Update: Story updated to reflect dates being set for preliminary injunction and expedited discovery
As was expected, 23XI Racing and Front Row Motorsports have filed a preliminary injunction that would allow them to compete as chartered teams next season while its antitrust lawsuit against NASCAR plays out.
23XI and Front Row were the only two teams to not sign the final charter agreement proposal by the deadline set by NASCAR last month. The two teams also stated in court documents that the offer gave them only an hour review and sign that agreement ‘or risk not having a charter for 2025’ before that deadline was extended to Midnight.
Both teams intend to field three chartered cars next season, the two that both organizations previously held and one each that both teams purchased from the impending closure of Stewart-Haas Racing. The charters provide each team guaranteed starting spots into every race and predictable revenue independent of sponsorship money.
How the NASCAR charter system works
For the past seven years, the sport has operated with a maximum field size of 40 – 36 chartered teams and four ‘open’ teams. However, the teams that choose to compete without a charter only receive a tiny fraction of monies that the teams with an ‘ownership token’ are privy to.
In fact, the filings on Wednesday state that Daytona 500 purse money amounts to 15 percent of total revenue for an entire season, thus 23XI Racing and Front Row Motorsports’ desire to continue operating under a system that both are effectively suing NASCAR with the goal of improving terms from a team standpoint.
The two teams did not sign the agreement the other 13 signed but made the following case in its request for preliminary injunction.
“… if Plaintiffs cannot obtain charters for the 2025 season without giving up their antitrust rights, they will suffer severe and irreparable harm. They have brought this motion for a preliminary injunction so that they can continue to compete in Cup Series events under the terms of the 2025 Charter Agreements without risking forfeiture of their antitrust claims.”
With that said, both 23XI and Front Row are willing to race at least next season as open teams, with Bob Jenkins, who owns the latter, conceding it is not a long-term solution.
“Because of our love for the sport and our determination to maintain the race team we have built, we are determined to race next year even if we have to do so on an ‘open’ basis but at some point, the losses may become so severe that we simply cannot continue,” Jenkins said in filings.
NASCAR could consider granting it only from the standpoint that should it lose a case that goes to trial, it would then be required to pay damages that no doubt would include the losses from 23XI and Front Row operating as open teams.
A judge has set dates for the preliminary injunction hearing for October 16 at 9 a.m. and the response to motion for that hearing is October 14.
23XI Racing and Front Row Motorsports have also filed a motion for ‘expedited discovery’ which requests the court to provide their legal team access to documents and files from NASCAR executives Jim France, Lesa France Kennedy, Ben Kennedy, Steve O’Donnell, Steve Phelps, and Scott Prime.
The two teams are also requesting documents discussing NASCAR means to repossess the charters currently held by the two teams, documents discussing the decision made by NASCAR to end negotiating with the combined Team Negotiating Committee and to only negotiate with teams on an individual basis, and documents concerning the take-it-or-leave it final proposal for the 2025 charter agreement.
NASCAR’s response to motion for the expedited discovery is due on Friday, October 11.
Jeffrey Kessler, who represents the two teams, says he ‘expects the case to take up to a year or two’ to reach trial.
Breaking point
The basis of the lawsuit alleges that NASCAR has acted in a monopolistic and anti-competitive nature in that it owns all the viable tracks that professional stock car racing competes on, now owns the rights of the cars and the contracts for the single source suppliers that provide the spec components, while also stifling competition in the marketplace by acquiring any would-be competitors.
NASCAR also placed a provision in the 2025 charter agreement that teams could not sue the sanctioning body on anti-trust grounds and also that it would have increased ability to use the intellectual properties of the teams as it sees fit, with 23XI and Front Row arguing that the teams would not receive commensurate revenue for the use of that IP.
Speaking on his podcast this week, Denny Hamlin, who co-owns 23XI Racing with Michael Jordan, says both provisions were deal breakers.
“The put in their at the 12th hour of the agreement, you cannot sue us for anything that we have done through this process, you can’t sue us for antitrust,” Hamlin said. “They basically took away all of our rights.
“At that point, we said, stop, we can’t sign this because we know this is wrong but if we do, we release them of all wrongdoing and they had wrong doings.”
Hamlin also said 23XI wasn’t comfortable signing away their IP to NASCAR.
“The 2025 agreement binds the teams in such away that there is no upside, whatsoever, all the upside goes to one side, and all of our rights are taken away,” Hamlin said. “Anyway that we had a path or avenue to use our rights, our rights and brands that we created, IP that we created, to then go get other revenue to supplement to this thing called a racing team, those got taken away so it’s just a broken system.
“I wish people understood how broken the system is.”
Hamlin also said that it would become clear, at least in his opinion, why it is an unfair agreement once things come out through the discovery process.
