The biggest reason the NBA can boot Donald Sterling whether he likes it or not

The biggest reason the NBA can boot Donald Sterling whether he likes it or not

Kudos to NBA Commission Adam Silver for taking swift and decisive action yesterday in banning racist LA Clippers owner Donald Sterling for life, fining him the maximum amount allowed under NBA rules and endorsing that the remaining league owners vote to force a sale of the Clippers.

Sterling has a motto of never selling anything he buys and a long history of litigation.  But he will sell and if he does sue, it will quickly get tossed.  How do we know this?

While the US Constitution guarantees you the right to free speech, no matter how abhorrent it is, it doesn’t prevent consequences in private business for your bad behavior.  The NBA has their own constitution and it allows an indefinite suspension at the discretion of the Commissioner as well as the fine.  And if 75% or more of owners vote to force a sale, it will happen because decisions made by the owners as a group, per the agreement that they all signed (including Sterling) are treated as binding arbitration.  Judges respect those decisions and while Sterling could sue, it would be almost surely be one last humiliation for him.

On top of all of this, the league can control the sale.  In other words Sterling can’t try and turn everything over to his son or his wife or anyone else.  The league will pick the new owner and negotiate the price.  Sterling will make hundreds of millions off of the eventual sale and you can bet that the league will try to get every last dollar as the sale of the Clippers will only make the other teams worth more.  If our neighbors to the north, the Milwaukee Bucks, are worth the $550 million they were recently sold for then it wouldn’t be surprising to see LA go for close to one billion dollars.

All of this was possible because the NBA has a partnership agreement for their franchises that makes sure the actions of one idiot doesn’t bring down the rest of the league.

If you are in a business and don’t have a similar agreement in place then you are not doing a good job at being a business owner.  It doesn’t have to be as long or complex as the one the NBA uses, but it should state clearly what will happen if one partner wants out or the two (or more) of you can’t get along or anything else.  Much like with Sterling it will help avoid litigation or if there is a lawsuit, it will surely be a quick one.

Of course the NBA is run by smart people which is no surprise since almost every owner was successful in business.  You don’t have to be that smart, but creating a partnership agreement isn’t brain surgery.  And it will save you money and headaches in the long run if you have one.  Adam Silver wasn’t talking tough yesterday.  He was just exercising his power under an agreement that Sterling signed off on.

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