NASCAR, 23XI and Front Row reveal 'smoking gun' documents in explosive hearing

0 1 11 minutes read

nascar,-23xi-and-front-row-reveal-'smoking-gun'-documents-in-explosive-hearing — NASCAR, 23XI and Front Row reveal 'smoking gun' documents in explosive hearing

It was made clear over the course of 90 minutes of oral arguments in a Charlotte, North Carolina court just how much tension and animosity exists as a result of the 23XI Racing and Front Row Motorsports v. NASCAR antitrust lawsuit.

For much of the summer, both sides have been going through fact discovery, which entitled both parties to request (and be granted) access to documents or communications relevant to the case. And by the way, not just documents from each other, but also from pertinent third parties, as long as they do not violate attorney-client privilege.

Independent of the merits of their respective arguments — matters regarding legal anti-competitive definitions — it was made clear just how much disdain and mutual distrust exists as a result of everything that has happened over the past four years.

Previously unseen messages

Michael Jordan and Denny Hamlin, co-owners at 23XI Racing

Photo by: Chris Graythen – Getty Images

From NASCAR’s opposition report on a statement from Hamlin, himself:

“In short, I’m in for the fight with NASCAR. My despise of the France family runs deep, but whatever we do, please lets not sabotage our own business over principle when it comes down to it. Love you all and thank you for allowing me to be a part of it.”

In a June 6, 2024 text from 23XI president Steve Lauletta to Hamlin:

“I wish I knew what to do and what is the best investment path. Being in for the long haul and Jim dying is probably the answer.”

Also revealed was a September 7, 2024 text from Michael Jordan, who co-owns 23XI with Hamlin, to business partner Curtis Polk about his reaction to Joe Gibbs Racing signing the charter agreement last year.

Jordan: Gibbs signed?
Polk: Yep. Sounds like he got thrown a bone at the 11th hour that is going to be documented in a side letter but I don’t know what that issue is
Jordan: Fuckers!!!!
Jordan: I think people understand our fight. Good things will come from this. Teams are going to regret not supporting us. Pussies!!!!!!

There were just as many provocative exchanges from NASCAR leadership in previously redacted text messages between the likes of (Executive Vice Chairwoman) Lesa France-Kennedy, (CEO) Jim France, (EVP, Chief Strategy Officer) Scott Prime, (President) Steve O’Donnell and (Commissioner) Steve Phelps.

Prime said ‘we have all the leverage and the teams will almost have to sign whatever terms we put in front of them.’

In a text message between the group, France-Kennedy felt a meeting with teams in April 2024 was ‘productive’ and ‘teams won’t get everything they want’ but could reach a middle ground.

Phelps responded with ‘productive? Insanity’ and said they had an internal chart, named the Amanda Chart, that detailed every agreement in terms of who any given deal provided more value to. Phelps alluded to ‘zero wins’ and O’Donnell wrote ‘fuck the teams’ and that one agreement would set the sport back to its ‘tiny southern roots, the tiny sport of 1996.’

However, a NASCAR source was adamant in making clear that this was O’Donnell, now the president of the Sanctioning Body, ‘pushing back with the family for the teams — which they eventually did and led to higher revenues.’ The ‘zero wins’ line is ambiguous in intent read without any additional context beyond what was provided during the hearing.

The aforementioned NASCAR source said 23XI and Front Row’s legal team ‘took this out of context’ and that O’Donnell figuratively stepped out of line with his bosses in trying to help the teams.

Phelps typed ‘give them the (contract), pick a date and sign it or lose their charters.’

The full context of the May 21, 2024 texts provide a fuller picture:

O’Donnell: Lesa called. “Spoke to Gary (Crotty), Mike (Helton) and Jim (France). They all thought meeting was productive and that we just need to keep trying to move the needle. Teams won’t get everything they want and hopefully we can just meet in the middle. I just listened as she didn’t want to hear any opinions but I of course didn’t hold back. I just asked for someone in the mtg to point out how any of our positions are going to grow the sport and position us for a big rights renewal in the future.

Phelps: Productive? Insanity. Look at the Amanda chart – zero wins for the teams.

Phelps: The draft must reflect a middle position of we are dead in the water – they will sign them but we are fucked moving forward

I feel better now. Thanks for that.

Prime: The approach of ‘here is a bit more money, fuck off everywhere else’ is a bold strategy

O’Donnell: And one that Lesa said both Mike and Gary thought is getting us close. Close to a comfortable 1996, fuck the teams, dictatorship, motorsport, redneck, southern, tiny sport.

