A panel of three federal appeals court judges suggested on Friday that it might overturn a court order allowing 23XI Racing, co-owned by NBA legend Michael Jordan and veteran driver Denny Hamlin, and Front Row Motorsports to compete as licensed teams in NASCAR this season.
The decision comes as both teams sue the auto racing series for alleged antitrust violations.
NASCAR’s attorney, Chris Yates, argued that the injunction, granted in December by U.S. District Judge Kenneth Bell, forced the series into an unwanted relationship with unwilling partners, harming other teams by reducing their revenue.
Yates asserted that the district court broke precedent in granting the injunction, noting that the “release” clause in the licensing agreements that prohibits teams from suing is “common”.
In essence, he argued that the teams should not enjoy the benefits of the licensing system they seek to revoke through the lawsuit.
If the court order is revoked, the two organizations could compete, but without the benefits of being licensed teams, such as guaranteed weekly income. In addition, they would have to qualify for each Cup event, where there are only four spots available each week. 23XI and Front Row compete with three cars each in the Cup this season.
During the 50-minute hearing at the U.S. Court of Appeals for the Fourth Circuit, Judges Steven Agee, Paul Niemeyer, and Stephanie Thacker questioned the arguments of the plaintiffs’ attorney, Jeffrey Kessler, who accused NASCAR of being a monopoly.
There is no other place to compete
Jeffrey Kessler
Kessler also noted that revoking the court order would cause tremendous damage to the two teams, who could lose drivers and sponsors. “It will wreak havoc to revoke this court order in the middle of the season,” he added.
The teams filed the antitrust lawsuit against NASCAR on October 2, arguing that the series pressured the teams to sign new licenses that made financial competition difficult. This occurred after two years of failed negotiations over the new license agreements, which are the equivalent of NASCAR’s franchise agreements.
23XI, co-owned by Jordan, Hamlin, and Curtis Polk, Jordan’s long-time business partner, and Front Row Motorsports, were the only two of the 15 licensed teams that refused to sign new agreements in September.
The licenses, which the teams originally signed before the 2016 season, have been extended twice. The most recent extension extends to 2031, coinciding with the current media rights agreement. This ensures that 36 of the 40 available places in the weekly races will be for licensed teams.
The judges agreed with Yates’ argument that the district court had erred in issuing the injunction allowing the teams to compete, as it required them to sign the NASCAR license but eliminated the release from the contract.
It seems you want to have your cake and eat it too
Niemeyer
Yates argued that forcing an unwanted relationship between NASCAR and the two teams “hurts NASCAR and other racing teams.” He stated that more licensed teams would make more money if it weren’t for the court order, and noted that 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. Niemayer disagreed.
The court wanted you to be able to compete but without a contract
Niemayer
A date for the trial was set for December and Agee urged the parties to meet for mediation, previously ordered by a lower court, to try to resolve the dispute over the injunction.
The prospect of a successful mediation seems unlikely. Yates told the judges: “We are not going to rewrite the license.”
