Sterlings turn to lawsuits in cases great and small

Her broken ankle. His aching heart. Marques Johnson’s ruptured disk. Bill Walton’s bum foot. Whatever the affliction, Donald and Shelly Sterling have long favored one particular cure: a lawsuit.
May 21, 2014
LOS ANGELES, CALIF - FEBRUARY 26, 2011: Donald Sterling, center,, owner of the Los Angeles Clippers, watches the Clipper game against the Boston Celtics at Staples Center in Los Angeles, on on February 26, 2011. At left is Sterling's wife, Rochelle. (Gary Friedman/Los Angeles Times/MCT)

 

LOS ANGELES — Her broken ankle. His aching heart. Marques Johnson’s ruptured disk. Bill Walton’s bum foot. Whatever the affliction, Donald and Shelly Sterling have long favored one particular cure: a lawsuit.

Over the last four decades, the billionaire couple have aggressively pursued all manner of litigation from small claims cases over a few thousand dollars to appellate matters worth millions. They have sued former Los Angeles Clippers players and coaches, neighbors, the Peninsula New York hotel, tenants, employees, graffiti vandals and even one of his mistresses.

Now facing their greatest challenge — the NBA’s attempt to force them to sell the Clippers — it is no surprise that the Sterlings are girding for a legal fight. Shelly Sterling has hired a lawyer who vowed to “go to war” to preserve her stake in the team while her estranged husband, a former trial attorney, has indicated that he will take the case all the way to the Supreme Court.

The record of suits filed by the Sterlings and their various business entities, as well as interviews with those involved, suggest that the NBA should expect a protracted and contentious dispute. Opponents and a former lawyer for Donald Sterling said the real estate mogul regards lawsuits as a stalling tactic and has initiated them even when the facts and the law were against him.

“I think he knew he wouldn’t win, but it would delay having to pay,” said H. Lee Watson, who worked as Sterling’s in-house counsel in the 1980s. “He was all about cash flow.”

The antitrust lawyer Donald Sterling recently hired to represent him to the NBA declined comment.

Greg Garbacz, who has represented Sterling in a variety of matters over the last decade, said it would be incorrect to portray Sterling as overly litigious.

“Sometimes businesses have to sue to protect their rights,” he said.

Although less prominent in the litigation, Shelly Sterling has often sued alongside her husband and acted as a witness in cases concerning their rental empire. She also filed her own claims over the years, including the caustic March complaint against V. Stiviano that appears to have led to the release of the recording of Donald Sterling making racist remarks.

In a statement, Shelly Sterling said she filed lawsuits “as a last resort to protect my assets, recover personal costs or safeguard business operations.”

“I don’t enjoy going to court or suing people. But, as is true for many people with means or a large business, litigation is an unfortunate fact of life,” she said, adding that “the number of court actions have been relatively few given the size of our business.”

For many years, coaches and players who arrived as saviors at the perennially terrible Clippers often left as goats. They were goats, however, that the team owed money and when Donald Sterling did not want to pay, he often headed to court.

Sterling fired coach Mike Dunleavy in 2010, but refused to pay him $6.75 million remaining on his contract. When Dunleavy asked for private arbitration, as provided under the contract, Sterling sued him for fraud.

“I think Mr. Sterling just thought he could delay the matter,” Dunleavy’s attorney Miles Clements said. “If he lost in court he could appeal it, string it out for a couple years.”

Sterling’s lawsuit was dismissed and an arbitrator ultimately awarded Dunleavy $13 million in salary and deferred compensation.

In 2001, Sterling sued Bill Fitch, another fired head coach mired in a dispute over money. Sterling argued that he should not have to pay $4 million because Fitch had failed to look for another job as the terms of his contract required. The suit and Fitch’s countersuit dragged on for a year and a half, becoming increasingly personal and unpleasant. Sterling’s side accused Fitch of lounging around on the golf course instead of looking for work with one Clippers executive testifying that the veteran coach should have taken a job at McDonald’s, according to court filings. Ultimately, the case was settled on the eve of trial.

