NBA, Donald Sterling, and the Enforceability of Morality Clauses

May 30, 2014

Donald SterlingOn Tuesday, April 29, NBA Commissioner Adam Silver banned Los Angeles Clippers owner Donald Sterling from the league for life, fined him $2.5 million, and said that he would urge the NBA Board of Governors to force Sterling—the league’s longest-tenured owner—to sell the team he bought in 1981. The swift, decisive action came in response to racially offensive comments Sterling made to his girlfriend, V. Stiviano, after she posted pictures of her and Magic Johnson at a Clippers’ game Instagram. Stiviano surreptitiously recorded their conversation, which was later leaked to the press.

Sterling is a lawyer by trade, notoriously litigious, and well-known for his unsavory practices as a Los Angeles real estate magnate. A simple Westlaw search across all state and federal for “Donald /2 Sterling” returns 58 cases. The first result is Housing Rights Center v. Donald Sterling, an anti-discrimination lawsuit brought by Sterling’s tenants under the Fair Housing Act (FHA), in which Sterling was “enjoined from using word ‘Korean’ in names of apartment buildings” and “from asking tenants their national origin or place of birth on any forms.” An all state federal docket search for “Donald /2 Sterling” in the participant name field returns 228 dockets.

To get a sense for how universal and systematic the condemnation of Sterling has been, look at the 3 results from Proposed and Enacted Legislation that return from that above search. The South Carolina House of Representatives passed a resolution to “recognize and commend the decisive and resolute action of NBA Commissioner Adam Silver in response to the inherent cancer of obvious and destructive racism.”

While Commissioner Silver clearly has unwavering support, the litigious Sterling is sure to put up a fight. The punishment meted out is the maximum allowed under the NBA’s constitution, which provides that that any owner’s interest may be terminated if they fail “to fulfill its contractual obligations to the Association, its Members, Players, or any other third party in such a way as to affect the Association or its Members adversely.” When he bought the team in 1981—and at various points since—Sterling signed contracts with the league that contain so-called “morals clauses.” While the exact language of these clauses is not yet known, ESPN reported that it precludes an owner from taking action that “materially and adversely affect a team or the league,” and holds owners to “the highest standard of ethical and moral behavior.”

These contracts and morals clauses are likely to be the focal point of any legal battle between Sterling and the NBA. So, what are they? The following search turns up some helpful secondary sources with a broad overview of morals clauses in general:

moral! /2 clause provision contract!

This search returns the most relevant cases on the issue of enforceability of these clauses:

enforce! valid! invalid! unenforce! /s moral! /2 clause provision contract!

One article from Business and Commercial Litigation in Federal Courts 3d American Bar Association Section of Litigation, 11 Bus. & Com. Litig. Fed. Cts. § 126:46 (3d ed.), gives a particularly insightful overview of “morals clauses” along with a number of annotations of the most relevant cases. Two more articles from Entertainment Law 3d: Legal Concepts and Business Practices, provide additional insight on the history (2 Entertainment Law 3d: Legal Concepts and Business Practices § 9:106) and scope (2 Entertainment Law 3d: Legal Concepts and Business Practices § 9:107) of morals clauses in the entertainment industry.

The issue has already garnered a significant amount of publicity, but judging by Sterling’s history and the stakes of the case, there is likely to be a lot more material on Westlaw about morals clauses and Donald Sterling in the near future.