The Los Angeles Clippers vehemently refute the NBA’s findings in the Kawhi Leonard salary-cap circumvention investigation, but converting that opposition into legal action will be challenging. That’s mainly because of the finality of league decisions and judicial deference to decisions of private associations.
The NBA on Wednesday concluded that the Clippers and several team officials, including owner Steve Ballmer, conspired to violate the salary cap by arranging for Leonard to receive extra compensation through endorsement deals for which the player did not have to perform services. Article XIII of the CBA prohibits salary-cap circumvention, meaning arrangements by teams to compensate players outside their employment contracts. Those arrangements undermine fair play and furnish teams with an unfair advantage over competitors.
The findings were based on a report issued by Wachtell, Lipton, Rosen & Katz, which conducted 73 interviews with 60 people and reviewed more than 200,000 pages of documents obtained from individuals and organizations. Among other penalties, the NBA stripped the Clippers of five first-round picks, suspended Ballmer for a year and fined Leonard $700,000.
Of legal importance, the NBPA agreed with the league’s punishments, and Leonard signaled that he accepted responsibility for not carefully monitoring those around him. That eliminates the prospect of a grievance proceeding involving a neutral arbitrator, and it’s an important distinction from the last time an NBA commissioner stripped a team of five first-round picks.
More than 25 years ago, the NBA imposed that punishment on the Minnesota Timberwolves for a cap-circumvention scheme in which they paid forward Joe Smith less on initial one-year contracts so they could sign other players, in exchange for promising to later sign Smith to a long-term, lucrative deal after acquiring his “Larry Bird rights,” which allowed the team to exceed the cap to retain a player.
The NBA also voided Smith’s 1999–2000 contract with the Timberwolves and his previous Timberwolves contract from 1998–99. Smith and the NBPA then used arbitration provisions in the collective bargaining agreement to challenge Stern. After reviewing the facts, an arbitrator upheld Stern’s decision to void the contracts. With Leonard, the NBA imposed a penalty that was apparently acceptable to Leonard and the NBPA, and thus there won’t be an arbitration challenge that extends the controversy.
The Clippers deny wrongdoing and “vigorously challenge the findings.”
David Kelly, an attorney for Ballmer, wrote a letter to NBA Commissioner Adam Silver on Wednesday in which Kelly argued that the NBA’s adverse findings and severe punishments don’t match what league officials had indicated to Ballmer and the Clippers. Kelly went so far as to call the NBA’s investigation a “witch hunt” that failed to adhere to basic legal notions of fairness, such as notice and the opportunity to respond, warning that the Clippers “are exploring every legal remedy to address this gross injustice.”
“League counsel,” Kelly wrote, “has acknowledged in our discussions that the league does not believe there was an agreement between the Clippers and Aspiration to funnel money to Kawhi Leonard.”
Kelly also maintained that NBA attorneys acknowledge Ballmer “was a victim” of fraud inflicted by Joe Sanberg, the former co-CEO of Aspiration, who was recently sentenced to 14 years in prison for fraud.
Ballmer’s attorney also insists that, while Silver has talked about ensuring a “fundamental sense of fairness” in the investigation, the Clippers were given less than an hour’s warning “and no opportunity to respond” before the NBA released its findings on Wednesday.
Further, Kelly charges that the NBA changed its “theory” of wrongdoing “at the 11th hour” to find it problematic that the Clippers introduced Leonard to team vendors and sponsors. The Clippers maintain that those introductions “are both proper and commonplace in the league,” that no rule prohibits them and that the league has known about the introductions for years without acting.
As Kelly sees it, the NBA has failed to adhere to basic notions of “due process,” which require procedural fairness and notice that a particular action is considered wrong and can trigger a punishment, and is “retroactively punishing the Clippers for violating a rule that never existed.”
Forecasting a lawsuit
Kelly’s letter suggests that the Clippers are contemplating a lawsuit. The Clippers could draw from the legal playbook of former owner Donald Sterling, on whom Silver imposed a lifetime ban and who, through a legal battle with his wife, Shelly Sterling, lost control of the trust that owned the team. The Clippers could sue the league for violating antitrust law, contract law and fiduciary duties, and accuse the league of misrepresentation and interference. The team could seek an injunction to block the NBA from imposing its penalties on the Clippers, Ballmer and team officials.
The basic argument would be that the NBA and its teams have conspired in anticompetitive ways to degrade the Clippers, with accompanying harm suffered by consumers—the Clippers’ fans. The Clippers will be “less competitive” without five first-round picks. The franchise could argue that team introductions are common and that the Clippers are being punished for conduct in which rival teams engage.
Another potential Clippers legal claim could concern what they depict as the NBA’s “witch hunt.” The team can’t credibly raise a due-process claim tied to the U.S. Constitution or California Constitution, because the NBA is a private body and thus isn’t a state actor, meaning a government entity that must adhere to due-process protections.
But the Clippers could still tie due process to a contractual theory—namely, that while the NBA commissioner has extensive discretion under the league constitution and bylaws, the commissioner still must act fairly, including by providing fair notice and opportunities to respond.
Other possible claims might include breach of fiduciary duty, breach of the duty of loyalty, fraud, misrepresentation and intentional interference with prospective economic advantage. The gist of these claims would be that the NBA and Silver are obligated to act fairly and reasonably, and that their alleged failure to do so has harmed the Clippers’ business interests, relationships with players and sponsorship dealings.
To the extent that the Clippers have other specific examples of team introductions that resemble the Leonard introductions, their argument becomes stronger. As Sportico has detailed, there are examples of players in the NBA and other leagues signing endorsements with companies that also sponsor those players’ teams.