Key players
Michael Jordan: 23XI co-owner
Denny Hamlin: 23XI co-owner
Curtis Polk: 23XI co-owner
Bob Jenkins: Front Row owner
Jim France: NASCAR CEO
Lesa France Kennedy: NASCAR vice chair
Ben Kennedy: NASCAR EVP
Steve Phelps: NASCAR president
Steve O’Donnell: NASCAR COO
Team Negotiating Committee: Jeff Gordon (Hendrick Motorsports), Dave Alpern (Joe Gibbs Racing), Steve Newmark (RFK Racing)
Jonathan Marshall: Executive director, Race Team Alliance
Timeline and terms
As part of the preliminary injunction filing, 23XI Racing and Front Row provided documents that detailed the process leading up to the take-it-or-leave-it final offer on September 6 and throughout the two years of negotiating.
The exchange of letters also makes public the first glimpses of NASCAR’s stance towards the teams, both during the process and leading up to the suit from 23XI Racing and Front Row Motorsports.
In a letter dated September 18, NASCAR president Steve Phelps rebutted how the final offer was presented both publicly and privately.
“It appears after 2+ years of negotiations with Teams, both collectively and individually, compromise and concession on both sides up until the last minute, we firmly believe that we have come up with a document that is fair and equitable to the industry. … You suggest that NASCAR somehow has ‘monopoly power’ and that 23XI and other Teams ‘depend on [NASCAR] for a competitive opportunity’ and have been presented with a ‘take-it-or-leave-it offer.’ We feel — and our attorneys have confirmed — that this contention is misplaced — and similar types of claims have already been rejected by courts.”
Phelps also, on September 11, pushed back on the argument that it did not negotiate in good faith.
“You also suggest that NASCAR was ‘not negotiating in good faith’ by virtue of the terms NASCAR offered in the renewal Charter Agreement.
“The Joinder Agreement referenced above requires eachassignee to assume ‘all obligations, liabilities, duties, and responsibilities ..under the CharterAgreement.’ Specifically, those obligations included Section 2.3 (Good Faith Renewal Obligations) of the Charter Agreement whereby. … ‘the final decision whether or not to renew, and the term of anyrenewal period, shall be subject to mutual agreement of the parties and, for clarity, either party may propose any changes to this Agreement during such Negotiation Period.’
“One party not agreeing to the other party’s proposed changes is not a failure to negotiate in goodfaith, it’s the process of negotiation. It appears that, after over two years of protracted negotiations,there has not been a meeting of the minds on certain key points which has led to an impasse. This does not imply that NASCAR has failed to negotiate in good faith, but rather reflects the complexities of the ongoing discussions and the differing positions of the parties involved. However, NASCAR has acted above board throughout this process. Despite your team waiving its exclusive negotiating right after it expired January 29, 2024, NASCAR did not talk or have discussions with third parties aroundthe charters in an effort to close agreements with the current charter owners.
“Throughout the process NASCAR has made concessions and in return negotiated for things that NASCAR felt were important. Lastly you suggest that 23XI was not afforded an opportunity to negotiate fairly with NASCAR, NASCAR and the Teams have been negotiating for over two years regarding the terms of this Charter Agreement and we began those conversations earlier than was set forth in the Charter Agreement inan effort to find common ground as early as possible. Many of those meetings directly involved yourrepresentative. We received individual comments from many teams and also received generalcomments from Covington, which purported to represent the interests of all the teams. The negotiations have been lengthy and exhaustive (see high level timeline attached, which is not meantto be exhaustive of every conversation but shows the on-going communication between Teams and NASCAR). We firmly believe that we have come to a document that is fair and balanced based on theinterest of all the stakeholders in the industry. The Charter Agreement has been finalized and thenegotiations are concluded.”
Full timeline
- June 2022- Initial proposal received from Teams
- Oct. 2, 2022 -First Charter negotiation session in Talladega (NASCAR counter)
- Oct. 2022- Individual Team meetings at race shops
- Nov. 1, 2022 – Team Owner Council meeting
- January 12, 2023- Charter negotiation session in Daytona (Team counter)
- January 19, 2023- Team Owner Council meeting
- February 4, 2023- Charter negotiation session in Los Angeles (NASCAR counter)
- February 23, 2023 -Charter negotiation session in Charlotte (Team counter)
- March 2, 2023 – First meeting of sub-committee to discuss “all in” and opportunities to collaborate
- March 14, 2023- Second meeting of sub-committee to discuss “all in”
- March 21, 2023-Jim sends Team business collaboration points
- March 24, 2023- Charter negotiation session – Virtual (NASCAR counter)
- March 28, 2023 – Follow up meeting with ancillary rights team scheduled. Teams cancelled and didn’t want to work further on this without the larger agreement terms in place.
