NASCAR Antitrust Trial Commences with Opening Statements and Initial Witness Testimony

Charlotte, NC – The highly anticipated antitrust trial pitting 23XI Racing and Front Row Motorsports against NASCAR officially began Monday in Charlotte, North Carolina. The inaugural day of proceedings saw jury selection, compelling opening statements from both the plaintiffs and the defendant, and the commencement of testimony from the first witness, 23XI Racing co-owner Denny Hamlin.

The legal battle centers on allegations that NASCAR has engaged in anti-competitive practices, primarily through its charter system, thereby unfairly suppressing the earning potential of its top-tier race teams. Attorneys for 23XI Racing and Front Row Motorsports, led by Jeffrey Kessler, laid out their case, asserting that NASCAR, under the direction of CEO Jim France, has orchestrated a strategy to maintain a monopsony – a market condition where a single buyer has a dominant influence over sellers – to the detriment of the teams.

Kessler informed the jury that over the next two weeks, evidence including emails and text messages from key NASCAR executives such as Steve Phelps, Steve O’Donnell, and Scott Prime will be presented. He argued this evidence will demonstrate an awareness among these executives of the inequitable treatment of teams during charter extension negotiations. A significant piece of this evidence, previously revealed over the summer, includes a text message exchange where Phelps reportedly stated the offer gave teams "zero wins," and O’Donnell characterized it as a "fuck the teams" offer designed to revert NASCAR to its "tiny southern roots, the tiny sport of 1996."

Kessler elaborated on the plaintiffs’ contention that the France family, as the board of directors, effectively controls NASCAR’s decision-making. He suggested that the three executives, reporting to Jim France, were aware of the organization’s actions toward the teams. The plaintiffs’ legal team plans to demonstrate that NASCAR ultimately pushed through a charter extension agreement that their own lieutenants deemed unfavorable. This offer, presented in September 2024, was described by Kessler as a "take it or leave it" ultimatum, with the threat of losing charters if not signed by midnight, which he characterized as an abuse of monopoly power and an infliction of monopoly injury.

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Specific grievances highlighted by Kessler included the teams’ desire for permanent charters, which were denied. Furthermore, the proposed charter value of $12.5 million per car fell short of the teams’ requested $20 million. The plaintiffs also sought veto power over competition changes, a demand that was not only refused but also resulted in the removal of a "three strikes" provision from the previous charter agreement, which had afforded teams a degree of veto authority.

Kessler drew an analogy between permanent charters and owning a house versus renting one, emphasizing that teams wish to permanently own their operational "house" to extract greater enterprise value. He posited that granting permanent charters would incur no cost to NASCAR, yet the sanctioning body has remained steadfast in its refusal.

To explain the concept of a monopsony to the jury, Kessler used the hypothetical scenario of a nurse seeking employment in a town with only one hospital. In such a situation, the nurse would have to accept whatever wage the hospital offered or forego their profession. He outlined three key points the plaintiffs intend to prove to establish their argument.

Concluding his opening statement, Kessler reiterated the belief that Jim France exploited NASCAR’s monopsony status to depress team earnings. He stated that expert testimony would show that in a fair market, teams would receive 45 percent of NASCAR’s value, a figure he contrasted with the current 39 percent, which he alleged was a direct result of France’s actions for the benefit of his family at the expense of the teams. He also referenced a Goldman Sachs valuation of NASCAR at $5 billion and highlighted the organization’s $400 million revenue over the past three years, providing context for the financial pressures faced by the teams.

Representing NASCAR, attorney John E. Stephenson presented the sanctioning body’s defense. Stephenson’s arguments echoed NASCAR’s long-standing position: that the charter system, implemented in 2016, has been honored with unwavering commitment in both principle and financial obligation. He contended that 23XI and Front Row Motorsports are essentially attacking this established system and that their antitrust claims emerged only after the charter extension deadline and the issuance of the final offer in September 2024.

Stephenson pointed to a September 6th letter from 23XI explaining their refusal to sign the agreement, noting it made no mention of anticompetitive behavior, a sentiment he echoed regarding communications with Front Row Motorsports. The NASCAR defense posits that 23XI likely intended to file a lawsuit if their financial demands were not met. Stephenson cited an email from Curtis Polk, a 23XI co-owner, stating, "A lawsuit is our greatest leverage," and characterized the plaintiffs’ actions as "negotiation through litigation," suggesting their objective is to secure better financial terms rather than to rectify an antitrust injustice.

Further evidence presented by Stephenson included a Polk email discussing a proposed meeting with NASCAR, where Polk allegedly wrote, "I hope they don’t come because it will build our record." Stephenson argued this indicated 23XI was not negotiating in good faith. He also referenced private emails from Polk in 2023 that expressed "admiration" for the France family’s business acumen and contained no references to anticompetitive behavior.

