Michael Jordan‘s NASCAR Lawsuit May Hit the Skids After Latest Hearing

Michael Jordan’s win streak in the NASCAR antitrust litigation could be coming to an end. 

On Friday, a three-judge panel on the U.S. Court of Appeals for the Fourth Circuit held an oral argument in the Lewis F. Powell, Jr. U.S. Courthouse in Richmond, Va., on whether a trial judge correctly granted preliminary injunctions for 23XI Racing, which Jordan owns with Denny Hamlin, and Front Row Motorsports in their case against NASCAR.

Judges Paul V. Niemeyer, G. Steven Agee and Stephanie Thacker heard the dueling arguments, and their remarks indicated they found the injunctive relief problematic and signaled they might vacate it.

Jeffrey Kessler of Winston & Strawn delivered the oral argument for Jordan’s group. Kessler is arguably the most prominent sports litigator in the country, having represented college athletes, Tom Brady and U.S. women’s national team players in antitrust, labor and contractual disputes. NASCAR retained Christopher S. Yates of Latham & Watkins to present its case. Yates, a highly accomplished sports litigator in his own right, recently led U.S. Soccer to an antitrust trial victory over the North American Soccer League.

To be clear, the hearing was not on the larger issues presented by the case, but on the narrow question of whether U.S. District Judge Kenneth D. Bell errantly granted injunctive relief last December. The relief prohibits NASCAR from denying 23XI and Front Row the same terms offered to charter teams but with a twist that seemed to bother the trio of judges: 23XI and Front Row, unlike NASCAR charter teams, weren’t required to sign a mutual release of claims. 

During the hearing, Thacker opined that “this is the first time . . . in all the history of contract law” that an injunction mandates what—NASCAR insists—is essentially a new contract. 23XI Racing and Front Row contractually receive the benefits of a charter without having to sign a release. Kessler countered that “there are very few adjudicated monopolization cases” and thus there is a shortage of decisions to cite.

Niemeyer seemed especially skeptical of the plaintiffs’ viewpoint. He said he understands Kessler’s contention that there are legitimate antitrust claims against NASCAR. The case centers on 23XI Racing and Front Row’s assertion that charters, which guarantee teams a starting position in NASCAR-sanctioned races while restricting their capacity to compete in other circuits, run afoul of antitrust law. NASCAR, as depicted by the plaintiffs, has too much control over the “buying” of drivers and teams’ services in premier stock racing series. 

But Niemeyer reasoned that the logic for the injunction breaks down when viewing the charter’s mutual releases as an exchange for teams getting what they really want: the chance to participate in NASCAR races as charter teams. 

The judge surmised that once teams sign the release, they aren’t injured in a legal sense since they’re able to race as chartered teams. In other words, if a team doesn’t want to race as a charter team because the team sees the charter as illegal, it simply shouldn’t sign and should then sue. Under this logic, 23XI Racing and Front Row want the benefits of the charter and the chance to sue.

Kessler disagreed, saying the relevant harm is that teams “are selling our services to NASCAR,” an organization Kessler says sets the price paid to teams and has “set below competitive market prices.” With the NCAA understandably on Kessler’s mind as he and other counsel wait for U.S. District Judge Claudia Wilken to approve the House settlement, Kessler compared NASCAR to the NCAA. While NASCAR allegedly sets prices for teams too low, Kessler said the NCAA has set prices at $0 for the services and NIL provided by college athletes. The injury in both instances, Kessler explained, “is you are getting too little.”

The judge suggested that Kessler wasn’t addressing the specific point at issue. Kessler was told it’s one thing to not sign the charter, which contains releases, and sue. But it’s another to sign the charter and get to sue because a trial judge has modified the charter for 23XI Racing and Front Row—but no other teams—by removing the releases.

Agee’s comments focused on the fact that the hearing is only about the injunctive relief, and he noted that Bell (the trial judge) made no findings of facts on other topics. Kessler was told he might ultimately prove the case at trial, which is scheduled for Dec. 1, but the three-judge panel is only weighing the lawfulness of Bell mandating NASCAR sign contracts with 23XI Racing and Front Row with modified terms.

Perhaps sensing the panel may be leaning in NASCAR’s direction, Kessler warned the three judges that vacating the injunctive relief “will cause irreparable harm.” He repeatedly said this part of the year “is the middle” of the NASCAR season and the trial isn’t until December. “We might lose our drivers in the interim,” Kessler said. He also said there would be injury to third parties, including Stewart-Haas Racing which sold charters via the injunction. Stewart-Haas “will have nothing . . . no drivers . . .  in the middle of the [NASCAR] season” if Bell’s ruling is set aside.

Yates disagreed with Kessler. He stressed that Bell’s written order indicated he had “no opinion” on the merits of the case outside the releases. As Yates told it, Kessler is “challenging” an ordinary and competitive term (releases) in contracts found in American pro sports. The gist of a release is that if an athlete or, in the NASCAR context, team is able to compete in a professional sports competition and receive all the financial and reputational benefits that such eligibility carries, the athlete/team must accept the terms of the eligibility contract. One term is that they waive the right to later sue the league.

“If you want to race in NASCAR as a charter team, you have to agree to the release,” and if a team doesn’t want to agree to the release, it can compete as an open (non-chartered) team, Yates said.

Yates also argued that NASCAR and charter teams are hurt by the injunction. He maintained that NASCAR is “forced” into a contractual relationship with a counterpart with whom it doesn’t want to be in contract under the judicially compelled terms. As for charter teams, Yates said they suffer because they “lose” opportunities for compensation. The money pie for charter teams is divided into smaller pieces with 23XI and Front Row included. Yates said 23XI Racing and Front Row’s case boils down to “they are trying to have their cake and eat it too.” 

The judges urged the two sides to take mediation seriously, and both Kessler and Yates pledged to do so. Yates, though, said, “we’re not going to rewrite the charter contract” to accommodate 23XI Racing and Front Row.

There is no timetable on when the Fourth Circuit will decide, but it will likely be within weeks. The fact that the judges seemed skeptical of the plaintiffs’ position doesn’t guarantee they’ll rule for NASCAR. Judges often use oral argument hearings to test their understanding of cases and accompanying arguments. Sometimes judges rule differently than how they sounded in a hearing. Still, it was a good day for NASCAR in court.