Month: January 2020

Stern’s legal experience helped him deal with a bevy of issues across the NBA during his time as commissioner.

David Stern, who passed away on Wednesday at the age of 77, was best known as commissioner of the NBA from 1984 to 2014. He was also a skilled sports attorney whose superior legal skills positioned him to transform the NBA from a league where the Finals were broadcast on tape delay as late as 1986 to one that, 28 years later, would sign TV contracts worth $24 billion.

Here are 11 ways in which Stern’s legal background played a pivotal role in his nearly 50 years of affiliation with the NBA and in the major controversies that surfaced along the way.

1. A young lawyer impresses as the NBA’s chief outside counsel in the Oscar Robertson case

A 23-year-old David Stern graduated from Columbia Law School in 1966. He passed the New York Bar and practiced at Proskauer, Rose, Goetz & Mendelsohn, an elite law firm headquartered in Manhattan that represents the NBA and other major sports organizations. Back then, sports law wasn’t a recognized area of law. Stern’s practice focused on labor, employment and antitrust issues.

One of Proskauer’s clients was the NBA, which at the time competed with the American Basketball Association (ABA) for standing as the world’s top basketball league. The two leagues offered contracts to the same players, meaning players could get one league to bid against the other. That would change in 1970, when the NBA and ABA announced a plan to merge. A group of NBA players, led by Milwaukee Bucks point guard Oscar Robertson, soon filed an antitrust lawsuit in hopes of blocking the merger. They argued that the NBA-ABA merger would unlawfully curtail competition between the two leagues for players’ services and thereby render the market for hiring pro basketball players less competitive. A less competitive market, the players feared, would lead to lower player salaries.

Stern was lead counsel for the NBA in the Robertson litigation. After six years of court hearings and negotiations, the NBA reached a settlement with Robertson. At the time, the settlement was largely viewed as a “win” for NBA players and a mild defeat for the league. The NBA agreed to a workplace policy that it had long resisted: free agency.

Prior to 1976, players could remain under contract without the ability to seek employment with other NBA teams. This was through a clause in every player’s contract known as the “reserve clause.” Teams “reserved” the right to renew a player’s expiring contract in perpetuity, essentially meaning that NBA players were bound to their teams as long as their teams wanted.

Although the NBA, under Stern’s legal counsel, made the important concession of free agency to players, time would prove that the NBA were also winners of the Robertson settlement. The settlement allowed the NBA to absorb the ABA, a move that led to long-term financial value for the NBA and its owners. Stern’s foresight proved spot on.

NBA commissioner Larry O’Brien was clearly impressed by Stern’s talents. In 1978, he hired Stern as General Counsel of the NBA, meaning the 35-year-old Stern became the league’s top attorney. Six years later, Stern was promoted to the commissioner, replacing O’Brien. Stern was only 41 years old at the time. It was a remarkable career ascension that would inspire many law students and young sports attorneys in the decades ahead.

2. Stern tactics: be willing to lock out the players because they will eventually capitulate

As commissioner, Stern oversaw a long list of legal controversies. Stern often applied hardball tactics and usually to the NBA’s advantage. Most notably, Stern approved the locking out of NBA players on four occasions: 1995, 1996, 1998 and 2011. Even though locking out players aggravated fans, media, broadcast partners and arena workers (among others), Stern felt it was advantageous to the long-term health of the league.

As Stern promised, the lockouts pressured NBA players into accepting employment terms that would increasingly favor the one and only group who decided whether to keep or fire Stern and how much he would be paid: the owners. Indeed, Stern’s strategy produced a number of decisive collective bargaining agreement “wins” for the owners.

In 1995, Stern convinced locked out players to accept a rookie wage scale which dramatically lowered rookie salaries. Also, by slotting rookie salaries with draft spots, the scale greatly reduced the incentive for a rookie to “hold out” for more money—the slotting prevented his team from paying him more money, even if the team wished to do so. The days of Glenn Robinson (the No. 1 pick in the 1994 NBA draft) securing a 10-year, $68 million rookie contract were over.

