NASCAR Cup Series

What's next for 23XI, Front Row on and off the track in lawsuit over charter deal

Published Oct. 3, 2024 11:26 a.m. ET

Expansion is never easy, but 23XI Racing and Front Row Motorsports might have found a new way to make it difficult.

Both organizations say their plans for 2025 haven’t changed to increase from two-car teams to three-car operations amid their filing of an antitrust lawsuit against NASCAR. Front Row agreed in May to purchase a charter from Stewart-Haas Racing and 23XI Racing agreed Aug. 7 to purchase a charter as well from SHR, according to the lawsuit. The transfer of the charter has to be approved by NASCAR.

Neither 23XI nor Front Row have signed the new NASCAR charter agreement that is set to begin in 2025 while the remaining NASCAR Cup teams (including SHR) have signed that agreement. Front Row and 23XI filed the lawsuit Wednesday against NASCAR and Chairman Jim France in federal court in North Carolina.

It will make for an uncomfortable time for both organizations and NASCAR on and off the track.

On the track, the teams say they will go ahead with their plans, even if they lose their request for an injunction to keep their chartered (guaranteed spot) status in 2025 while the litigation continues. Presumably, that would include the approval of the transfer of the charter from SHR to their organization.

A chartered team earns about three times more money — possibly more depending on performance — during a season than a chartered team.

"23X1 plans to race next year," 23XI co-owner Curtis Polk said. "We plan to continue to go through with all the things that we were planning before this lawsuit.

"Our business model is going to move forward, and we were going to continue to grow and compete at the highest level."

FRM owner Bob Jenkins said the same.

"We made a commitment to our teams and staffing people and preparing for 2025," Jenkins said. "So we're full speed ahead either way."

Polk, a longtime associate of Michael Jordan, said they invested in the team with Denny Hamlin because they want to race. Jordan has a long history in the sport, with his father working on race cars in North Carolina, and he has been to several races since the team first fielded a car in 2021.

"When Denny approached Michael and myself about starting 23X1, we did it for the love of the sport," Polk said. "We did it for [driver] Bubba [Wallace], for giving him a platform where he could compete at the highest level in the sport.

"We didn't have a racing company or racing team. All the investment that we've made is to go Cup racing. We don't race anywhere else. We just plan on racing anywhere else. This is what we built this team for."

Their lawyer, Jeffrey Kessler, said legal ramifications should keep the teams from feeling any retribution on the competition side as far as inspections and on-track rulings.

"I spent my career where we're representing plaintiffs who have to continue to do business with or be employed by the people we're suing," Kessler said. "And I will tell you that usually on the other side, there will be counsel who will caution the other side to not take retribution, to not treat the parties suing unfairly, because if that were to happen, it will be immediately addressed.

"As you can imagine, it's not a great place for a defendant to be, so in most of my cases, we don't see any of that type of behavior, and I don't think we'll see it here. If it came, we'd be ready for it."

Off the track, that request for a preliminary injunction would be the first matter taken up by the federal court in Charlotte. NASCAR would have the option to just agree to that provision — unlikely but possible considering that it would have a mess on its hands if it sells those charters to another entity and then 23XI and FRM win the lawsuit.

NASCAR most likely will file a motion to dismiss, where the judge would determine that even if everything 23XI and FRM claim to be true is true it doesn’t violate the law.

If the teams prevail in that instance, then each side would ask the other for information and have the opportunity to depose witnesses and executives.

"We will be able to obtain financials," Kessler said. "We will be able to follow the money. We will be able to see exactly how exploitative this system has been and how much injury it's inflicted on the teams and the drivers.

"Because when the teams have no money, that also directly kills the drivers. The teams are the ones who compensate the drivers. It is a direct attack on both. And the last time I spoke to a NASCAR fan, the reason they love this sport is about the teams and the drivers."

Sam Cherry, an attorney who represented Speedway Motorsports shareholder Francis Ferko in an antitrust case against NASCAR filed in 2002, told FOX Sports on Wednesday he believed 23XI and Front Row have enough in the complaint to withstand a motion to dismiss.

"NASCAR is a very, very tough litigator, but that's not uncommon, especially when the core business itself depended upon prevailing on the antitrust complaint that we had filed," Cherry said. "Many of the pundits were calling me and asking me, ‘Aren't you afraid that you're going to kill the goose that's laying the golden egg?’ I said, ‘Perhaps but they’ve got a bigger fear than we do, and our people were risk takers."

