Denny Hamlin (L) and Michael Jordan are co-owners of 23XI Racing in the NASCAR Cup Series. (Photo by Chris Graythen/Getty Images)
(Chris Graythen via Getty Images)
A federal appeals court ruled in favor of NASCAR on Thursday in the sanctioning body’s ongoing legal battle with Michael Jordan’s 23XI Racing and Front Row Motorsports.
The Fourth Circuit of Appeals in North Carolina overturned an injunction that allowed the teams to race as chartered teams as their lawsuit against NASCAR proceeded. The teams won the injunction in December after they were the only two teams in NASCAR’s Cup Series to not sign the current franchising agreement between NASCAR and its teams.
“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 participate 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 decision stated. “And without satisfaction of the likelihood-of-success element, the plaintiffs were not entitled to a preliminary injunction.”
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Front Row and 23XI had said that NASCAR was monopolistic in its antitrust suit filed in October. Chartered teams receive guaranteed entries into every Cup Series race and, most importantly, get a bigger share of purse money from the season-ending points fund.
Per the terms of the decision, the teams have 14 days to ask for another hearing and the revocation of the charters — if it happened — wouldn’t go into effect for another week after that 14-day deadline. There’s still plenty of time for more legal machinations to happen before the teams’ charters would get taken.
Where everything stands now
There were signs the teams’ argument could be in trouble a month ago during a May hearing. The appeals court proceeding happened after NASCAR appealed the injunction in favor of the teams. A judge on the panel openly questioned the teams’ argument that they should receive the benefits of the charter contract while not signing the contract.
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“I had thought coming in and you can correct me, that the district court concluded that the (lawsuit release clause) was anticompetitive and therefore, to protect your antitrust claims, the court wanted you to be able to race but without a contract that included the release,” said [Judge Paul V.] Niemeyer, “and my concern and I’ll just lay it out there, I don’t understand the Section 2 analysis, what we need to have is the exercise of monopoly power to exclude competition.
“I can’t see why a release addresses competition in any sense. If you don’t want the contract, you don’t enter into it and you sue. But if you do want the contract, you enter into it, and you’ve given up past releases. But the Omega (a precedence case) is that you can’t have your cake and eat it too.”
The teams have been represented by famed antitrust lawyer Jeffrey Kessler. The 71-year-old has been on the winning side in previous high-profile sports cases like the NCAA’s lifting of its cap on college athlete compensation, the United States Women’s National Team’s pay discrimination case and even Tom Brady’s appeal of his four-game suspension as part of the “Deflategate” scandal.
Neither 23XI or Front Row seem to be at risk of failing to qualify for any races if they lose their charter protections because no race since the Daytona 500 has featured more than 40 teams attempting to qualify for the 40 available starting spots. In fact, all but one race since the 500 has not featured a full field.
The money, however, is a much bigger factor. Cup Series teams rely heavily on purse and points fund money from NASCAR. With chartered teams getting a much larger share of that money than open teams, the budgets of both 23XI and Front Row Motorsports could be heavily impacted.
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The decision could also lead to a fascinating dilemma. Both Front Row and 23XI expanded from two cars to three over the offseason by purchasing charters from the now defunct Stewart-Haas Racing team that closed at the end of the season. NASCAR would assumably take over the ownership of the charters since SHR no longer exists and other chartered teams could end up getting larger shares of the money designated for chartered teams.
Front Row currently fields cars for Todd Gilliland, Noah Gragson and Zane Smith, while 23XI Racing has cars for Riley Herbst, Tyler Reddick and Bubba Wallace.
