NASCAR Antitrust Trial Commences with Opening Statements and Key Witness Testimony

The highly anticipated antitrust trial pitting 23XI Racing and Front Row Motorsports against NASCAR officially began in Charlotte, North Carolina, on Monday. The day’s proceedings, overseen by Judge Kenneth D. Bell, featured the meticulous selection of a nine-person jury, compelling opening statements from both the plaintiffs and the defendant, and the initial testimony of a pivotal witness, 23XI Racing co-owner Denny Hamlin.

Lead attorney for the plaintiffs, Jeffrey Kessler, outlined a two-week strategy aimed at demonstrating an alleged anti-competitive scheme orchestrated by NASCAR leadership, specifically citing the actions of NASCAR CEO Jim France. Kessler indicated that evidence, including internal communications such as emails and text messages from executives Steve Phelps, Steve O’Donnell, and Scott Prime, would be presented to the jury. These documents, he argued, would illustrate an awareness of unfair practices during negotiations for charter extensions.

Kessler highlighted a publicly released text message exchange from earlier in the year, where Phelps reportedly described the charter offer as granting teams "zero wins," and O’Donnell characterized it as a "fuck the teams" offer that would regress NASCAR to its "tiny southern roots, the tiny sport of 1996." Kessler further asserted that these executives understood NASCAR’s operational structure, where the France family and its board of directors effectively constitute the sanctioning body, and that they were aware of Jim France’s alleged intentions toward the teams.

The plaintiffs’ legal team intends to prove that NASCAR presented a final offer in September 2024, described as a "take it or leave it" proposition, with a deadline of midnight to sign or risk losing their charters. Kessler characterized this ultimatum as an exercise of "monopoly power" resulting in "monopoly injury." Specific grievances detailed by Kessler included the teams’ desire for permanent charters, which were not granted; a proposed charter payout of $12.5 million per car, falling short of the $20 million sought; and the refusal of teams’ requests for veto power over competition changes, which also resulted in the loss of a "three strikes" provision from the previous agreement that offered teams a degree of veto authority.

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Kessler drew an analogy between renting and owning a home to explain the concept of charter permanency, stating that teams wish to "permanently own their figurative house" to increase their enterprise value. He argued that granting permanent charters would incur "absolutely nothing" for NASCAR, yet the sanctioning body has remained unyielding on this point. To illustrate the concept of monopsony, Kessler used the example of a nurse seeking employment in a town with only one hospital, where the hospital dictates the salary.

The plaintiffs’ case is built on three core arguments, though specific details of these points were not fully elaborated upon in the initial opening statement. Kessler concluded by reiterating his belief that Jim France leveraged NASCAR’s monopsony status to suppress team earnings. He cited expert testimony suggesting that in a fair market, teams would receive 45 percent of NASCAR’s value, and claimed that Phelps, O’Donnell, and Prime were privy to this information. Kessler concluded his opening statement by asserting that the evidence would demonstrate that "France ran this for his family at the expense of the teams." He also presented financial context, referencing a Goldman Sachs valuation of NASCAR at $5 billion and reporting $400 million in revenue over the past three years.

NASCAR’s defense was presented by attorney John E. Stephenson, who characterized the lawsuit as an attack on the charter system, which NASCAR asserts it has upheld in both letter and spirit since 2016. Stephenson emphasized that 23XI and Front Row Racing only raised antitrust claims after the charter extension deadline and the issuance of the final offer in September 2024. He stated, "Literally none of these things were raised to NASCAR until the lawsuit was filed. From 2016 to 2024, none of it was brought up."

Stephenson pointed to a September 6 letter from 23XI explaining their refusal to sign the agreement, which he noted did not mention anticompetitive behavior, and made similar claims regarding communications with Front Row. NASCAR’s position is that 23XI likely intended to file a lawsuit if their desired financial terms were not met. Stephenson quoted from a discovery email from Curtis Polk, a co-owner of 23XI, stating, "A lawsuit is our greatest leverage," and accused the teams of "negotiation through litigation."

Further bolstering NASCAR’s argument, Stephenson presented another email from Polk that allegedly indicated a lack of good-faith negotiation, stating, "I hope they don’t come because it will build our record," in reference to a proposed meeting with NASCAR. He also referenced private emails from Polk in 2023 that expressed "admiration" for the France family’s business acumen without mentioning anticompetitive behavior. Stephenson posed the question to the jury: if the charters were indeed a product of anticompetitive behavior and a "bad deal," why did 23XI continue to acquire them?