Some examples include online shopping platform Rakuten having a sponsorship with the Golden State Warriors and an endorsement deal with Warriors star Steph Curry; Samuel Adams partnering with both the Boston Red Sox and then-third baseman Alex Bregman on the release of Bregman’s Beer; and Nike signing Neymar to an endorsement deal while also sponsoring Brazil’s national soccer team.
The Clippers can also attack the reliability of the findings. Wachtell acknowledges that its investigators interviewed Joe Sanberg, co-founder of former Clippers sponsor Aspiration and who, in June, was sentenced to 14 years in prison for fraud. Sanberg orchestrated a scheme to defraud lenders and investors, including Ballmer, of more than $248 million between 2020 and 2025. It’s fair to question Sanberg’s veracity and the accuracy of any materials he shared with the NBA.
In April, Kelly objected to Wachtell attorney David Anders, a former federal prosecutor who leads the NBA’s investigation, writing a letter to the judge who was set to sentence Sanberg. Anders said that he and other investigators sought Sanberg’s cooperation to further the investigation. Anders reflected that Sanberg provided “additional information that was relevant to our investigation” and helped the investigators “develop a more complete understanding of key events.” Kelly suggested that Sanberg agreed to provide the NBA with information “in return for a sentencing letter that the league submitted on his behalf.”
Game-planning NBA legal defenses
The NBA would be armed with several defenses to block a Clippers lawsuit and secure its dismissal long before there would be any pretrial discovery requiring each side to provide testimony and share evidence.
First, the NBA would cite case law standing for the legal principle that a court should abstain, which refers to judges declining to hear a case when there is another proceeding. Here, the NBA would argue that no court should interfere with the internal disputes of a private membership association. Indeed, courts usually provide broad deference to private associations and intervene only when they act arbitrarily or capriciously.
The NBA would assert that the Clippers were given ample opportunities to make their case, including the chance to offer specific examples of other teams engaging in similar conduct, and apparently failed to do so. The NBA would also argue that it followed applicable procedures in the league constitution and thus satisfied its contractual process obligations.
Second, the NBA would stress the league constitution, which is a contract among the league, teams and owners and specifies their respective duties and rights. The constitution is not the collective bargaining agreement, which governs the relationship among players, teams and the league. It is a separate source of contractual rights and obligations. By owning an NBA team, owners agree to the constitution, which expressly states that all decisions of the commissioner are “final and binding” and should understood as arbitration awards.
Third, the NBA would insist that there is no viable antitrust claim, as there is no injury to competition. The league could maintain that enforcement of its rules furthers, rather than hinders, competition, because it communicates to fans—consumers—that the games reflect fair play and genuine competition, and that teams attempting to circumvent fair-play rules are held accountable.
Fourth, the league would maintain that there is no conspiracy against the Clippers. The Wachtell report doesn’t merely argue there were introductions to otherwise organic endorsement opportunities; it says the introductions were ruses to facilitate payments directed by the Clippers.
For instance, it says that in June 2020, team president of business operations Gillian Zucker wrote what were called “introduction” emails between the team and potential companies that might sign Leonard to endorsements but, Wachtell argues, were in reality “in an apparent effort to create the appearance of complying with the circumvention rules.”
To that point, Wachtell says Zucker claimed she was emailing in response to requests by those companies to get in touch with Leonard. Wachtell concluded that there was no evidence the companies actually requested introductions and found it suspicious that each of these emails was sent within six days of the others, “in the midst of the COVID-19 pandemic and while the NBA season was suspended.”
Other defenses might include the argument that there is no relevant fiduciary duty owed by the NBA or Silver to the Clippers or Ballmer, and that claims like intentional interference require an underlying wrongful act, which the NBA would maintain never happened.
How the Clippers can reduce penalties—and stigma
Ballmer has billions of dollars to spend on attorneys, should he try the litigation route, but as detailed above, he’d probably lose.
Consider what that means. Not only would a court rule against him, but the scandal would play out in court over months or years, casting a cloud over the franchise and possibly making Ballmer persona non grata with the NBA and fellow owners.
Ballmer might instead consider the approach used by the New England Patriots and owner Robert Kraft in the aftermath of a damning report by a law firm, the Wells Report, accusing the team of cheating through a purported conspiracy to slightly underinflate footballs—Deflategate.
Many urged the Patriots to sue, and there was significant scientific evidence that the NFL’s assertions were uncorroborated, if not outright implausible.
But Kraft didn’t sue, knowing that the case would have gone nowhere. As in the NBA, punishments by the commissioner are final and conclusive. Instead, he and the Patriots relied on lawyers, scientists and commentators to refute the claims. The team released The Wells Report in Context, a document that didn’t help in court but likely did shift public opinion and left serious questions about whether the NFL was right.
The Clippers could offer a similar document that tries to poke holes in the NBA’s assertions. The team might argue that some of the materials are not reliable, because they are not based on sworn testimony, and thus individuals making assertions wouldn’t risk perjury charges if they knowingly lied.
The Clippers might also maintain that executives of other companies involved, including sponsors that do business with other NBA teams and the league in addition to the Clippers, might have deflected blame onto the Clippers to protect their own business interests. Further, the Clippers might contend that additional texts, emails and comments provide important context not reflected in Wachtell’s report.
None of those arguments might help in court, but they could help the Clippers and Ballmer defend their reputations and legacies.
Ballmer could also attempt to negotiate a reduced draft-pick penalty, perhaps by agreeing to a longer separation from the team. The NBA reduced the Timberwolves’ draft penalty, first from five picks to four and then from four to three, after team executive Kevin McHale and owner Glen Taylor agreed to serve suspensions. Obviously, any Ballmer suit against the NBA and Silver probably wouldn’t help the team’s effort to reduce the punishment.