NASCAR’s central argument, as articulated by Stephenson, questions why 23XI continued to purchase charters if they were indeed a product of anticompetitive behavior and a "bad deal." Regarding the non-compete clauses teams must agree to, Stephenson drew a parallel to similar clauses signed by drivers, framing it as a standard industry practice. He explained that the provision preventing teams from competing against NASCAR was a reciprocal agreement for the guarantee of increased revenue. "Be all in on NASCAR Stock Car racing," Stephenson stated, adding that teams agreed to these terms and only raised objections after filing their lawsuit.

Addressing the plaintiffs’ claim that NASCAR’s merger with International Speedway Corporation (ISC) was an anti-competitive move to secure tracks and maintain its monopsony, Stephenson asserted that the merger was driven by a need for "schedule flexibility" and "innovation." He argued that NASCAR and ISC, as former publicly traded entities, were constrained in their ability to take risks on events like the Chicago Street Race or the Los Angeles Coliseum event, risks that could result in financial losses. Stephenson repeatedly questioned the necessity of the trial, suggesting Polk had a pre-meditated plan to sue NASCAR if charter terms were not met.

The day concluded with approximately 40 minutes of testimony from Denny Hamlin, co-owner of 23XI Racing. His direct examination, conducted by Jeanifer Parsigian, a partner at Winston & Strawn, focused on his background and the operational realities of his team. Hamlin, a seasoned NASCAR Cup Series driver, offered insights into the financial challenges faced by teams and the competitive landscape for sponsorships and talent.

Earlier in the day, Judge Kenneth D. Bell ruled on a NASCAR motion to limit the number of 23XI owners present in the courtroom to hear all testimony. While "reluctant," the judge granted the motion to avoid potential mistrials, designating Jordan as the sole representative. Hamlin, as the first witness, was permitted to remain in the courtroom after his testimony.

Parsigian’s questioning began with basic inquiries about Hamlin’s background and recent racing performance, to which Hamlin responded with characteristic candor. A recurring theme in Hamlin’s testimony was the intense competition for sponsorships, a crucial element for team profitability. He explained that 23XI’s acquisition of the Germain Racing charter in 2021 was facilitated by Germain’s loss of sponsorship to NASCAR, leading to their exit from the sport.

Hamlin described his role at 23XI as encompassing competition and sponsorship acquisition, referring to himself as a "professional fundraiser." He reiterated that securing sponsorships often requires him to compete directly with NASCAR for potential partners. He cited the team’s $35 million investment in its "Airspeed" race shop as a strategic move to attract sponsors and top talent, again emphasizing the need to "fight" NASCAR and other teams for both.

Hamlin became emotional when discussing his racing journey and the support from his parents, particularly his father, whose declining health is publicly known. He highlighted the substantial cost of fielding a Cup car, estimated at $20 million, with the current charter agreement covering $12.5 million. The remaining $7.5 million must be secured through sponsorship. He credited Michael Jordan’s co-ownership as instrumental in 23XI’s ability to achieve profitability, a factor that made Jordan an appealing partner for Hamlin’s long-held ambition 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, stating, "If the terms were fair, they wouldn’t have gone out of business. Only one side is going out of business." He also noted that team profits are subject to fluctuations influenced by factors outside their control, such as mid-season rule changes that can cost $1.5 million per car, and international races.

Hamlin also disclosed that 23XI pays Joe Gibbs Racing an alliance fee of $2.66 million per car per season, acknowledging JGR’s primary role within the Toyota organization. He explained his team’s leaner workforce of 140 employees compared to JGR’s 500, citing instructions from his business partners to operate 23XI as efficiently as possible.

The day’s proceedings concluded around 5 p.m., with Judge Bell signaling his intention to adhere to a similar schedule for the remainder of the trial, which is set to commence at 9:00 a.m. daily.

Earlier in the day, jury selection for the nine-person panel (six men, three women) concluded after approximately two hours. Both legal teams engaged with prospective jurors, with questions focusing on familiarity with NASCAR and its key figures, including Michael Jordan. Several candidates were dismissed, including one who worked for Hendrick Automotive Group and another who demonstrated extensive knowledge of NASCAR and the parties involved. A particularly memorable moment involved a juror candidate who, after being dismissed for expressing strong opinions about Michael Jordan, shared a lighthearted exchange with the basketball legend.

Judge Bell opened the day by addressing both legal teams regarding their "confrontational" approach and prohibiting the use of exhibits during opening statements, expressing concern that disallowed exhibits might be presented. He urged a less confrontational strategy moving forward.

The list of potential witnesses for the trial includes prominent figures from both NASCAR management and team ownership. For NASCAR, expected witnesses include 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. The teams plan to call Richard Childress, Rick Hendrick, Roger Penske, Heather Gibbs, Cal Wells III, Steve Newmark, Rob Kauffman, and Jonathan Marshall.

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