Judicial Panel Could Revoke Injunction in NASCAR Case
A three-judge federal panel on Friday suggested the possibility of overturning an injunction that allows 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 dispute arises from an antitrust lawsuit filed by the teams against the stock car racing series.
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.
The “release” clause in licensing contracts, which prohibits teams from suing, is “common.”
Chris Yates, NASCAR attorney
Yates alleged that the teams should not enjoy the benefits of the licensing system while seeking to revoke it through a lawsuit.
If the injunction is revoked, both organizations could compete, but without the benefits of the license, such as guaranteed weekly income. They would also have to qualify for each Cup event, with only four spots available each week. 23XI and Front Row compete with three cars each in the Cup this season.
Judges Steven Agee, Paul Niemeyer, and Stephanie Thacker questioned the arguments of the plaintiffs’ lawyer, Jeffrey Kessler, who accused NASCAR of being a monopoly.
There is no other place to compete.
Jeffrey Kessler, lawyer for the plaintiffs
Kessler warned that revoking the injunction would cause significant damage to the teams, with the possible loss of drivers and sponsors.
The antitrust lawsuit was filed on October 2 in North Carolina, accusing NASCAR of pressuring teams to sign new licenses that hinder financial competition. This followed two years of failed negotiations over new licensing agreements, similar to franchise agreements.
23XI, co-owned by Jordan, Hamlin, and Curtis Polk, and Front Row Motorsports were the only ones of the 15 licensed teams that refused to sign new agreements in September.
The licenses, originally signed before the 2016 season, have been extended twice. The most recent extension runs until 2031, coinciding with the current media rights agreement. It guarantees that 36 of the 40 available spots in the weekly races will be for licensed teams.
The judges expressed agreement with Yates’ argument that the district court erred in issuing the injunction, which compelled the teams to sign the NASCAR license but eliminated the contract’s release clause.
It seems they want to call the shots.
Judge Niemeyer
At another point, the judge told Kessler that, if the teams wanted to compete, they should sign the license.
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 injunction and pointed out 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 them to be able to compete, but without a contract.
Judge Niemeyer
A date was set for the trial in 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.
“It will be a very interesting trial,” Agee said with an ironic smile.
The possibility of a successful mediation seems unlikely. Yates told the judges: “We are not going to rewrite the license.”
