Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Foul called on Sterling's antitrust claim in L.A. Clippers sale, (Mar 25, 2016)

By Edward L. Puzzo, J.D.

Donald Sterling, the former owner of the Los Angeles Clippers, suffered no antitrust injury as the result of the forced sale of that NBA franchise, the federal district court in Los Angeles has ruled (Sterling v. National Basketball Association, March 22, 2016, Olguin, F.).

Following action by the National Basketball Association (NBA) forcing Los Angeles Clippers owner Donald Sterling to sell the franchise in 2014, Sterling filed a lawsuit against the NBA and its commissioner Adam Silver. The lawsuit alleged, among other claims, that the NBA owners violated the Sherman Act by conspiring to force a sale of the Clippers resulting in a lower price for the franchise than would otherwise be the case.

Sterling alleged that he suffered at least $600 million in damages because the NBA's lifetime ban from ownership resulted in a forced sale of the Clippers at a lower price than he otherwise would have been able to obtain in a sale, and because the sale exposed him to “massive tax liability" stemming from the capital gains from the sale. Sterling claimed that, in practical terms, the market for NBA franchises is limited to billionaires and the NBA's move to bar him from ownership prevented him from fully soliciting buyers from this limited group. Finally, he claimed that his lifetime ban injured competition and created an antitrust injury by "making the relevant market unresponsive to consumer preference.”

Injury to competition. The court explained that adequately pleading a conspiracy in restraint of trade or commerce under Section 1 of the Sherman Act requires (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) which is intended to restrain or harm trade; (3) which actually injures competition; and (4) harm to the plaintiff from the anticompetitive conduct. In the Ninth Circuit, the court explained, claimants must plead and prove a reduction of competition in the market in general and not mere injury to their own positions as competitors in the market.

Sterling's claimed injuries of a lower price and massive tax liability were injuries personal to him, not to competition in the market, the court stated. Even if his loss of ownership were attributed to the actions of the NBA, the Clippers continue as an operating club, and Sterling's exclusion from its ownership would have no anticompetitive effect, nor an effect on the public interest, the court stated.

Lack of injury. In addition, the court expressed its skepticism that Sterling suffered any injury at all, let alone an antitrust injury. The court noted that the franchise sold for a record $2 billion, the highest price ever paid for an NBA team.

Sterling could provide no basis for his claim that, without a forced sale, he could have sold the franchise for $2.6 billion, or as much as $8 billion. The court noted that the lowest bid obtained during the bidding process for the Clippers, $1.2 billion, was more than double the $550 million price paid for the Milwaukee Bucks franchise earlier in 2014, which was itself the highest price paid for an NBA franchise at the time. The $2 billion sales price was also significantly more than the $850 million price for the Atlanta Hawks, sold within a month of the Clippers sale.

The court found that Sterling’s antitrust claim was plainly insufficient, as it was not a conspiracy claim in restraint of trade under the Sherman Act. The court therefore dismissed the antitrust claims with prejudice.

The case is Civil Action No. 2:14-cv-04192-FMO-SH.

Attorneys: Babak Samini (Samini Scheinberg PC) for Donald Sterling. Jeffrey A. Mishkin, Anthony J. Dreyer, Karen Hoffman Lent, Jason D. Russell, Peter S. Julian, and Angela Colt (Skadden Arps Slate Meagher and Flom LLP) for National Basketball Association.

Companies: National Basketball Association

Cases: Antitrust CaliforniaNews