Judge Michael Levanas just slam dunked Donald Sterling's attempt to hold on to ownership of the Los Angeles Clippers. The sale of the Clippers to former Microsoft CEO Steve Ballmer for $2 billion should be concluded by the contractual deadline of August 15, absent an emergency stay by the appeals court or an injunction from one of the two other lawsuits that Donald Sterling has filed.
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Donald Sterling
In a clean sweep, Judge Levanas ruled:
1. Donald Sterling was properly removed as a Trustee of the Sterling Family Trust based upon a finding of his mental incapacity;
2. Shelly Sterling, as the sole Trustee, had the authority to conclude the sale of the Clippers even though Donald Sterling revoked the Sterling Family Trust after Shelly Sterling had entered into the binding agreement to sell the team to Steve Ballmer; and,
3. The sale could close even if Donald Sterling filed an immediate appeal. In making this ruling, Judge Levanas relied upon a seldom used California statute that provides sweeping powers to a probate judge to allow a trustee to proceed as if no appeal is pending.
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Donald Sterling lost the judge
In a bench trial, where the judge rules without a jury, gaining the trust of the judge is the most important battle. Donald Sterling's antics at trial clearly cost him any smidgen of credibility with Judge Levanas. Throughout his ruling, the judge found that Shelly Sterling's witnesses were credible and that Donald was not.
"Donald's answers were often evasive and, in one instance, inconsistent with his previous testimony." First, Judge Levanas rejected Donald's argument that Shelly Sterling had him submit to neurological testing as part of a plot (called "Secret Plan B") to wrest control of the team away from him. To the contrary, the judge held that Shelly Sterling's testimony was "far more credible" that she sought the exams out of concern for his well-being after witnessing his disasterous interview with Anderson Cooper. The judge also rejected Donald Sterling's claim that he never authorized Shelly to sell the team, finding that she had a "reasonable" belief that he had authorized her to sell.
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In one of his most important factual findings, Judge Levanas essentially held that Donald Sterling's testimony that he could sell the team for between $2.5 billion to $5 billion was pure fantasy. The court held that the $2 billion that Steve Ballmer agreed to pay was far above the market price. "Ballmer paid an amazing price that cannot be explained by the market."
The ruling is appeal-proof
For Shelly Sterling, it was not enough to win confirmation of her right to sell the team. Under the terms of her agreement with Ballmer, she had to obtain a "final, non-appealable" judgment by August 15 or else Ballmer would be under no obligation to close. If the sale did not close, the NBA owners were scheduled to vote on September 15 on whether to terminate the Sterling family ownership and seize the team. Under ordinary circumstances, filing an appeal would stay the trial court's ruling and there would be zero likelihood of the appeal being concluded within the next two weeks. Shelly Sterling's only hope was for the court to use its power under Probate Code Section 1310(b) to empower her to act "as if no appeal was pending."
Shelly Sterling's attorneys demonstrated that the Clippers were in a "death spiral" that could only be stopped by a ruling under Section 1310(b). Donald Sterling had borrowed over $500 million secured by the assets in the Sterling Family Trust, the lenders were demanding immediate repayment once Donald revoked the trust, and the Trust's CFO testified that the Clippers were the only Trust asset that could be sold to raise that sort of money quickly. Coach and Team President Doc Rivers and All-Star guard Chris Paul had publicly stated that they would not continue as Clippers if Donald Sterling was still team owner when the season resumed in October. Major sponsors were sitting on the sideline, awaiting the result of the drama.
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In the end, Judge Levanas was convinced that the catastrophic consequences to the Clippers if Donald Sterling was allowed to hang on to the team during the pendency of an appeal justified the extraordinary relief of granting Shelly Sterling power to act under Section 1310(b). His ruling strongly indicated that he believed that Donald Sterling was not fighting the case in good faith, but rather trying to run out the clock until the sale withered on the vine. Judge Levanas found that the Clippers were unlikely to fetch more than $1.6 billion if sold by the NBA after September 15, and that the potential loss of $400 million justified empowering Shelly Sterling to sell the team immediately.
Donald Sterling's last gasp options
Having lost on every issue before the probate court, Donald Sterling has limited options to fight the sale of the team. As soon as Judge Levanas files his final order, Donald will file an appeal and seek an emergency stay from the appeals court. His legal team will also likely seek injunctions from the (1) California Superior Court and (2) the United States District Court where Donald Sterling has filed his lawsuits for damages against the NBA, Adam Silver and Shelly Sterling.
It would be highly surprising if any of these courts granted Donald Sterling relief from Judge Levanas's rulings. Most judges are loathe to reverse a judge who has made a ruling based upon factual findings that hinge upon evaluation of the credibility of live testimony by witnesses.
Final steps
Armed with this ruling, I expect that Shelly Sterling and Steve Ballmer will close this deal quickly. Within minutes of the ruling, the NBA urged the deal to be concluded "as soon as possible." I would expect that the attorneys have been working on preparing the final deal documents so that they could act quickly after Judge Levanas ruled. I would be shocked if the deal was not concluded by August 15.
If the deal closes, Donald Sterling will continue his lawsuits against his wife and the NBA, but he would be powerless to get the sale reversed. Money would be the only relief that he could obtain. Because Shelly Sterling has agreed to indemnify the NBA and Adam Silver, and California is a "community property" state, Donald Sterling would essentially be suing himself. With the fate of the Clippers decided, Donald Sterling should fade from public attention.
Commentary by Mitchell Epner, an attorney specializing in white-collar crime, sports and entertainment law and intellectual property. He's also a former Assistant United States Attorney in the District of New Jersey. Follow him on Twitter @mitchellepner.