two additional factors—one cutting against Shelly and one cutting in her favor—that might also affect how this issue plays out.

Sterling has threatened to sue the league if it sells the team out from under him. If the league rebuffs Shelly’s efforts to broker a deal, it may fuel Sterling’s desire to “lawyer up”, the theory being that the league took charge of the process and sold the Clippers for less than their fair market value, thus breaching a fiduciary duty to obtain the highest price for the team. It’s quite likely that Adam Silver is sufficiently concerned about this potential claim to at least consider giving Shelly some very brief period in which to secure a potential buyer.

The significant counterweight to that argument is the belief that the league is committed to ensuring that there is a significant African-American presence in the ownership of the Clippers going forward. Magic Johnson has been reported to be among the potential owners that would be appealing to the league, and on a host of levels (including Magic’s enormous success in business ventures, especially in Southern California), having the charismatic Magic as the face of the Clippers franchise would be a win-win.

In the perfect world, Shelly would be having private discussions with Magic, and he and perhaps other high-profile celebrities (David Geffen) who have demonstrated an interest in buying the Clippers would come together and make a fair market value offer for the team, which the league would accept and at the same time secure an agreement from Sterling and Shelly not to sue the league or the other owners.

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