The merits of the case

23XI Racing logo

Photo by: Adam Davis – Icon Sportswire – Getty Images

The entire reason both parties were even in court on Wednesday was to argue over whether or not the teams should be granted three things as part of a preliminary injunction motion made in advance of the December 1 trial:

Restoring the de facto chartered status of 23XI and Front Row
Resuming payouts to the teams as if they were chartered
Preventing NASCAR from transferring the charters they previously held the rights to

Recall that the same federal district judge, Kenneth D. Bell, issued an injunction in December that forced NASCAR to recognize the teams as if they were chartered even thought they did not sign the 2025-2031 extension.

This ruling also forced NASCAR to accept the two teams purchasing one charter each from the shuttered Stewart-Haas Racing.

NASCAR appealed that decision and the Fourth Circuit of Appeals overturned it. As far as NASCAR is concerned, it holds the four charters 23XI and Front Row gave up the rights to by not signing the new agreement before the start of the 2025 season.

In a filing last week, NASCAR stated that it has reached an agreement with a redacted organization to transfer one of those charters, and the two teams motioned the court to prevent that outcome before a trial.

The teams say another organization acquiring their former charters would irreparably damage them in the sense that, should they lose the charters but go on to win the lawsuit after trial, regaining their status would be impossible.

NASCAR countered that it would be irreparable harm to the Cup Series to not fill out the grid with teams that want to be in the division and grow the sport.

NASCAR President Steve Phelps

Photo by: Chris Graythen – Getty Images

Judge Bell made this more than just a binary decision because he asked both parties why NASCAR couldn’t simply issue one of the four charters it has in reserve to issue at any point in its discretion. To his point, NASCAR ended last season with 36 chartered teams but the agreement allows the Sanctioning Body to issue up to four more for any reason — typically associated with the arrival of a new manufacturer like the rumored Honda and Dodge options.

In other words, up to 40 overall charters.

Inside the courtroom discussions

Tyler Reddick, 23XI Racing Toyota

Photo by: Sean Gardner / Getty Images

Judge Bell asked NASCAR’s legal representation why the Sanctioning Body would not simply issue one of those four charters to this redacted organization as opposed to one those previously held by 23XI and Front Row.

Representing NASCAR, attorney Christopher Yates said that would harm the current charter owning teams due to how revenue is split amongst them but also due to charter scarcity because ‘scarcity drives value.’ Yates also said that releasing one of those charters would create ‘uncertainty,’ to which Judge Bell said NASCAR losing the trial would create far greater concerns than charter certainty.

Bell made that point because losing the antitrust trial in December would possibly force NASCAR to have to sell tracks, the ARCA Racing Series and perhaps restructure the charter agreement entirely.

Additionally, the NASCAR defense includes an argument that the court cannot make the Sanctioning Body do business with someone it does not want to. And after all the harsh things Hamlin, Polk and Jordan have said about NASCAR and the France family, they don’t want to do business with 23XI and Front Row.

The rebuttal from Jeffrey Kessler, representing the teams, is that NASCAR so resents working with 23XI that it literally asked driver Bubba Wallace to make an appearance on Good Morning America this week to promote the start of the Cup Series Playoffs.

“That’s how much they hate us,” Kessler said while oozing sarcasm

Ultimately, Judge Bell says he will render a ruling on the preliminary injunction by next week. He also admonished both lead attorneys for the personal slights they levied at each other during their arguments. Yates and Kessler are close friends who frequently face each other in sports antitrust lawsuits but issued digs at each other on Wednesday.

He also suggested to both that they need to make sure that they understand a Charlotte jury because they are unique and they need to do their homework on that front.

Bell also said it was clear to him that this is going to trial. As a result, it is more than likely that ongoing mediation will not produce a settlement. In advance of the trial in December, Bell says he is going to try his best to sort through all the things that need to happen first.

He needs to make determinations on the two sides’ disagreement of material facts like how much revenue increases NASCAR actually gave to teams in 2025. The teams claim NASCAR misrepresenting and ‘fudged’ the numbers. Expect a hearing for these matters in October.

“I’m not going to let your animosity for each other inconvenience me,” Bell said in his stern closing statement.

But also, one more warning before this reaches a point of no return.

“Everybody is going to get hurt if this thing goes a certain way,” Bell said. “If either party feels certain they are going to win, they’re wrong.”

Additional details

Todd Gilliland, Front Row Motorsports Ford

Photo by: Meg Oliphant / Getty Images

A NASCAR document stated that the collective teams asked for $720 million, what the document characterized as a third of industry revenue. Kessler said the initial counter was for $450 million and that NASCAR ultimately gave the teams that signed $430 million.

