Report Claims Donald Sterling’s $1 Billion Suit Against the NBA Has a ‘Major Flaw’

Jun 4, 2014  •  Post A Comment

"Embattled business magnate Donald Sterling is suing the NBA for a whopping $1 billion for allegedly 'forcing' him to sell the Los Angeles Clippers, but his lawsuit has one major flaw," reports Erin Fuchs at the Business Insider.

The story reports: "Sterling will struggle to prove he has been damaged by the sale now that former Microsoft CEO Steve Ballmer has offered to buy the Clippers for $2 billion, which is significantly more than its recently projected value, two experts in sports law told me."

Fuchs adds: "In order to succeed in a civil suit like Sterling's, a plaintiff has to prove he's been injured by the defendant and therefore entitled to monetary damages. 'The Achilles heel with all of these claims is that Sterling will have a nearly impossible time proving damages,' law professor and sports business expert Marc Edelman told me."

Added Matt Mitten, director of the National Sports Law Institute at Marquette University, in comments to Fuchs, "The real significant issue is, how has he been harmed, given that the sale price is $2 billion, almost four times what any other franchise has sold for."

Fuchs notes that The New York Times has written that "Given how much [Sterling] paid for the team in 1981 [$12.5 million], Sterling will get a 15,900% return on the sale."

Indeed, that same New York Times piece, by Josh Barro, explains that over the 33 years that Sterling has owned the Clippers, his return will end up being "an annualized rate of 16.6 percent. In fact, he’s probably done even better than that, because of the distributions of profits during the years of ownership. To say the least, the rate of return is very impressive. It’s a much better performance than most of the ways Sterling could have invested his money."

The Times adds: "For example, it’s about four and a half times the return he would have gotten by putting his money in the stocks of the S&P 500 index and reinvesting the dividends.

"The Clippers were probably about twice as lucrative an investment as Mr. Sterling’s primary business: residential rental real estate. We don’t know the performance of Mr. Sterling’s real estate holdings (the portfolio of apartments that led to his payment of $2.725 million to settle claims of racial discrimination), but we do know that BRE Properties, a real estate investment trust that mostly owns California apartment buildings, returned 6,259 percent over the period Sterling has owned the Clippers."

And then the Times' Barro delivers the coup de grâce: "But there is one investor who puts Mr. Sterling to shame: Mr. Ballmer. An investment in Microsoft stock has returned 55,700 percent since the company’s initial public offering in 1986. … [Which is why] Ballmer can afford to pay $2 billion for the Clippers."

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