Attorneys for 23XI Racing And Front Row Motorsports Square Off Against NASCAR At First Hearing In Antitrust Case

Yesterday at 05:45 PM

By Jerry Jordan, Editor

CHARLOTTE, N.C. — NASCAR teams, 23XI Racing and Front Row Motorsports, represented by Jeffrey Kessler, a prominent antitrust attorney, were in U.S. District Court on Monday, requesting a preliminary injunction against NASCAR to prevent enforcement of a contractual clause they argue restricts their rights under antitrust laws.

The core of the dispute revolves around NASCAR’s exclusive charter system, which the plaintiffs allege monopolizes the stock car racing market, impeding their ability to compete without giving up significant legal protections.

The teams — 23XI Racing and Front Row Motorsports — claim that NASCAR's requirement to sign a "release" clause as part of the 2025 charter agreement is an anti-competitive practice that bars them from pursuing legal recourse under antitrust laws. Plaintiffs argue this clause could harm their ability to operate independently, even if they chose to race as an Open Team without a charter and jeopardizes their place in the sport.

Kessler described the preliminary injunction as "modest" and "narrowly targeted," asserting that the release clause effectively prevents NASCAR teams from seeking antitrust relief in the future if they face unlawful competitive barriers.

"This injunction is not about past agreements, but rather to prevent NASCAR from imposing an anti-competitive release clause in the 2025 charter," said Kessler. "Without this injunction, we cannot pursue our antitrust claims — an essential element of our right to fair competition."

NASCAR's Exclusive Charter System: A Double-Edged Sword

NASCAR introduced its charter system in 2016 after extensive negotiations with the teams, who sought a more stable revenue stream and guaranteed entry into events. The system created a form of team ownership by assigning "charters," effectively a license to participate in all NASCAR Cup Series events. The charters can be traded, leased, or sold to other teams and investors. However, without a charter, participation in the full season becomes almost untenable, as history has shown, according to Kessler, as it is too cost-prohibitive to succeed.

Kessler argued NASCAR's control over the charter system grants it an unassailable monopoly over top-tier stock car racing, making it impossible for other potential leagues to emerge.

"Teams operating without a charter cannot feasibly participate in the full schedule of races due to logistical and financial obstacles, including difficulties in attracting sponsors and keeping drivers," Kessler said, noting teams that tried to race without a charter were unsustainable, with most folding within a year.

The crux of the teams' argument is that NASCAR uses the charter system to maintain total control over the market, making NASCAR the only viable entity for top-tier stock car racing in the U.S.

Kessler also highlighted that recent negotiations over the 2025 charter reached a deadlock, as the teams he represents refused to sign an agreement requiring them to forfeit their right to pursue antitrust claims.

"Without a charter, teams lose essential stability and potential revenue, which includes nearly half of media rights for Cup Series events," Kessler said. "This is no minor matter; it's about our very survival."

Representing NASCAR, attorney Christopher Yates argued against the injunction, describing the request as unprecedented and unwarranted. NASCAR's defense centered on the fact that the release clause has existed since the charter system's inception in 2016 and that both 23XI Racing and Front Row Motorsports had previously signed similar agreements without objection.

"This clause is not a new or last-minute addition," Yates told the judge. "The release provision has been part of the agreement for years and was fully understood by the teams' representatives, including some of the most sophisticated figures in the sport, such as Roger Penske and Rick Hendrick."

NASCAR maintains that the charter system has provided substantial benefits to teams, including a guaranteed share of media revenue, stable event participation, and the creation of an asset that can be sold or traded. The defense argued that without this stability, the sport could not sustain its current level of competition and that the teams were fully informed about the terms before agreeing to them in past charters.

Kessler countered by emphasizing that even if the release clause was included in past agreements, its continued enforcement still constituted an anti-competitive practice. He noted that courts have previously granted preliminary injunctions in cases where monopolistic entities used contracts to restrict legal challenges from competitors.

"This request is neither modest nor narrowly targeted, despite what the plaintiffs contend," Yates countered. "It would compel NASCAR to re-enter a contract on the plaintiffs' terms, essentially rewriting the agreement and imposing a mandatory relationship."

Judge's Questions on Market Impact and Legal Boundaries

Throughout the hearing, U.S. District Judge for the Western District of North Carolina, Frank D. Whitney, questioned both parties about the balance of harm and the legal boundaries for preliminary injunctions in antitrust cases. The judge raised concerns about the impact that prohibiting the release clause might have on NASCAR's business model, which relies on consistent team participation to generate revenue for event promoters and broadcasters.

It did not appear during arguments from attorneys that Judge Whitney understood the inner workings of the NASCAR charter system or what it means to be an Open Team versus a Charter Team. Additionally, prior to the hearing, Judge Whitney attempted to recuse himself from the case because one of the defense attorneys for NASCAR  was a law clerk in his court until July 2024.

According to Notice Concerning Waiver of Judicial Disqualification filed by Judge Whitney's clerk on his behalf, he requested both sides approve of his staying on the case or he was removing himself.

"Canon 3D of the Code of Conduct provides (with exceptions not pe1iinent to this case) that when a judge is disqualified in a proceeding because 'the judge’s impartiality might reasonably be questioned,' the judge may participate in the proceeding only if all the parties and lawyers, after notice of the basis for the disqualification, have an opportunity to confer outside of the presence of the judge and all agree in writing or on the record to waive the disqualification under a procedure independent of the judge’s participation," the document stated. "Unless a waiver is obtained from all parties and all counsel, Judge Whitney intends to disqualify in this proceeding because of these circumstances: Local counsel for Defendants previously served as Judge Whitney’s Career Law Clerk and left service with the Comi on July 26, 2024."

It is speculated the conversation around this disqualification document is the reason the hearing began 30 minutes later than originally scheduled on Monday. During the hearing, Judge Whitney had questions for both sides.

The judge also questioned Kessler's position on whether the release clause itself was an anti-competitive act and not merely a contractual provision. Kessler responded, stating the clause functions as a restriction on their clients' ability to defend themselves in the face of what he contends is a monopolistic system.

"The release is not just another contractual term; it's a mechanism that prevents competition by blocking the teams' right to hold NASCAR accountable if it abuses its monopoly power," Kessler argued. "Without relief from this court, we cannot fairly compete, and we may be forced out of the sport entirely."

Kessler added that each team's drivers, sponsors and employees could leave their respective organizations under their own, independent contract terms.

What's Next in the Case

Judge Whitney informed both sides that he would rule on the injunction by Friday. Whichever way Judge Whitney rules, it is expected the losing side will seek an immediate appeal.

Following the hearing, NASCAR executives, including James (Jim) France, who is a defendant in the case and NASCAR's corporate attorneys and members of its communications department all left the courthouse without comment.

Kessler, however, met with about a dozen members of the NASCAR media pool on the courthouse steps.

"I am optimistic that we’re right," Kessler said. "Hopefully the judge will see it the right way and that we will eventually prevail in this case. This is the first step, but I’ve been litigating a very long time. I don’t make predictions about outcomes of cases because I’ve been surprised in the past, but I felt very good, which is all I can do, that we made our case, that we are right on the facts, we are right on the law, and hopefully the judge will agree."

Kessler said, if the ruling does not go in his clients' favor, "We have an immediate right to appeal, as do they."