Five years later, a different group of locked out players agreed to “maximum salaries.” The new system prevented Chicago Bulls star (and future Charlotte Hornets owner) Michael Jordan, who in 1997 had signed a one-year, $33.1 million contract, from landing a similar one-year deal.

In 2011, yet another group of locked out players agreed to a drop in their share of basketball-related income from 57% to 50%. This amounted to hundreds of millions of dollars being directed from players to owners.

Stern kept winning and winning for the owners.

3. Stern understood the power of league expansion, the growth of TV contracts and maximizing the global impact of legendary players

The NBA also grew by seven franchises under Stern’s watch. Expansion is generally a sign of league health since it means, among other things, that groups are willing to spend millions of dollars, and later billions of dollars, to buy a franchise. Those who invested in NBA teams under Stern’s leadership did quite well. Take Donald Sterling, who I have more to say about below. For now, consider that Sterling purchased the Clippers in 1981 for $12.5 million, an amount worth about $32 million in 2014 dollars. He would sell it (albeit under duress) in 2014 for $2 billion—a massive increase in inflation-adjusted dollars.

As more Americans obtained cable TV and subscribed to ESPN in the 1980s, the NBA became much more popular. Stern wisely capitalized on this fundamental change in television viewing habits by negotiating increasingly lucrative TV deals. Of course, the players deserve most of the credit. Stern benefited by several highly marketable players leading the NBA in the 1980s, 1990s and 2000s. They included Jordan, Magic Johnson, Larry Bird, Charles Barkley, Karl Malone and, later on, Shaquille O’Neal, David Robinson, Kobe Bryant, Kevin Garnett and LeBron James.

Stern took advantage of these marquee players’ presence by negotiating apparel, merchandise and video game deals. Those deals brought new sources of revenue to the league. Likewise, Stern enhanced the NBA’s brand by marketing his players to new markets, including Toronto and Vancouver which landed expansion teams. He also pursued globally-minded initiatives such as international exhibitions and supporting NBA players playing on the Dream Team (the 1992 U.S. Men’s Olympic Basketball Team).

4. Wisely or not, Stern won the age restriction battle

Stern sparked controversy at times. This was true when he pushed for a legal change to the age eligibility rule, a move that he believed would improve the overall quality of play. Prior to 2006, players could “jump” from high school to the NBA. Bryant, Garnett, James, Tracy McGrady and other stars had made the jump. Stern nonetheless harbored concerns about young players and their development upon entering the league.

In 2001, Stern told media, “If these kids have the ability to get a little more maturity, a little more coaching, a little bit more life experience overall, that’s good.” The reference to “these kids” troubled some since 18-year-old adults joining the NBA (or those same adults joining MLB, NHL, pro tennis, pro golf, acting, music, the U.S. Armed Forces and numerous other occupations) were adults, not “kids.” The fact that the “kids” who sought to enter the NBA at age 18 were usually African American also invited criticism for Stern’s choice of words.

Stern nonetheless prevailed. He convinced the National Basketball Players’ Association to accept a revised eligibility rule. Beginning with the 2006 NBA draft, in order for an American player to be draft eligible, he must be at least 19 years old and at least one NBA season must have elapsed since when he graduated from high school or, if he didn’t graduate, when he would have graduated. It should be noted that Stern’s successor, Adam Silver, is reportedly less supportive of this rule and is open to restoring the lower age limit.

5. Stern was “too stern” with Latrell Sprewell

Stern also received both praise and critique for his handling of player conduct matters. In 1997, Stern suspended Golden State Warriors guard Latrell Sprewell for one year after Sprewell choked his coach, P. J. Carlesimo. An arbitrator, Fordham Law School dean John Feerick, later reduced the suspension to 68 games on grounds that Stern’s punishment was excessive and unjustified in light of precedent.

Stern would complain to The New York Times that Feerick “missed the opportunity to send a message with respect to all the good things sports can stand for . . . we are more than a little disappointed.” Stern, however, fully honored the decision. As an attorney, he was no doubt respectful of the views of a law school dean.

