CHARLOTTE, N.C. (AP) — A three-judge federal appellate panel ruled Thursday in favor of NASCAR in the antitrust lawsuit filed by two teams, one owned by Michael Jordan, and vacated an injunction that required 23XI and Front Row be recognized as chartered teams as their case snakes through the legal system.
Both race teams sued NASCAR late last year after refusing to sign new agreements on charter renewals. The charter system is similar to franchises in other sports, but the charters are revocable by NASCAR and have expiration dates. 23XI, which is owned by Jordan and three-time Daytona 500 winner Denny Hamlin, allied with Front Row in suing NASCAR after 13 other organizations signed the renewals last September and those two organization refused.
“We are disappointed by today’s ruling by the Fourth Circuit Court of Appeals and are reviewing the decision to determine our next steps,” said Jeffery Kessler, attorney for 23XI and Front Row. “This ruling is based on a very narrow consideration of whether a release of claims in the charter agreements is anti-competitive and does not impact our chances of winning at trial scheduled for Dec. 1.
“We remain confident in our case and committed to racing for the entirety of this season as we continue our fight to create a fair and just economic system for stock car racing that is free of anticompetitive, monopolistic conduct.”
The two teams sued and asked for a temporary injunction that would recognize them as chartered teams for this season. The antitrust case isn’t scheduled to be heard until December.
The teams said they needed the injunction because the current charter agreement prohibits them from suing NASCAR. 23XI also argued it would be harmed because Tyler Reddick’s contract would have made him a free agent if the team could not guarantee him a charter-protected car.
The original judge ruled that NASCAR’s charter agreement likely violated antitrust law in granting the injunction. But when they heard arguments last month, the three judges at the the U.S. Court of Appeals for the Fourth Circuit in Richmond, Virginia, indicated they were skeptical of that decision.
The judges said in Thursday’s ruling they were not aware of any case that supports the lower court’s theory of antitrust law, so they vacated the injunction.
“In short, because we have found no support for the proposition that a business entity or person violates the antitrust laws by requiring a prospective participant to give a release for past conduct as a condition for doing business, we cannot conclude that the plaintiffs made a clear showing that they were likely to succeed on the merits of that theory,” the court said. “And without satisfaction of the likelihood-of-success element, the plaintiffs were not entitled to a preliminary injunction.”
The teams have 14 days to appeal to the full court. The injunction also has no bearings on the merits of the case, and the earliest NASCAR can treat the teams as unchartered — a charter guarantees their organizations a starting spot each week and prize money — is one week after the deadline to appeal, provided there is no pending appeal.
NASCAR has not said what it would do with the six charters held by the two organizations if they are returned to the sanctioning body. There are only 36 chartered cars for a 40-car field. If the teams do not appeal, the six entries would have to compete as “open” cars — which means they’d have to qualify on speed each week to make the race and they would receive a fraction of the money.
It’s not clear what would happen to Reddick’s contract. He goes to Michigan this weekend ranked sixth in the Cup Series standings. Both organizations are still seeking a win this season — Hamlin’s three victories are with Joe Gibbs Racing, the team he drives for.
Reddick is last year’s regular-season champion and competed for the Cup title last November.
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