23XI Racing, Front Row file injunction to compete as chartered NASCAR teams during lawsuit

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David J Griffin | Getty Sports

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.

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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.

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NASCAR retains noted antitrust lawyer in 23XI Racing, Front Row Motorsports suit

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.

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Richard Childress ‘did not have a choice’ in signing NASCAR charter agreement

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.”

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Denny Hamlin says NASCAR lawsuit isn’t a distraction from winning its championship

Full timeline

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