6. Fallout from the Malice at the Palace

Player discipline also garnered headlines in 2004 when five NBA players—Ron Artest, Stephen Jackson, Jermaine O’Neal, David Harrison and Anthony Johnson—were charged with crimes for their roles in the “Malice at the Palace” at the Palace of Auburn Hills. The incident was, in a word, a disaster for the NBA. A fan tossed a cup of Diet Coke on Artest, who rushed up to the stands and attacked a man who he mistook as the cup thrower. It led to a riot. All of the players reached plea deals with prosecutors and avoided jail time, but nine players were suspended for a total of 146 games.

The incident reflected poorly on NBA leadership, including Stern, particularly since it suggested that NBA games weren’t safe for families. It also signaled that at least some players were anything but role models for children. The NBA responded with a number of measures, one of which was adding security at games.

7. The Dress Code: racist, paternalistic or smart business?

A year after the Malice at the Palace, Stern pushed for the NBA to adopt a player dress code. It required that players wear “business casual” attire to games and on team travel. The code forbid chains, pendants and medallions players wore over their clothing.

Some players, including Gary Payton and Stephen Jackson, lambasted the policy as “racist” while others, including Alonzo Mourning and Dwayne Wade, were more supportive. In a league where corporate groups buy many of the season’s tickets, the policy was generally seen as improving the NBA’s image.

8. The Lost Chris Paul Trade: Stern wearing two hats as NBA commissioner and Pelicans owner

Stern’s tenure as commissioner included overseeing the NBA during the financial crisis of 2008. The crisis caused financial problems for some owners. George Shinn, the owner of the New Orleans Pelicans (then called the Hornets), experienced particular financial trouble and wished to sell the team. Timing complicated matters. Selling an NBA franchise during the Great Recession wasn’t easy. Without a viable bidder, the NBA agreed to buy the Pelicans from Shinn. The league planned to hold onto the franchise until it could find an attractive buyer.

Stern arguably didn’t anticipate the degree to which the league owning a team would create awkwardness for him and undermine his duties as commissioner. This was clear in 2011 when the Pelicans, Los Angeles Lakers and Houston Rockets came to an agreement on a three-way deal that would have sent Pelicans point guard Chris Paul to the Lakers. In return, the Pelicans would have netted a first-round pick and four players (Kevin Martin, Luis Scola Lamar Odom and Goran Dragic).

Stern rejected the proposed trade, claiming that it wasn’t in the best interest of the Pelicans. He would later tell Sports Illustrated writer Chris Ballard Pelicans general manager Dell Demps has negotiated a poor return for the Pelicans.

However, it’s been reported that a number of team owners—remember, and as noted above, the owners were Stern’s boss—opined to Stern that it would be negative for the league if Paul joined Kobe Bryant in L.A. Stern insisted he made the decision only with respect to the Pelicans, but the dual position of league commissioner/de facto team owner was ill-conceived. Stern, in hindsight, should have either found a buyer earlier or divested himself from any role with the Pelicans.

9. Problematic handling of the Seattle SuperSonics

Stern attracted criticism for his handling of the Seattle SuperSonics and the eventual loss of an NBA franchise in the country’s 13th largest media market. The Sonics’ story has many twists and turns, and a terrific website on that topic is Sonics Rising.

The Cliffs Notes version is that Seattle had featured a loyal and passionate fan base for the Sonics, which played there from 1967 to 2008. In 2006, Starbucks CEO Howard Shultz sold the franchise to Oklahoma City businessman Clay Bennett, who pledged to make a good faith effort to keep the team in Seattle. Bennett demanded public (taxpayer) funding for a new arena. Those demands weren’t met. He and the City of Seattle then litigated the lease obligation in Seattle’s Key Arena. Bennett effectively prevailed and moved the franchise to Oklahoma City, where they were renamed the Thunder.

In 2013, Seattle business leaders spearheaded a bid to relocate the Sacramento Kings to Seattle. An agreement was reached whereby Chris Hansen would buy the Kings from the Maloof family. The deal included a new arena in Seattle. The NBA Board of Governors needed to approve the transaction. Instead, Stern permitted other potential buyers to offer terms to the Maloofs with an accompanying pledge to keep the Kings in Sacramento. On behalf of a Sacramento-based investment group, Vivek Ranadivé presented an offer that the Board would approve. Many in Seattle felt that the city had been used by the NBA—and in particular by Stern—as leverage to increase the price of the Kings remaining in Sacramento.