Addressing the non-compete clause that teams must agree to, Stephenson drew a parallel to similar clauses signed by drivers. He explained that the provision preventing teams from competing against NASCAR was a reciprocal agreement for greater guaranteed revenue, arguing, "Be all in on NASCAR Stock Car racing, is what that says. You’re getting guaranteed money. They agreed to it. They never made claims against it until filing their lawsuit." Regarding NASCAR’s merger with International Speedway Corporation (ISC), Stephenson dismissed the plaintiffs’ claim of an anti-competitive measure to secure tracks. He asserted the merger was driven by the need for "schedule flexibility" and "innovation," allowing NASCAR to pursue events like the Chicago and Los Angeles street races, which, as a publicly traded entity, NASCAR or ISC could not risk. Stephenson repeatedly questioned the necessity of the trial, suggesting Polk had a premeditated plan to sue if charter terms were not met.

The day concluded with approximately 40 minutes of testimony from Denny Hamlin. His initial questioning, conducted by Jeanifer Parsigian of Winston & Strawn, focused on establishing his role and basic background. Hamlin, a successful Cup Series driver and co-owner of 23XI Racing, humorously responded to questions about his graduation and the previous season’s performance, noting he was leading the championship race with three laps remaining before a caution ended his chances.

Hamlin’s testimony repeatedly touched upon the challenge of securing sponsorships, a crucial element for team revenue. He mentioned that 23XI acquired its charter from Germain Racing in 2021 after that team lost its sponsor, GEICO, to NASCAR and subsequently ceased operations. Hamlin described his responsibilities as a "professional fundraiser," emphasizing the constant competition with NASCAR itself for potential sponsors. He also detailed the $35 million investment in 23XI’s "Airspeed" race shop, stating it was a strategic move to attract sponsorships and top talent.

"First, I have to fend off the series," Hamlin stated regarding new sponsors. "If a new sponsor want to come in, NASCAR will go after them. I have to fight them. I have to fight other teams for them. I have to fight them for employees." Hamlin became emotional when recounting his racing origins and the sacrifices made by his parents, particularly his father, whose declining health was publicly acknowledged. He underscored the substantial cost of fielding a Cup car—$20 million annually—with the current charter agreement covering $12.5 million, necessitating significant sponsorship acquisition. Hamlin acknowledged that Michael Jordan’s co-ownership was instrumental in 23XI’s profitability, a factor that made Jordan an appealing partner for Hamlin’s long-held desire to own a team.

When asked about the fairness of the charter agreement, Hamlin pointed to the fact that 11 of the original 19 charter teams from 2016 have ceased operations. "If the terms were fair, they wouldn’t have gone out of business," he stated. "Only one side is going out of business." Hamlin also noted that 23XI’s profits are subject to fluctuations influenced by factors within NASCAR’s control, such as mid-season rule changes that can cost up to $1.5 million per car, and international races. He disclosed that 23XI pays Joe Gibbs Racing $2.66 million per car annually for an alliance fee, as JGR is the primary Toyota organization. He contrasted 23XI’s 140 employees with the 500 employed by JGR, attributing this leaner operation to his business partners’ directive to run 23XI as efficiently as possible.

The day began with Judge Bell addressing a NASCAR motion to limit the courtroom presence of 23XI’s owners to one individual. While initially hesitant, the judge granted the motion to prevent potential mistrials on technical grounds. 23XI designated Jordan as their representative, though Hamlin, as the first witness, was permitted to remain in the courtroom for the remainder of the trial after his testimony.

Jury selection involved a process of questioning potential jurors to ensure impartiality. Notably, one candidate was dismissed for working at Hendrick Automotive Group, and another for possessing extensive knowledge of NASCAR and the parties involved. Candidates were also questioned about their familiarity with Michael Jordan and any pre-existing opinions that might affect their judgment. Two candidates, one who admitted to having strong feelings about Jordan and another who expressed affection for him, were dismissed. A juror candidate whose questionnaire indicated "heavy drinking" as a hobby was ultimately selected after defending it as non-impairing.

Prior to the commencement of opening statements, Judge Bell admonished both legal teams for their recent "confrontational" approach and prohibited the use of exhibits during their statements, expressing concern that disallowed exhibits might be presented. He urged a less confrontational approach for future proceedings.

The list of potential witnesses presented on Monday includes prominent figures from both sides. For NASCAR, the list includes Jim France, Lesa France Kennedy, Ben Kennedy, Brian Herbst, Steve O’Donnell, Steve Phelps, Scott Prime, Tim Clark, Greg Motto, John Probst, and Ron Drager. Representing the teams are Richard Childress, Rick Hendrick, Roger Penske, Heather Gibbs, Cal Wells III, Steve Newmark, Rob Kauffman, and Jonathan Marshall.

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