On September 2, 2026, the NBA announced the results of an independent investigation concerning the Los Angeles Clippers and Kawhi Leonard. According to the NBA, the investigation concluded that certain off-court compensation arrangements violated the league’s salary cap circumvention rules. The Clippers and Leonard received penalties under the NBA’s collectively bargained rules.
The NBA’s rules are unique to professional basketball. This article takes no position on the merits of the NBA’s findings, and the NBA’s determination does not establish that any participant committed fraud, conspiracy, or any other violation of California law.
The investigation nevertheless provides a useful starting point for a broader issue that frequently arises in commercial litigation: when one party allegedly arranges for another party to provide money or another economic benefit, does putting a third party in the middle change the legal analysis?
In California business disputes, the answer often depends on the facts surrounding the entire transaction.
The Entity Making the Payment May Be Only Part of the Story
According to the NBA’s published findings, the investigation examined relationships among the Clippers, outside businesses, and compensation opportunities provided to Leonard.
For purposes of California business litigation, the important lesson is not whether the NBA reached the correct result under its own rules. The more general lesson is that a transaction involving several parties may require examination of more than the contract or payment that appears on the surface.
Consider a hypothetical commercial arrangement. Company A does not make a payment directly to an individual. Instead, Company B enters into a separate agreement with that individual and makes the payment.
There is nothing inherently improper about that arrangement. Businesses routinely make introductions, refer opportunities, negotiate joint transactions, arrange sponsorships, and participate in transactions involving multiple companies.
But if a dispute later arises, the inquiry may extend beyond the identity of the party whose name appears on the check. Relevant questions may include:
- Who proposed the transaction?
- Who introduced the parties?
- Who negotiated the amount and terms?
- Was one agreement conditioned on another?
- Did one company promise business or some other benefit in connection with another company’s payment?
- What services or consideration were actually provided?
- How did the parties describe the transactions internally?
- Who ultimately received the economic benefit?
Those questions can become significant when a plaintiff contends that several transactions that appear separate on paper were actually connected.
Separate Contracts Do Not Necessarily Mean Unrelated Transactions
Businesses often structure transactions through different corporations, vendors, affiliates, investors, consultants, or other third parties. That is normal commercial activity. The existence of several entities or several contracts does not itself establish wrongdoing.
At the same time, separate documents do not necessarily end the analysis when litigation later raises questions concerning intent, knowledge, consideration, or the relationship among the transactions.
For example, assume Company A enters into a substantial commercial agreement with Company B. Around the same time, Company B enters into a separate agreement to compensate an individual associated with Company A. The two agreements may be completely unrelated.
But suppose discovery later produces communications suggesting that Company B would not have entered into the second agreement unless Company A entered into the first. The dispute may then focus on whether the two arrangements were economically connected, what each participant understood, and what each party expected to receive.
The answer will depend on evidence, not simply on the number of contracts involved.
Third-Party Participation and Aiding and Abetting Claims
One legal theory that can arise in California business litigation is aiding and abetting.
California courts have recognized that a person may potentially be liable for aiding and abetting an underlying tort where that person has actual knowledge of the specific wrongdoing and provides substantial assistance or encouragement.
The requirement of actual knowledge is important. Simply doing business with someone who later turns out to have committed misconduct generally does not mean that every vendor, lender, customer, or business partner becomes liable.
A materially different issue may arise, however, when evidence allegedly shows that a third party knew of a particular wrongful act and intentionally assisted in accomplishing it.
This is why contemporaneous evidence can become extremely important. Emails, text messages, payment instructions, accounting records, contracts, amendments, internal memoranda, and communications among the participants may help establish what the parties actually knew and intended at the time.
Civil Conspiracy and Multiple Participants
Civil conspiracy can present a related issue.
Under California law, conspiracy is generally not an independent cause of action. Rather, it is a doctrine that may extend responsibility for an underlying tort to persons who agreed to participate in a common plan and acted in furtherance of it.
Again, the involvement of several entities does not itself establish a conspiracy. Companies regularly participate in the same transaction without engaging in any wrongful conduct.
But where an underlying tort is alleged, litigation may examine whether multiple participants knew of the alleged conduct, agreed to participate, and took actions to advance it. As a result, corporate separateness does not necessarily prevent discovery into communications and transactions among the different participants.
Asset Transfers Can Raise Similar Questions
Third-party transactions can also become significant when a commercial dispute involves transfers of money or property.
California’s Uniform Voidable Transactions Act permits certain transfers to be challenged when the statutory requirements are satisfied, including in circumstances where a debtor allegedly transfers assets with actual intent to hinder, delay, or defraud a creditor.
In evaluating such claims, courts can consider circumstances surrounding the transfer, including whether it was concealed, whether litigation had been threatened or filed, whether an insider was involved, whether the debtor received reasonably equivalent value, and other relevant circumstances.
