Sterling Trial Day 4: Shelly Strikes Back
After Donald Sterling reduced her to tears by calling her a "pig" at the end of her testimony on Day 3 of trial, Shelly Sterling calmly took apart Donald Sterling's case during her testimony on Day 4. She provided vivid detail of (1) Donald's panic that the NBA was about to terminate his ownership of the Clippers, (2) his participation in the decision to sell 100% of the team, (3) his joy on hearing that Shelly had obtained $2 billion from Steve Ballmer and (4) his temper tantrum that accompanied his last minute change of heart. She also revealed that Donald Sterling had larded the Trust with $500 million in debt, requiring the sale of the team now that the Trust has been dissolved. All in, it was another bad day for Donald Sterling.
Trial will continue on July 22 with closing arguments scheduled for July 28. Shelly has concluded her case, including Donald as an adverse witness. Donald will present his witnesses when trial continues.
Please follow below the fold for the details on Day 4, with a cameo appearance by Barbara Walters.
Shelly Provided A Plausible Account Of Her Decision To Seek Neurological Testing
Shelly testified that she was motivated to seek neurological testing of Donald after his horrific interview by Anderson Cooper. Donald was supposed to apologize to Magic Johnson but ended up insulting him as a man whose only contribution to the African-American community was getting infected with HIV.
She testified that her concern was heightened by Donald's bizarre backstage behavior when they prepared for a joint interview by Barbara Walters. Donald picked an irrational fight with a crew member, leading Walters to refuse to allow Donald Sterling to appear on camera. According to Shelly, Walters suspected that Donald was suffering from dementia and would not exploit him by putting him on air.
Shelly firmly rejected the suggestion on cross-examination that she had sought the neurological examinations in order to oust Donald as co-trustee. She stated that (1) she was unaware of that possibility and (2) at the time he was tested, there was no reason to seek his removal because he had signed an authorization for her to sell the team. "I had in my mind my husband's welfare. I wanted to know what was wrong with my husband's mood swings. I was concerned for his health."
This testimony is likely to be taken as credible by Judge Levanas. By all accounts, it was the only time that Shelly Sterling showed strong emotion during her testimony. It is consistent with her testimony that she still cares for him and Donald's testimony that she did not know the inner workings of the Trust agreement.
Important side note - someone on Shelly Sterling's team made a huge mistake by leaking to the New York Times the blow-by-blow of the execution of the plan to push Donald Sterling out of the process by having him declared mentally incapacitated. It has given Donald's attorneys fodder for cross-examination of Shelly and the doctors and Donald talking points for his testimony.
Donald Sterling Was Panicked At The Prospect Of The NBA Terminating His Franchise
According to Shelly Sterling, Donald Sterling was deathly afraid that the NBA owners would vote to terminate his franchise at a vote scheduled for June 3. "His biggest concern was to stop the sale of the team by the league. He knew that they were going to vote us out." To avoid that possibility, he encouraged Shelly to meet with NBA Commissioner Adam Silver to suggest that the team be sold in advance. To this end, Donald signed a letter authorizing Shelly to negotiate the sale of the team.
Although Shelly sought to obtain approval for the Sterling Family Trust to retain a percentage of the team, Commissioner Silver refused to entertain that plan. When Shelly reported back to Donald, he acquiesced in the sale of 100% of the team. "He was nice. He was really nice. He was on the same page I was." [editorial note: I suspect that Donald Sterling feared what the NBA would find if they seized the team and subjected the financial records to months of due diligence].
Donald Sterling Celebrated When He Learned That Shelly Had Received The $2 Billion Bid From Steve Ballmer
Shelly testified that her husband was in the loop during the entire auction process. He knew that 100% of the team would be sold. He participated in the discussions that led to a multi-round auction. He quizzed Shelly about her conversations after she interviewed each of the bidders. Shelly testified that Donald told her that he was proud of her when she received the final $2 billion bid from Steve Ballmer.
Donald Sterling Threw A Temper Tantrum When Asked To Sign The Binding Term Sheet
On May 29, when Shelly Sterling had finalized the deal to sell the team to Steve Ballmer, Donald Sterling suddenly switched to adamant opposition to the sale that he had been championing. According to Shelly's testimony, Donald started to yell at his attorneys Max Blecher and Bobby Samini [who are representing him in this trial] for advocating the sale and made their houseguest Lawrence cry. Thirty minutes after Donald Sterling refused to sell, Shelly's attorney Pierce O'Donnell issued the paperwork certifying the removal of Donald Sterling as co-trustee.
Donald Sterling Loaded $500 Million In Debt On The Sterling Family Trust
One important issue for Judge Levanas to resolve is whether Shelly Sterling has the authority to carry out the sale of the team now that Donald Sterling has exercised his right to dissovle the Sterling Family Trust. According to the terms of the Trust, the trustee is to return the property held in trust to Donald and Shelly as soon as practical. Donald has argued that Shelly must that Shelly must return his half of the team immediately.
Shelly Sterling's testimony provides strong evidence why she must sell the team in order to carry out her duties as trustee. It turns out that Donald Sterling had taken out $500 million in loans against the assets held in the Sterling Family Trust. The dissolution of the Trust allowed the lenders to demand immediate repayment, which they have. The Sterling Family Trust does not have nearly enough cash to repay those loans without liquidating assets. As a result, the Clippers must be sold in order to reapy the loans. And if the team were to be sold now by the Sterling, or if the team were to be sold by the NBA after the Sterlings were terminated, it is highly unlikely they would get $2 billion in the shadow of Donald Sterling's battle cry that he will fight the sale to his death.
What To Expect When The Trial Resumes
On July 22, Donald Sterling will have the opportunity to present his case. He may take the stand again to answer questions on topics not raised during his initial question by Shelly's attorneys.
The court has identified three open issues to be addressed:
Whether Donald Sterling was properly terminated as co-trustee.
Whether Shelly Sterling Can Consummate The Sale After Donald Sterling Revoked The Trust.
Whether Shelly Sterling Can Sell The Team If Donald Sterling Appeals An Adverse Ruling
I suspect that Judge Levanas is strongly predisposed after Shelly's compelling factual presentation and Donald's bewildering behavior to find that Donald was properly terminated as co-trustee. Shelly's testimony provides a strong factual basis to rule that she can complete the sale of the team to avoid defaulting on the $500 million in loans or enduring a firesale.
The final issue is a pure question of procedural law. I suspect that Judge Levanas will strain to use his discretion to allow the sale during the pendancy of an appeal.
It was a bad week in court for Donald Sterling.