- April 4, 2023-Team Owner Council meeting (Teams did not attend)
- May 5, 2023- Letter to NASCAR Board on permanent Charters
- May 9, 2023 – Letter sent to TNC saying that we were scheduling one-on-one team meetings
- May 11,2023- e-mail from Dave Alpern asking us to add the Charter conversation to the June 22 TOC – NASCAR replied that individual meetings would not be concluded by then given Jim in Europe for Garage 56
- May 18, 2023- Letter from Dave Alpern from the TOC regarding driver ambassador program
- May 19, 2023 -e-mail from Jeff Gordon on desire / feasibility of permanent Charters
- May / June 2023-Individual Team meetings
- June 22, 2023- Team Owner Council meeting
- July 7, 2023 – Meeting with 23Xl and Jim France and Steve Phelps
- July 25, 2023- Charter negotiation session – Virtual (NASCAR proposed subgroups to make progress)
- August 30, 2023-Team Owner Council meeting
- September 19, 2023 Charter negotiation session-Hendrick Barn
- October 9, 2023~ Charter negotiation session- Charlotte Law firm
- October 25, 2023 – Team Owner Council meeting
- December 22, 2023- Full Charter draft sent to Owners
- December 29, 2023 – First Charter extension letter sent and agreed to
- January 5, 2024-RTA/ Covington letter to NASCAR
- January 9, 2024 Letter response back to Covington
- January 16, 2024-Charter negotiation session – JW Marriott Charlotte
- January 25, 2024 – Charter negotiation session – Charlotte
- January 26, 2024 – 2nd Extension letter sent and not agreed to
- January 30, 2024-Team Owner Council meeting
- February 14, 2024 – Letter sent to each individual Team Owner to clarify position and ask for individual meetings
- February 2024- Limited number of individual Team meetings
- April 8, 2024- Letter from Jim France to 32X1 offering to meet with the team and asking them to respond by April 11, 2024
- April 12, 2024- Steve Lauletta emailed letter from Denny Hamlin to Steve Phelps. The letter referred NASCAR back to the TNC to negotiate on their behalf.
- Mid-April 2024 to late May 2024- Individual Team Meetings
- April 26, 2024-Steve Newmark sends Pool Allocation proposal to Scott Prime done by 3 team CFO and 3 team execs. Directs Prime to Newmark or Jonathan Marshall if there are questions
- April 29, 2024 – Steve Newmark e-mailed Scott Prime to provide additional color on how they reached the Pool Money proposal. 13 of 15 teams voted to endorse
- May 1 2024 Team Owner Council meeting
- May 10, 2024 – Letter from 3-4 teams with their concept/feedback from the meetings (23X1 said they did not support and would be sending their own comment with TNC)
- May 10, 2024-meeting with Jim France, Steve Phelps, Steve O’Donnell, Ben Kennedy and Scott Prime (NASCAR) and 23XI
- May 13, 2024 -In response to NASCAR’s request in individual team meetings to understand the evergreen request, Steve Newmark sends evergreen language on behalf of the TNC (23X1 copied)
- May 17, 2024 – Steve Phelps calls all teams to let them know they will not receive the draft on this day.
- May 28, 2024 Charter draft sent to Teams with request to return feedback by June 11.
- June 11, 2024: Email from Steve Lauletta to Steve Phelps acknowledging that 23Xl was working with the other teams on a redraft of the May 28, 2024 draft from NASCAR and letting us know their outside counsel wouldn’t have the draft ready to send back until EOD Friday June 14.
- June 11, 2024: email to teams acknowledging the request from some teams to extend the window to provide feedback to Friday, June 14, so provided that extension to all team
- June 14, 2024 – email from Steve Lauletta (23XI) letting us know the teams met with the attorneys yesterday and they would need more time to get comments.
- July 10, 2024~ NASCAR receives redline of the Charter draft from Teams
- July 17, 2024 Team Owner Council meeting
- July 24, 2024 – NASCAR Legal/Latham met with Covington for NASCAR questions on the Team’s redline
- August 14, 2024 – Charter Redline and executable agreement sent out to Teams stated goal was to have them executed by September 1.
- August 2, 2024 – Amanda Oliver (NASCAR legal) meets with Jonathan Marshall (RTA) regarding questions asked by the Teams
- August 24, 2024-Joe Gibbs, representing the teams, met with Jim France
- August 29, 2024- Brian Herbst and Tim Clark meet with Torrey Galida and Steve Newmark to discuss Ancillary Rights. NASCAR offered to meet with any teams who wanted to discuss and were told these were the representatives.
- August 30, 2024 Charter Agreement draft and executable PDF sent out to all teams
- September 4, 2024-Email from Jeff Gordon as co-Chair of the Team Owner Counsel to Steve Phelps and Steve O’Donnell which represented that 15 Teams (including 20 Owners) had a call with Covington and asking NASCAR legal to reach out for call with Covington
- September 4, 2024-NASCAR legal reaches out to Covington as directed by the Teams September 5, 2024 AM ET NASCAR lawyers met with Covington and Jonathan Marshall at 10
- September 5, 2025 at 3:15 PM NASCAR provides redline to Covington with the revisions from the call
- September 5, 2024-NASCAR provides Driver Agreement to Covington at 3:23 PM ET
- September 6, 2024 -NASCAR sends revised redline to Covington 4:08 PM ET with revision of the Extension Term to synch to Traditional Broadcast Deal term length.
- September 6, 2024- NASCAR sent out email notifying 23XI the Charter Agreement was being sent for signature 4:56 PM ET
- September 6, 2024-NASCAR receives Covington comments 5:36 PM ET
- September 6, 2024-Letter from 23Xl to Steve Phelps 5:45 PM
- September 6, 2024~ Adobe sign sent to 23Xl for Charter 4 (5:46 PM ET) and Charter 30 (5:47 PM ET)