In case you’re not a sports fan, or you live under a rock –and many would say the two go hand in hand– this past Spring was filled with talk radio topics and blogs about Donald Sterling, the soon-to-be former owner of the Los Angeles Clippers, a professional basketball team. Topics ranged from racism (and hypocrisy) to geriatric cradle robbing to privacy rights.
Sterling is a billionaire in his 80s and is one of the more hated sports owners for two reasons: perpetual futility of the Clippers for close to 3 decades (until the past two seasons) and shrewd landlord practices including shades of racist views and approaches.
Donald, who appears to have nothing more than a business relationship with his wife, has been openly dating young, female “friends” who have no marketable skills –as seems to be the case with dozens of people in reality t.v. these days. In the Spring, one such friend (who I refuse to give a line of publicity to) capitalized on her friendship, receiving a house, car and all kinds of clothes and jewelry. And, as is common with this type of sycophant, she wasn’t satisfied and turned to extortion. When she didn’t get her way, a voice recording of a private conversation was “unintentionally” released to the public where Sterling stated his preference that she not bring men of a certain race to Clippers games.
Suddenly, and despite 30 years of knowing Sterling was a racist, everyone reacted as people seem to do on Twitter, Facebook and traditional media. The NBA was, of course, faced to deal with one of its elephants in the corner of the room by fining Sterling and banning him from his own team’s games. I won’t go into the legalities of the NBA franchise, but the NBA seemed to have grounds to do so.
Shelly, seizing the opportunity to mitigate damages, sought to sell the Clippers, get max dollar for it, and allow everyone to move on. The Clippers, however, were owned by the Sterling Family Trust (or whatever it’s named) and Donald was her co-trustee meaning she could not sell the team –or any large asset– without his signature. What to do?
Fortunately, the scandal had Donald spinning, acting questionably, and making contradicting statements every 12 hours or so. Shelly brought Donald to two physicians to determine whether or not he showed signs of dementia, or incapacity. Why? Because the Trust dictated that either co-trustee could be relieved of their powers if they were deemed incapacitated by two doctors. Both doctors diagnosed him as incapacitated, Shelly sold the team, and the Sterlings will make $2 Billion while the NBA quietly sticks the elephant back in the corner (what, you thought he was the only racist owner?).
As expected, Donald sued when he came out of his funk. On Monday, July 28, 2014, the LA Superior Court ruled that the doctors who had examined Donald Sterling and ruled him mentally incapacitated had acted appropriately. The trial was narrow in scope, focusing on three issues: whether Shelly Sterling had followed the directions of the trust in removing her husband as co-trustee; whether the probate court had jurisdiction over the matter; and if Shelly Sterling won, whether the sale could proceed even if the decision was appealed.
Although Donald is planning to appeal, he will likely lose the appeal for boring legal reasons you don’t want to read about. But Donald should be happy that the Trust worked exactly as it was designed to.
What if Donald was tired of owning the team and wanted to sell it, but Shelly didn’t want to? And what if Shelly was suffering from early Alzheimer’s and was irrational in her refusal? He would have been able to avail himself of the very clause Shelly used. Get two doctors to properly diagnose her, remove her as co-trustee, and handle the assets as he sees fit.
Many of you may not know that you don’t have to choose two doctors. You can pick anyone to make a determination of incapacity, including the other spouse. You can require a court order that takes months to accomplish. Donald probably wishes he chose this last option, but I’m sure somewhere in the back of his head, he wanted an easier way to manage the Trust if Shelly was incapacitated.
As one of my standard “horror stories” I tell in seminars I give, there are other power triggers that one spouse can use against another because of shoddy wording. I once had a client whose husband was taking money from the community to give to a 20-something fitness instructor he had a crush on. The Trust revealed that he actually had the power to create a second trust, transfer all the property there, and give her everything had he wanted to. Both co-trustees had that power. Scary. If the Sterling Trust contained that clause, Shelly could have done whatever she wanted without even seeking doctors’ opinions. (The happy ending in my story is that we used that clause to transfer the property and kept hubby from dipping into the funds anymore).
At the end of the day, Donald lost his case. He really seemed to be fighting for his reputation and enjoyment of being a team owner and can’t cry too hard over splitting $2 Billion when he paid only $12.5 Million back in 1981. But, as a successful, shrewd businessman, I’m sure there’s a part of him that appreciates his Trust can be used as he intended, if the need arises.
And this is why it’s always a good idea to have your Trust reviewed every few years.