RICHMOND, Va. — A three-judge federal appellate panel indicated Friday it might overturn an injunction that allows 23XI Racing and Front Row Motorsports to compete as chartered teams in NASCAR’s top-tier Cup Series this season while the two organizations sue the stock-car sanctioning body for alleged antitrust violations.
NASCAR attorney Chris Yates argued the injunction, granted in December by U.S. District Judge Kenneth Bell of the Western District of North Carolina, forced the series into an unwanted relationship with unwilling partners. Yates also said it harms other teams because they earn less money.
Yates said the district court broke precedent by granting the injunction, saying the “release” clause in the charter contracts forbidding the teams from suing is “common.” He argued, essentially, that the teams should not have the benefits of the charter system they are suing to overturn.
Overturning the injunction would leave the two organizations able to race but without any of the perks of being chartered, including guaranteed weekly revenue. They would also have to qualify at every Cup Series race to make the field, which currently has only four open spots for each points race; 23XI and Front Row are each running three cars in Cup Series competition this season.
Judges Steven Agee, Paul Niemeyer and Stephanie Thacker, at multiple points during the 50-minute hearing at the U.S. Court of Appeals for the Fourth District, pushed back on the argument made by plaintiffs’ attorney Jeffrey Kessler, who accused NASCAR of being a monopoly.
“There’s no other place to compete,” Kessler told the judges, later noting that overturning the injunction would cause tremendous damage to the two teams, which could lose drivers and sponsors. “It will cause havoc to overturn this injunction in the middle of the season.”
The teams filed the antitrust lawsuit against NASCAR on Oct. 2 in the Western District of North Carolina, arguing the series bullied teams into signing new charters that make it difficult to compete financially. That came after two years of failed negotiations on new charter agreements, which are NASCAR’s equivalent of franchise deals in other pro sports leagues.
Of 15 charter-holding organizations, just two refused to sign the new agreements in September: 23XI Racing — which is co-owned by Joe Gibbs Racing driver Denny Hamlin, retired NBA star Michael Jordan and Curtis Polk, the basketball great’s longtime business partner — and Front Row Motorsports, which is owned by entrepreneur Bob Jenkins.
The charters, which teams originally signed before the 2016 season, have twice been extended. The most recent extension runs until 2031, matching NASCAR’s current media rights deal. It guarantees that 36 of the 40 available spots in weekly races will go to teams holding charters.
The judges expressed agreement with Yates’ argument that the district court had erred in issuing the injunction allowing the teams to race, because it mandated they sign the NASCAR charter but eliminated the contract’s release.
“It seems you want to have your cake and eat it, too,” Niemeyer told Kessler.
At another point, the judge pointedly told Kessler that if the teams want to race, they should sign the charter.
Yates contended that forcing an unwanted relationship between NASCAR and the two teams “harms NASCAR and other racing teams.” He said that more chartered teams would earn more money if not for the injunction, and he noted the two teams are being “given the benefits of a contract they rejected.”
Kessler argued that even if the district court’s reasoning was flawed, other evidence should lead the circuit court to uphold the injunction. Niemeyer disagreed.
“The court wanted you to be able to race but without a contract,” the judge said.
A trial date is set for December, and Agee strongly urged the sides to meet for mediation — previously ordered by a lower court — to attempt to resolve the dispute over the injunction.
“It’ll be a very interesting trial,” Agee said with a wry smile.
The prospect of successful mediation seems unlikely, though, with Yates telling the judges: “We’re not going to rewrite the charter.”