The same could be said about 23XI and FRM. By hiring Kessler, who has represented athletes in a variety of sports and is best known for his work in getting college athletes paid for their name, image and likeness, 23XI and FRM bring with them someone experienced to what possibly could be a lengthy legal fight.

"Our clients are in this to the end — what that's going to be is going to depend on what the courts rule and allow," Kessler said. "But they are going to do their best to keep competing as long as they can. And we expect that to add to the legal victory or the settlement that transforms this sport."

Obviously, Kessler expresses confidence in the case but NASCAR prevailed in its most recent antitrust challenge about 20 years ago when the owners of Kentucky Speedway sued NASCAR. The track owners lost that case and then dropped the appeal after selling the track to track operator Speedway Motorsports.

Speedway Motorsports had already agreed not to sue NASCAR over antitrust issues as part of the 2004 settlement reached in the Ferko case, which never went to trial as SMI bought Rockingham Speedway and moved one of its dates to Texas Motor Speedway.

Antitrust litigation relies on defining a market and the noncompetitive behavior that impacts the consumer. The teams’ lawsuit defines the market as premier stock-car racing teams in the United States.

It claims that a premier stock-car racing series requires premier stock-car racing teams to have a premier racing series product. It claims that NASCAR owning the series, the majority of the tracks, its agreements that prohibit any Cup track from hosting other major stock-car events, and its control of the supply chain for the Next Gen car’s parts and pieces have created a restraint in trade because the premier stock-car racing teams cannot compete anywhere else.

"[The charter agreement] did not provide a fair split of revenues so that the teams would have a chance to earn a reasonable return on their investment," the teams said in their lawsuit. "It seized control over team intellectual property rights, to be used for NASCAR’s benefit.

"It did not provide permanent charters so that the teams could realize value through permanent charter appreciation. It did not give teams the ability to resist unilateral NASCAR rules that increased team costs. And it did not give the teams any meaningful role in the governance of the sport. It also imposed terms that would undermine the relationship between teams and drivers."

Former NASCAR team owner Chris Lencheski, Chairman and CEO of Phoenicia and co-founder and CEO of SKI Partners, who advises private equity companies on NASCAR investments and is an adjunct professor in the masters program at Columbia University, says an important factor is that NASCAR is a business enterprise and not a sports league.

He is skeptical on whether they can prevail considering that 32 of the 36 charters have been signed for by other team owners.

"I'm still trying to square how any one individual organization among a business enterprise suggests that this was unfair to them, uniquely, and not unfair to the other 32," Lencheski said. "If 32 organizations stand up and say, ‘We all agree,’ then you might have some merit because there might be something unknown to me as a consumer I may not be aware of."

Teams arguing they are the injured party could be a tough sell as other sports league cases primarily focus on the athletes or fans as the consumers. The charter agreement isn’t raising prices for fans nor limiting the ability of people in a market to watch racing, although the teams would likely argue that strong teams are needed to have a quality product.

"The race consumer ... is the person I'm focused on," Lencheski said. "All of this other stuff is millionaires versus millionaires style of discourse.

"It's about how does it affect the race consumer? And nothing in the activity, in my eyes, by either NASCAR or Jim France affects the race consumer's ability to enjoy the sport, engage in the sport meaningfully, or address the sponsors’ needs that would have been outside of one charter versus another."

Kessler said the teams filed the suit as a last resort, that they didn’t feel NASCAR has provided them with a way to get a return in their investment in the sport, with the tipping point being the new charter agreement that most teams signed to start in 2025.

"[These two team owners] wished that they never had to come to this moment," Kessler said. "They wanted NASCAR to be a good partner. They wanted to find a way to restructure this voluntarily so teams could actually have a fair chance to get a return of their investment and invest in this sport.

"NASCAR was not willing to engage in that type of discussion, so instead, we filed."

Bob Pockrass covers NASCAR for FOX Sports. He has spent decades covering motorsports, including over 30 Daytona 500s, with stints at ESPN, Sporting News, NASCAR Scene magazine and The (Daytona Beach) News-Journal. Follow him on Twitter @bobpockrass.