“My sense was their marching orders were to be as tough and as strong as they could be and if we were going to make it to trial, they were going to make it as hard on Fitch as possible,” said Paul Murphy, Fitch’s attorney.

After Marques Johnson, an all-star forward, suffered a debilitating neck injury in a 1986 game, the Clippers stopped cutting him checks. Sterlings’ lawyers cited a clause in his $1.3 million contract that said the team could delay paying him in case of a permanent disability.

When Johnson asked for NBA arbitration, Sterling responded with a fraud suit, accusing him of failing to disclose a past cocaine problem during contract negotiations. The suit contended that Johnson wasn’t entitled to any more money and in fact, he and his agent should have to pay the Clippers for “losses to the overall quality of the team,” including decreased ticket sales.

During the dispute, Johnson’s toddler son, Marques Jr., drowned. An acquaintance of Sterling approached Johnson and said the team owner was sympathetic to his grief and wanted to speak to him, Johnson recalled.

“I called Donald and he starts yelling at me and berating me and telling me how he is going to ruin me financially,” Johnson said. He settled the case out of court for less than he wanted, he said. “I was worn down psychologically, spiritually and financially.”

Sterling’s attorneys also went to court in a bid to avoid paying Bill Walton, who had struggled with the Clippers because of foot injuries. He decamped to Boston in 1985 and quickly helped Larry Bird win the championship. Sterling still owed Walton money under a deferred compensation plan, but in 1988, the team filed a fraud suit, alleging that the player had lied about being in “first class physical condition” a decade earlier during contract negotiations.

The suit alleged that Walton “repeatedly engaged in certain activities” which “caused him to experience sinus infections” and other problems. It did not specify what those activities were. A subsequent letter from Sterling’s lawyer to Walton’s representatives was similarly vague. The team had “overwhelming evidence ... from several sources establishing improper conduct by Mr. Walton” and planned to ask a court to make public a confidential deposition containing “admissions” by the star, according to a copy of the letter in the court file.

As in Johnson’s case, the Clippers asked not only to stop paying Walton, but also to recoup money already paid him. During a closed-door arbitration hearing, a lawyer for Sterling disclosed that they were preparing to accuse him in court of using drugs from the time he was a college star at UCLA through his days at the Clippers, according to a transcript of the hearing in the court file.

Walton’s attorney called the suit “a disgraceful action” and an “attempt by the Clippers ... to extort ... a settlement of the money” owed under the contract, according to the transcript. The arbitrator ordered the Clippers to pay Walton more than $68,000 in missed payments. Undeterred, Sterling’s lawyers filed another version of the suit, but a judge tossed it.

Walton did not respond to messages seeking comment.

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Sterling has said that growing up in a working-class Jewish family in the Boyle Heights section of Los Angeles in the 1940s, he did not choose the law as much as it was foisted upon him by his mother.

“ ‘You will be a lawyer,’ she said,” he told the Los Angeles Times in 1984.

Within six months of his admission to the bar in 1961, he was filing headline-grabbing suits. He sued singing cowboy Gene Autry for $5.1 million on behalf of a widow and two sons who were injured in a car accident. The case was settled before trial.

Up against actress Carol Lynley and a team of lawyers in her 1963 divorce, Sterling came on “like a tiger shark,” her former husband recalled.

“He forced (legendary director) Otto Preminger to fly from a movie set in New York and give a deposition in his office,” Sterling’s client, Michael Selsman, told the Times in 1996. In the end, Lynley had to pay Selsman $25,000.

Arn Tellem, who was a lawyer for the Clippers before becoming a top sports agent, has said one of Sterling’s strong suits in litigation was figuring out what his opponents wanted — and what they feared.

He had “a brilliant sense of what the other side was thinking, whether they had options or not, what motivated them to settle,” Tellem told the Times in 1996.

When Sterling’s mistress, Alexandra Castro, broke off their three-year affair in 2002, he threatened to sue her if she did not resume the relationship, she wrote in a court declaration the next year.

“He told me ... he would force me to hire attorneys and spend everything I owned so that I would go broke, and be forced to go back to him for financial support,” she wrote.