While there is no longer an NBA franchise in Seattle, I predict the Sonics will return in the 2020s.

10. Tolerating the bigotry of Donald Sterling

In my Top 10 NBA legal controversies of the 2010s story, I list Silver’s ouster of Sterling as the most important legal development for the NBA during the last decade. I was less effusive of how Stern handled Sterling:

It didn’t take very long for the NBA’s new commissioner in 2014 to make his mark. Adam Silver succeeded where his predecessor, David Stern, failed: removing Donald Sterling from the league.

Sterling was an insubordinate figure long before his infamously racist tirade. An attorney and real estate developer, Sterling had bailed out the NBA in 1981 by purchasing the San Diego Clippers for $12.5 million. The team was losing on the court and losing money off the court at a time when the NBA was an afterthought to many sports fans. This was an era before cable TV and ESPN took off and where NBA Finals games were shown on tape delay. Teams relied heavily on gate receipts for revenue. There was talk of league contraction, meaning franchises could have been terminated.

Sterling quickly became a thorn in the side of the NBA. He pledged to keep the Clippers in San Diego, but then, over league objections, moved the franchise to Los Angeles, which already had the Lakers. This prompted the NBA to sue Sterling for $25 million. Sterling countersued the NBA for $120 million. They settled. Given that the Clippers still play in Los Angeles, it’s no mystery as to who won that settlement.

Sterling also managed his team in objectionable, if not illegal, ways. He refused to pay bills and bizarrely contemplated having home games played without a live audience in order to avoid having to pay for concession workers and security. Sterling also openly talked about tanking in hopes of landing the top pick in the 1982 NBA draft. Years later he allegedly instructed scorekeepers to deflate players’ statistics so that the players could be paid less.

There were also sexual harassment lawsuits brought against Sterling, who along with his wife, Shelly Sterling, was sued by the U.S. Justice Department for discriminating on the basis of race and national origin in rental properties (the lawsuit led to Donald and Shelly Sterling paying a multi-million dollar fine). Former general manager Elgin Baylor also sued Donald Sterling for race discrimination, claiming that Sterling referred to his players as “poor black boys.”

Through it all, the NBA acted like a curious onlooker. The league took almost no action against Sterling, who was 80 years old in 2014. He clearly wasn’t afraid of David Stern or Sterling’s predecessor, Larry O’Brien. By all accounts, Sterling felt emboldened to do whatever he wanted. That changed in April 2014, two months after Silver took over as commissioner.

11. The Tim Donaghy scandal

The NBA experienced a major officiating scandal in the mid-2000s. Referee Tim Donaghy pleaded guilty to federal crimes for receiving cash payments in exchange for providing advice to gamblers on NBA games, including games that he officiated. There are various reports, and statistical findings, that Donaghy went so far as to conspire with others to “fix” games over a period of several seasons.

The scandal was an embarrassment to the NBA, in part because league officials weren’t aware of Donaghy’s actions. Hindsight is 20/20, but inadequate monitoring of game data was one reason why the NBA didn’t uncover the problem. It’s also not clear when the NBA would have figured it out. FBI agents and Vegas betting experts, including R.J. Bell, detected the problem. Some lawmakers were outraged. Congressman Bobby Rush, who chaired the House Subcommittee On Commerce, Trade and Consumer Protection, demanded a meeting with Stern to discuss potentially “one of the most damaging scandals in the history of American sports.”

The NBA’s view on sports betting has changed dramatically over the last decade. Shortly after becoming commissioner, Silver openly advocated for the right to bet on sports, albeit in a framework where states used similar rules. Since the U.S. Supreme Court declared in the 2018 Murphy v. NCAA decision that states can legalize sports betting, the league has embraced betting opportunities. To that end, it has signed partnerships with MGM Resorts, Sportradar and Genius Sports.

The Donaghy matter is now a distant event. It remains one of a handful of instances where Stern’s run as NBA commissioner showed its limitations. No one is perfect, and Stern was no exception. On the whole, though, his tenure was very impressive.

Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.