At the same time, California law contains important protections for certain transferees, including protections relating to good faith and reasonably equivalent value.
The important point is that transferring property through another person or entity does not answer the legal question by itself. The circumstances surrounding the transfer still matter.
Follow the Economic Benefit, Not Just the Check
Commercial litigation often requires lawyers to follow more than the movement of money. They may also need to determine where the economic benefit ultimately went.
Consider another hypothetical. Company A pays Company B $5 million under a commercial agreement. Company B separately agrees to pay $2 million to an individual affiliated with Company A.
Nothing about those facts alone proves that the two transactions are connected. But suppose internal communications later indicate that the second agreement was expected as part of the overall commercial relationship. Additional questions naturally follow.
- Was the second payment independently negotiated?
- What did the recipient provide in return?
- Was the compensation commercially reasonable?
- Would Company B have entered into the agreement without its relationship with Company A?
- Was either agreement expressly or implicitly conditioned upon the other?
- Did the company’s accounting and internal records treat the transactions as related?
- Were relevant decision makers informed?
These are factual questions. Their importance is precisely why complex business litigation often cannot be resolved simply by looking at where money first entered or left a bank account.
Why Emails and Text Messages Often Matter
Written contracts remain extremely important in commercial disputes. But they are often not the only evidence.
Suppose two contracts state that the transactions are independent. During discovery, however, an email states: “We need this agreement completed before they will proceed with the other transaction.”
Or an invoice describes a payment as a consulting fee, while contemporaneous text messages discuss a different purpose for the payment.
Those communications do not automatically determine the outcome of a lawsuit, and informal communications do not automatically override enforceable contracts. They may, however, become relevant evidence when the parties dispute intent, knowledge, consideration, or the relationship among several transactions.
This is one reason business owners should assume that important communications may someday be reviewed outside the company.
The Difference Between a Direct Payment and an Allegedly Facilitated Benefit
The recent NBA matter also illustrates a more general analytical distinction. These are two different questions:
- Did Party A directly pay Person X?
- Did Party A allegedly arrange, facilitate, encourage, or provide an economic incentive for Party B to provide a benefit to Person X?
A negative answer to the first question does not necessarily resolve the second.
That distinction appears in many types of commercial disputes. A plaintiff investigating alleged fraud may look beyond the person who directly received the money. A shareholder pursuing a fiduciary duty claim may examine benefits provided through related entities. A creditor may investigate whether property was transferred through intermediaries. A company accused of participating in another party’s misconduct may face questions about what its executives actually knew and what assistance the company allegedly provided.
None of those inquiries establishes liability by itself. But they illustrate why a complete factual investigation may extend beyond the most obvious transaction.
What California Business Owners Should Consider
Third-party transactions are a normal and often necessary part of doing business. The goal is not to avoid them. The goal is to make sure the company’s records accurately reflect the commercial reality of the transaction.
For significant transactions involving several companies or individuals, businesses may want to consider whether:
- the written agreements accurately describe the purpose of each transaction;
- each payment corresponds to identifiable services, property, rights, or other consideration;
- potential conflicts of interest have been appropriately disclosed;
- related transactions have been properly documented;
- the company’s accounting treatment is consistent with the underlying agreements;
- internal communications are consistent with the legitimate business purpose reflected in the formal documents; and
- decision makers understand whether separate agreements are actually dependent upon one another.
These considerations can become particularly important when officers, shareholders, investors, related entities, consultants, and outside vendors participate in the same overall transaction.
When a Dispute Has Already Started
Once litigation is anticipated, analyzing each entity in isolation can create an incomplete picture. The more useful questions may be:
- What is the relationship among the companies?
- Who controls each entity?
- What agreements were executed?
- What money or other benefits changed hands?
- What happened before and after each transaction?
- What did the participants say privately about the purpose of the arrangements?
- What did each participant receive?
For businesses facing claims involving complicated transaction structures, preserving documents and understanding the complete chronology early can be critical. A dispute that initially appears to concern one contract may ultimately involve several contracts, related entities, third-party payments, and years of communications.
The Broader Business Litigation Lesson
The Clippers investigation received national attention because it involved professional basketball. The broader analytical issue is much more ordinary.
Businesses regularly enter transactions involving multiple entities and multiple agreements. Most of those arrangements are completely legitimate.
But when a dispute arises, simply placing another company between two participants does not necessarily determine the legal consequences. Courts and litigants may examine who arranged the transaction, what each party knew, what consideration was exchanged, how the participants communicated about the arrangement, and where the ultimate economic benefits went.
Sometimes the contract tells the entire story. Sometimes it is only the first document that needs to be examined.
Related practice areas: Business and Commercial Litigation · Civil Litigation