She refused and Sterling sued her for embezzlement. Over the next year and a half, Sterling and his wife filed three additional legal claims against her, including an application for a restraining order in which Shelly Sterling said Castro had threatened to kill her and her husband. A judge granted the restraining order.

During the case, Castro’s attorney reported that his office was burglarized and recordings of voice mails Sterling and his sister left Castro were stolen, according to a letter in the court file. The lawyer, Douglas Bagby, wrote to opposing counsel saying he “had no intention of seeking to prove that Mr. Sterling orchestrated the burglary,” noting that he had “other copies of the tapes.” Bagby, who has practiced family law for 42 years, said the litigation ranked among the most contentious of his career.

Under oath, Donald Sterling initially denied a personal relationship with Castro. After being confronted with photos, love letters and other evidence, he reversed course and described their relationship as her offering sex for money and him paying her if she performed well, according to deposition transcripts.

Castro and her lawyer asked a judge to refer both Sterlings — Shelly had backed up some of his claims in her own deposition — to the district attorney for perjury. The request was denied.

“I came away having a view of Donald that was clearly he is willing to say anything under oath if he thinks it will give him an advantage in the litigation,” Bagby said. Castro settled the cases and reconciled with the Sterlings. In a statement Friday, Shelly Sterling said she had “no recollection” of the perjury allegation, adding, “I trust the judge’s decision that the claims lacked merit to warrant an investigation.”

Donald Sterling’s combativeness as a witness rankled attorneys in other cases. He stormed out of at least two depositions, calling the opposing attorney in one “a creep.” When a lawyer for tenants who lost property in a fire noted the absence of alarms in the building, Sterling responded with a shrug: “So what?”

His poor performance under oath was a running joke among his lawyers, said Watson, Sterling’s former in-house counsel.

“He didn’t seem to understand how he was coming off or maybe he didn’t care. It was the kiss of death to try to put him on the witness stand,” he said. Watson was convicted of fondling two girls in 1998 and placed on probation by the California bar for four years. He is retired and no longer practices.

The Sterlings, whose net worth is estimated at $1.9 billion, have been just as aggressive in court fights over relatively small sums of money. In 2000, Shelly Sterling successfully sued a man in small claims court who owed her $2,000 and two years ago, she sued a body shop over the cost of repairs to a family vehicle. When she fractured her ankle in a fall on an icy walkway at the Peninsula New York hotel in 1996, she sued to recover $15,000 medical expenses. She and the couple’s son Scott, who died last year, sued former neighbors in Beverly Hills in 1998 over injuries he had suffered 10 years earlier in a dog attack. They ultimately settled for $25,000, court records show.

Shelly Sterling noted Friday that the Rottweiler attacked her son “viciously” and said that in that case and in the hotel fall, “the responsible parties covered our expenses.”

Several years ago, a West Hollywood code enforcement officer discovered that one studio apartment lacked a proper permit. The officer sent a letter to the Sterlings’ Beverly Hills headquarters explaining the situation and enclosing an application to participate in a new program to help landlords easily obtain such permits. Their response was a $6.3 million lawsuit accusing the tenant of fraud and naming the city as a co-defendant.

“I really didn’t understand it,” recalled Alison Regan, a city attorney. “I thought maybe they had misunderstood.”

An attorney for the Sterlings told Regan that “while he knew the unit was illegal, his client was unwilling to take any steps to either legalize or eradicate the unit,” she wrote in a court filing.

In the lack of a permit, the Sterlings’ lawyers saw grounds to evict the longtime tenant, an unemployed man paying less than $500 a month. His lawyer accused them in a court filing of trying to flout rent-control laws and predicted that his client would become homeless if the suit succeeded. The Sterlings’ attorneys pressed the case to trial, trotting out an obscure 19th century property law and summoning Shelly Sterling to the witness stand.

The city and the tenant ultimately prevailed, but only after a year and a half of costly litigation.

“It was unfortunate,” Regan said, noting the loss of “time, money and judicial resources.”

 

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