A jury trial that could fundamentally reshape the business relationship between NASCAR and its teams — and which will feature Michael Jordan, NASCAR CEO Jim France and other major U.S. sports figures — will begin next Monday in federal district court in Charlotte, North Carolina. This trial will proceed unless a settlement is reached during the Thanksgiving holiday.
U.S. District Judge Kenneth D. Bell will preside over the trial, which is expected to last 10 days. The trial will focus on antitrust claims filed by 23XI Racing, owned by Jordan, Denny Hamlin and Curtis Polk, and Front Row Motorsports against NASCAR.
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The litigation launched last year has been intense, with numerous filings and pre-trial maneuvers. The parties engaged in three sets of motions for preliminary injunctions, one of which was considered by the U.S. Court of Appeals for the Fourth Circuit, regarding whether 23XI and Front Row could enjoy the benefits of charters without the drawbacks. Although one motion for a preliminary injunction is common before a trial, three are not. Additionally, the parties litigated NASCAR’s counterclaim against 23XI and Front Row for allegedly operating an “illegal cartel,” and they made several attempts at mediation, none of which worked.
Both parties have also spared no expense when it comes to lawyers. The parties are represented by two of America’s top sports lawyers: Jeffrey Kessler of Winston & Strawn, who represents 23XI and Front Row, and Christopher Yates of Latham & Watkins, who represents NASCAR.
Kessler is best known for advocating on behalf of college athletes in NCAA vs. Alstonwhich involved antitrust claims regarding education-related expenses for college athletes and resulted in a 9-0 victory for Kessler at the U.S. Supreme Court. Yates has also won major victories in sports antitrust cases, including his defense of US Soccer against a $500 million lawsuit brought by the North American Soccer League, represented by Kessler.
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As 23XI and Front Row report, NASCAR has engaged in anticompetitive practices to maintain monopsony control over the services of major stock car racing teams. They also argue that NASCAR imposes contractual restrictions, including non-compete measures with track owners and racing teams, to hinder competition. These types of restrictions would allegedly suppress team revenue and erect barriers to entry for any Cup Series rival.
Much of the dispute centers on charters, the multi-year contracts between NASCAR and teams. The charters guarantee a starting position in NASCAR-sanctioned races, but include non-competition clauses and mutual waivers of claims. 23XI and Front Row claim the charters give NASCAR excessive control and financial leverage, and they have refused to sign them, believing they compromise the freedom to engage in business that owners usually enjoy.
NASCAR tells a very different story. The association insists it has become an industry leader through merit and good judgment, including smart decisions and business acumen. In other words, even though NASCAR is dominant, NASCAR claims that it achieved this status through merit and that the association should not be blamed for its success.
NASCAR also points out that it allows teams to race in other stock car series and that some NASCAR Cup Series teams compete elsewhere. For example, Team Penske competes in NASCAR and IndyCar, and Rick Hendrick, owner of the NASCAR team Hendrick Motorsports, entered a car in the Indy 500 last year as one of the owners, with Kyle Larson, one of NASCAR’s biggest stars, as the driver.
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As detailed in its briefs filed over the last year, NASCAR will focus its defense on portraying its activities as enhancing the sport and benefiting fans, sponsors and teams. A key indicator that could support NASCAR’s defense is the rising value of charters. Some charters have appreciated by tens of millions of dollars, or around ten times more in recent years. As an illustration, the sale of a charter for $45 million was at issue in a dispute involving Rick Ware and Legacy Motor Club. NASCAR will maintain that these data points undermine the theory behind 23XI and Front Row, since at least some teams are thriving financially in the current system.
NASCAR will also feature the system sought by 23XI and Front Row as an attempt to bring NASCAR into an NBA-like league, with franchise-style ownership. Both teams describe the existing system as inadequate, arguing that permanent or longer-term charters would be more beneficial. When Jordan owned the Charlotte Hornets, the franchise was his and he didn’t need to renegotiate ownership terms every few years. But the ability to sell charters, NASCAR pointed out, arguably offers a more dynamic market. This setup allowed Jordan’s 23XI to enter the sport in the early 2020s.
To reinforce that NASCAR is not analogous to the NBA, the association could rely on Hendrick, Joe Gibbs and other team owners to testify in favor of the current system and warn that NASCAR should not be reshaped into a more traditional professional league structure. They can highlight the growth of the sport and the increased value that charters have created for owners and team members.
Of course, 23XI and Front Row will anticipate this line of testimony. They will probably say that these owners underestimate the economic constraints imposed by the charters. 23XI and Front Row could also rely on testimony from their drivers, including Bubba Wallace and Tyler Reddick, about charter challenges and their negative impact on careers.
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NASCAR will also argue that the exclusivity and non-competition aspects of the charters reflect the standard and legal business practices of American professional sports. They ensure that teams and athletes are loyal to a league, which helps the league market its product to fans and broadcasters.
Much of the testimony will involve economic arguments, data analysis and expert insights. Antitrust is one of the most complex areas of law, and antitrust trials can sometimes seem convoluted, esoteric, and dry. The challenge for Kessler, Yates and their colleagues will be to ensure that jurors don’t get lost in the details and abstractions. This point was made clear last year when a federal judge overturned a multibillion-dollar verdict against the NFL in the Sunday Ticket antitrust litigation. The main reason: The jurors were confused by expert testimony and misled by assumptions.
Other parts of the NASCAR trial will seem more accessible. When Jordan testifies, he will be instantly familiar to jurors, which could make his testimony particularly impactful. This is also true when he is cross-examined and forced to answer difficult questions, including about the potential downsides of the trial outcome he wants.
Nor will the trial be the last word. Whichever side loses can, and almost certainly will, appeal to the U.S. Court of Appeals for the Fourth Circuit. The Fourth Circuit may not have the last word either, since the losing party could then go to the U.S. Supreme Court. It is not impossible that this antitrust conflict in sports, like so many others in recent years, will last several years.
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No matter how 23XI and Front Row vs. NASCAR ends, the end will be felt for a long time on the circuits.
Penske Motorsports is owned by Roger Penske and is not associated with Penske Media Corporation, the parent company of Sportico.
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