NASCAR Trial Looms as 23XI, Front Row Prepare for the Final Stretch

It’s been a year since 23XI Racing and Front Row Motorsports sued NASCAR and its CEO, Jim France, for alleged antitrust violations. The move sparked a multifaceted and contentious legal controversy, with the future of auto racing in America hanging in the balance.

As the litigation passes the one-year mark and a federal jury trial scheduled for Dec. 1 approaches, it’s worth taking stock of the case and considering what might happen if a trial occurs.

The case centers on allegations that NASCAR uses monopoly power to suppress competition in the purchase of services provided by racing teams. According to 23XI and Front Row, NASCAR has conspired with racetrack owners and others connected to the industry to ensure that non-NASCAR events aren’t held at tracks. Similarly, they object to NASCAR’s use of exclusive dealing terms as a condition for hosting Cup Series events.

NASCAR also—allegedly—coerces teams to accept inferior terms, including smaller shares of revenue. This brings us to the element at the heart of the plaintiffs’ case: NASCAR’s use of charters, which are multiyear contracts between NASCAR and teams.

Charters guarantee teams a starting position in NASCAR-sanctioned races. This supplies a comparative advantage given that open teams need to qualify for a limited number of slots. On the other hand, charters contain noncompete language that forbids teams from racing in other circuits. Charters also require both the team and NASCAR to waive potential legal claims they might have against the other.

23XI and Front Row argue that NASCAR uses charters to constrain professional opportunities for teams and their drivers. They also contend that charters unfairly allocate revenue in NASCAR’s favor.

There are (at least) two sides to every case, and that is true with 23XI & Front Row v. NASCAR & France.

For starters, NASCAR has repeatedly argued that 23XI and Front Row are using antitrust litigation to try to renegotiate terms of a charter that was signed by 13 of the 15 teams; 23XI and Front Row were the holdouts.

Sometimes antitrust litigation is used opportunistically to gain a business advantage. This has been seen when pro leagues and players’ associations litigate against each other during work stoppages caused by breakdowns in labor relations. There is no “players’ union” or franchises in NASCAR, but an analogous framework exists, with racing teams negotiating business terms with the stock-car racing circuit.

NASCAR also asserts that charters furnish economic benefits that make the sport more competitive and are consistent with standard practices in the professional sports industry. Noncompete agreements, for example, are used by leagues, teams and players to ensure loyalty to one league and one sport.

NASCAR also portrays charters as enhancing the marketplace and strengthening commercial ties between the sport and its fans, sponsors and broadcasters.

To that point, charters have increased in value in recent years, with Beyond The Flag reporting earlier this year that charters rose in value from around $2.5 million five years ago to as much as $25 million. 

The charter system also made it possible for 23XI—co-owned by Michael Jordan, Denny Hamlin and Curtis Polk—to enter the sport in the early 2020s. The team purchased a charter, which elevated its status with drivers and fans. It appears that 23XI and Front Row want longer-term or even permanent charters, akin to how someone buys an NBA team and can’t lose it back to the league, but that might make it more difficult for new entrants to access the market.

NASCAR also maintains that other owners are on its side. In a recent court filing, NASCAR provided sworn statements from owners including Rick Hendrick, Roger Penske and Joe Gibbs. Each asserted that charters provide stability and predictability to the sport’s economics and have led to the long-term viability of teams and their partnerships with sponsors. Should 23XI and Front Row defeat NASCAR at trial, and assuming the victory withstands appeals to the U.S. Court of Appeals for the Fourth Circuit and potentially the U.S. Supreme Court, it is unclear what system would replace the current iteration of charters.

The case is not simply about 23XI and Front Row accusing NASCAR of misconduct. It also involves a countersuit by NASCAR. The association insists that 23XI, Front Row and Polk engineered an “illegal cartel” and threatened a group boycott. As NASCAR spins it, 23XI and Front Row didn’t only reject charters but “embarked on a strategy to threaten, coerce and extort NASCAR into meeting their demands for better contract and financial terms.”

Polk, in particular, is portrayed as fomenting rebellion and attempting to influence NASCAR’s relationship with a media partner. 23XI, Front Row and Polk deny the accusations.

There’s been no shortage of filings in the litigation. 23XI and Front Row have thrice sought preliminary injunctions that would allow them to compete with the benefits of charter teams but not—as charter teams must—waive legal claims against NASCAR. On their second attempt, 23XI and Front Row landed an injunction from U.S. District Judge Kenneth D. Bell, but the Fourth Circuit vacated it on grounds that a judge can’t use an injunction to create a new contract that the parties didn’t negotiate.

It’s possible that the parties will reach a settlement before Dec. 1. They have tried mediation before longtime sports attorney Jeffrey A. Mishkin and most recently before Bell, but those sessions didn’t yield a resolution. The trial would be before a jury of North Carolinians. Likely witnesses include Jordan, Hamlin, Polk, Bob Jenkins (owner of Front Row), France, Steve O’Donnell (NASCAR president), 23XI drivers Bubba Wallace and Tyler Reddick, and many other high-profile sports figures. Each would face cross-examination and difficult questions posed by skilled litigators attempting to undermine their positions.

Jordan would be the most prominent witness. Arguably the greatest basketball player of all time, he is universally famous but especially celebrated in North Carolina. He grew up in Wilmington, N.C., starred at UNC Chapel Hill and owned the Charlotte Hornets. NASCAR would likely use the jury selection process to screen out potential jurors who might be biased in Jordan’s favor.

There’s also a rivalry of sorts among the lead attorneys. Winston & Strawn’s Jeffrey Kessler, who represents 23XI and Front Row, and Latham & Watkins’ Christopher Yates, who represents NASCAR, are two of the most celebrated sports litigators in America.

The two men have battled against each other several times. Earlier this year, Yates represented the U.S. Soccer Federation, which defeated the North American Soccer League—represented by Kessler—in NASL’s $500 million antitrust suit. The case concerned how U.S. Soccer classified a league as Division I, II or III, and whether NASL was wrongly classified due to an alleged conspiracy between U.S. Soccer and Major League Soccer. Jurors weren’t persuaded there was a kind of harm to competition that antitrust law ought to remedy.

Meanwhile, Kessler’s advocacy in the House settlement— which, if it withstands appeals, will pay out billions of dollars to college athletes—resulted in a fundamental change: College athletes will now be paid. Yates represented the Atlantic Coast Conference in the settlement.

As a final point, a trial wouldn’t be the end of the case. These litigants have spared no expense and likely would continue to pursue every possible path to a win. The loser would almost certainly appeal to the Fourth Circuit, kicking off what might become years of appellate litigation that could go all the way to the U.S. Supreme Court.

Buckle up.