A federal judge from the Western District of North Carolina has denied 23XI Racing LLC and Front Row Motorsports’ bid for a preliminary injunction in a case that in which the teams, co-owned by basketball legend Michael Jordan, were seeking permission to participate in NASCAR’s Cup Series. Meanwhile, the lawsuit, alleging that NASCAR monopolized “premier stock car racing and the terms of the 2025 Charter Agreements, which allow teams to participate in its racing events,” continues.
The plaintiffs are represented by the nation’s premier antitrust lawyer for the spirts industry, Jeffrey Kessler of Winston & Strawn.
In 2016, NASCAR implemented a Charter Agreement system that guaranteed each
chartered car entry into every Cup Series race for the term of the Charter Agreement. The 2016 Charter Agreements expired on December 31, 2020. If the teams gave NASCAR
written notice, then the 2016 Charter Agreements could be renewed and extended until December 31, 2024.
Teams can compete in NASCAR’s events without a charter, but they must qualify for one of the
open, non-chartered spots, which generate revenue from prize money and sponsorships.
In October 2020, 23XI acquired a 2016 Charter and began racing one car, according to the complaint. In the fall of 2021, 23XI purchased a second 2016 Charter. In 2016, Front Row received two 2016 charters from NASCAR and signed two corresponding Charter Agreements, which run through December 31, 2024. As such, both teams currently race two full-time cars in
the Cup Series and both teams are in the process of acquiring a third charter. Joint negotiations for the 2025 Charter Agreements began in 2022, and in March 2024, NASCAR began negotiating with teams individually. The final 2025 Charter Agreements include a release provision that is the subject of this lawsuit, according to the complaint.
The plaintiffs allege this release provision will bar them from bringing antitrust claims arising out of the formation of the 2025 Charter Agreements against the defendant. The open team agreements also include this provision. Plaintiffs 23XI and Front Row are the only two teams that did not sign the 2025 Charter Agreements. At the hearing, NASCAR represented it
withdrew the offered 2025 Charter Agreements to the plaintiffs 23XI and Front Row, and “therefore there are no pending negotiations.”
In seeking a preliminary injunction, the plaintiffs are asking for the following:
- Defendants and their agents, servants, employees, attorneys, and all persons in active concert or participation with Defendants, shall grant two NASCAR Cup Series Charter Member Agreements to 23XI Racing with the same terms as the NASCAR Cup Series Charter Member Agreements that NASCAR offered to 23XI on September 6, 2024;
- Defendants and their agents, servants, employees, attorneys, and all persons inactive concert or participation with Defendants, shall grant two NASCAR Cup Series Charter Member Agreements to Front Row Motorsports with the same terms as the NASCAR Cup Series Charter Member Agreements that NASCAR offered to Front Row Motorsports on September 6, 2024; and
- Defendants and their agents, servants, employees, attorneys, and all persons in active concert or participation with Defendants, shall be enjoined from enforcing Section 10.3 of any NASCAR Cup Series Charter Member Agreement that is granted, or transferred (pursuant to the pending transactions with Stewart-Haas Racing, LLC), to either Plaintiff as a defense to any antitrust claim that either Plaintiff is pursuing in this action.
Before reviewing the argument, the court noted that for a plaintiff to be successful in its bid for a preliminary injunction it must show: (1) a likelihood of success on the merits; (2) a strong prospect of irreparable harm if the injunction is not granted; (3) the balance of equities favors the movant; and (4) an injunction is in the public’s interest. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008).
The plaintiffs allege that without a preliminary injunction, they “will face irreparable harm
through several avenues. First, the plaintiffs assert they will ‘risk’ losing sponsors if competing as open teams. Specifically, the plaintiffs allege that there is a risk their sponsors ‘could abandon [them] if they have to compete as open teams and do not qualify for all of their races.’ For instance, 23XI’s sponsorship agreements require that each sponsored car runs in every Cup Series race, so failure to qualify for a race could reduce the amount of sponsorship money it receives. Second, the plaintiffs allege they will ‘risk’ the loss of their drivers. Both teams allege their drivers may leave if they do not have access to a chartered car. For example, 23XI driver Tyler Reddick is permitted to terminate his contract with the team if there is no Charter
Agreement in place for his car. Third, the plaintiffs assert that racing as open teams ‘could threaten [their] continued existence.’ Both teams allege they will lose substantial amounts of revenue without charters. Fourth, the plaintiffs allege they may lose goodwill with fans and sponsors if they fail to qualify for a race. Finally, the plaintiffs allege that ‘NASCAR has the power to exclude open competitors completely’ under the 2025 Charter Agreement.”
The court, however, was unpersuaded.
“Although the plaintiffs have alleged that they will face a risk of irreparable harm, they
have not sufficiently alleged present, immediate, urgent irreparable harm, but rather only
speculative, possible harm,” wrote the court. “That is, although the plaintiffs allege they are on the brink of irreparable harm, the 2025 racing season is months away—the stock cars remain in the garage.
“First, the plaintiffs have not alleged a ‘present prospect’ that they will be harmed by the loss
of sponsors. Instead, they have alleged a possibility that they will lose sponsorship agreements. Such potential harm of loss of sponsorship is too speculative to give rise to a preliminary injunction.
“Second, Plaintiffs have not alleged a ‘present prospect’ of the loss of their drivers. Instead,
they allege that their drivers may leave if Plaintiffs compete as open teams. Presently, this harm is too speculative to merit a preliminary injunction.
“Third, although injunctive relief may be available ‘where the moving party’s business
cannot survive absent a preliminary injunction.’ The plaintiffs have not alleged that their business cannot survive without a preliminary injunction. Instead, they allege that their businesses may not survive without a preliminary injunction. This allegation does not indicate an ‘impending threat of [Plaintiffs’] operations not surviving the pendency of this matter.’ Eco Fiber Inc. v. Vance, No. 3:24-cv-465-FDW-DCK, 2024 WL 3092773
“Fourth, although loss of goodwill may justify injunctive relief, Signature Flight Support
Corp. v. Landow Aviation Ltd. P’ship, 442 F. App’x 776, 785 (4th Cir. 2011), at this stage,
Plaintiffs have alleged only a potential loss of goodwill, contingent on a host of events occurring,
including speculation about how third parties may or may not act.
“Finally, the possibility that NASCAR may exclude open teams, is merely speculative. Based on the parties’ representations at the hearing, the Court understands the plaintiffs could sign open contracts today and continue racing in 2025. Instead, they have chosen not to because they have been unable to negotiate a contract without the provision of which they complain. As such, this speculative harm does not warrant the extraordinary relief of a preliminary injunction.”
23XI Racing LLC and Front Row Motorsports, INC., v. NASCAR et al.; W.D.N.C; CASE NO. 3:24-CV-00886-FDW-SCR; 11/8/24