NASCAR says it pays more in ‘team payment percentage’ that Formula 1 pays to Concorde Agreement teams in the form of 70 percent to 63 percent in 2023 and 69 percent to 62 percent in 2024. NASCAR claims a payment increase to teams in 2025 of 62 percent.

Overall, NASCAR feels like the charter system is fair, and not a result of anti-competitive behavior because it has generated around 1.5 billion in equity of value for teams.

Kessler said NASCAR has misrepresented the figures in that they have frontloaded the payouts in this charter agreement, which decrease in subsequent years, while also not delivering any percentage of new revenue, no media increases, no permanent charters or no seats at the decision making table.

“No wins,” Kessler said, referencing the above detailed text from Phelps.

Additionally, Kessler made a reference to NASCAR having a ‘gold code’ that he alleges would ‘get rid of all the teams’ and turn the Cup Series into a division like the now defunct Superstar Racing Experience where the sanctioning body owns all the cars, no teams, and selects the drivers.

The gold code was a solution to the problem should no Cup Series teams ultimately sign the 2025-to-2031 charter extension agreement. NASCAR, through Yates, argued that the plan would have utilized Xfinity Series and Truck Series teams that wanted to race at the highest level in the absence of Cup teams.

“Gold code would have gotten rid of all the teams,” said Kessler. “They’d rather do that than create a fair agreement with all the teams.”

Again, NASCAR said it would have utilized Xfinity or Truck Series team owners but that ultimately, NASCAR would have to move forward with some form of ‘Cup Series’ to satisfy its TV partners and contractual agreements.

NASCAR also appeared to have had a plan to curtail the Race Teams Alliance teams from trying to create their own ‘copycat series.’ It involved locking down all the Cup Series tracks like Indianapolis and those owned by Speedway Motorsports to have agreements that would prevent a copycat series from racing at tracks considered to be Cup level.

Kessler, 23XI and Front Row allege this to be anti-competitive behavior.

Unlike the Gen-6, the Gen-7 or NextGen as it is known, has intellectual property restrictions that do not allow teams to race it anywhere else. Previously, if the arguments in court are to be believed, teams could have taken the previous generation of cars and raced with them outside of the Cup Series.

NASCAR countered, using a Toyota/Joe Gibbs Racing relationship, as evidence that the teams couldn’t do that anyway because items like their engines are proprietary and available for use only at the Cup Series level anyway.

NASCAR also argued that the NextGen’s IP restrictions are ordinary business practice that would avoid a copycat entity from replicating ‘Cup Series racing’ under a different name, and that this is not a violation of antitrust law.

At one point, Yates said the teams were welcome to create their own series and Judge Bell interupted to say ‘your clients have made that impossible.’

In a text between them, Prime and O’Donnell expressed concern that the teams were attempting to make their own version of a series under a ‘LIV Golf model,’ which led to all the changes with the track sanctioning agreements and NextGen IP restrictions.

A continued theme of this process has been NASCAR responding to 23XI and Front Row by suggesting that it cannot be operating anti-competitively because it has increased value for teams and that there is interest from outside parties to join the charter system.

Kessler and the teams say a profit and an increase in payout is not the standard, but rather, how much the increases would be if not for NASCAR’s alleged anti-competitive, in violation of Sherman antitrust law, behavior.

As for NASCAR and Yates?

“People would not be trying to buy these charters if they were so unfair.”

Judge Bell asked Kessler why 23XI and Front Row would continue investing in something that was such a bad deal, the attorney likened a love of racing to a love of apple pie.

“You will pay more for the pie because you love it,” Kessler said. “They brought forth this case so everyone can afford the pie.”

Closing remarks

It has been NASCAR’s stance from the beginning that they do not address the media outside of the courtroom after hearings and that trend continued into Wednesday.

However, the usual verbose Kessler had just a limited statement and took no questions.

“I think NASCAR’s own documents speak for themselves,” Kessler said. “I think you finally got to see them and you can see what this case is about. I think NASCAR’s arguments against those documents speak for themselves. We are very happy to have had this opportunity and we look forward to Judge Bell ruling on this next week.”

He then opened the door for Jordan to issue a statement, also a rarity outside of the courthouse as he usually defers to Kessler.

“I’ve been a fan of the game for a long period of time,” Jordan said. “When we first started this whole process, I’ve always said that I want to fight for the betterment of the sport. “Even though they (NASCAR) try to point out that we made some money and we had a successful business, that’s not the point. The point is that the sport itself needs to continually change for the fans, as well as for the teams, as well as for NASCAR, too, if they understand that.”

“I feel like we made a good statement today about that, and I look forward to going down with the fire. If I have to fight this to the end for the betterment of the sports, I will.”