Lue and his representatives turned down the Lakers' offer Tuesday, league sources said. The Lakers then on Wednesday offered Lue a deal in the range of three years and $18 million, after which Lue's side pulled out of negotiations.
According to the sources, Lue's camp was seeking a five-year deal with a salary commensurate with a championship résumé.
Beyond an inability to agree on contractual terms, the Lakers had proposed several scenarios involving their preferred candidates for assistant coaches, including Jason Kidd, sources said.
The Cleveland Cavaliers still owe Lue more than $10 million on his contract payout, and accepting a less-than-market-value deal from the Lakers could ultimately cost him money.
Several days of discussions culminated Wednesday without an agreement that will reunite Lue and LeBron James, a partnership that delivered Cleveland the NBA championship in 2016.
Lue was a preferred choice of James, but Lue's championship history as a Lakers player -- coupled with his successful run as Cavaliers coach -- also played a strong role in the Lakers offering him the job.
Lakers adviser Kurt Rambis has assumed an increasingly powerful voice in basketball operations and has played a central role in the coaching search, league sources told ESPN. His wife, Linda, works closely with team owner Jeanie Buss.
Rambis and general manager Rob Pelinka had interviewed Kidd for the head-coaching position, and they became convinced Kidd should be a key member of a Lue coaching staff, league sources said. They believed Kidd could be impactful with point guard Lonzo Ball, and they were impressed with the Milwaukee Bucks' player development during Kidd's tenure there. It isn't believed that Lue had objections to Kidd joining his staff, but the two had not discussed the possibility directly, league sources said.
Lue's candidacy moved to the forefront oncePhiladelphia 76ersassistant Monty Williams accepted the Phoenix Suns' head coach position on Friday. The coaching search began after the Lakers and coach Luke Walton parted ways April 12.
Before Lue's dismissal six games into the 2018-19 season, he had led the Cavaliers to three consecutive NBA Finals appearances. He had a 128-83 record in three-plus seasons in Cleveland.
As a player, Lue was part of Lakers championships in 2000 and 2001.
The Lakers also conducted a head-coaching interview with Miami Heatassistant Juwan Howard.
Stephen A.: Lakers' offer to Tyronn Lue was 'pathetic'
Stephen A. Smith explains why the Lakers' contract talks with Tyronn Lue fell apart and where it leaves their head coaching search going forward.