Injunction no more

By ZECH YODER

The ongoing legal battle between NASCAR and Twenty-Three Eleven (23XI)/Front Row Motorsports (FRM) just took another interesting turn.

After an initial issuance of a preliminary injunction by a North Carolina Federal District Court preventing NASCAR from denying 23XI and FRM its NASCAR charters while the antitrust lawsuit unfolds, the United States Court of Appeals for the Fourth Circuit reversed and vacated the preliminary injunction

For those who might want a quick refresher, NASCAR and the race teams had been in negotiations for a new charter agreement for years. The charter agreement covers everything from revenue splitting to intellectual property. As is the case with all major sports, both sides wanted more money and more control.

NASCAR finally put its foot down and provided the teams with a take it or leave it offer. All the teams but 23XI and FRM signed the agreement. This meant that 23XI and FRM would forfeit their charters worth tens of millions of dollars and have no guaranteed starting spot in any of the Cup Series races.

Instead of simply forfeiting their charters, however, 23XI and FRM sued NASCAR, arguing that NASCAR had a monopoly over the highest levels of stockcar racing.

To ensure that they could continue racing as chartered teams, 23XI and FRM asked the North Carolina District Court to enjoin or stop NASCAR from revoking its charters until it had the opportunity to present its case at trial. The North Carolina Court found that 23XI and FRM would suffer irreparable harm if the injunction was not granted and put the injunction in place just in time for the start of the 2025 season.

Dissatisfied with the result, NASCAR challenged the decision and appealed the preliminary injunction to the Fourth Circuit. As we learned with week, the Fourth Circuit agreed with NASCAR and the injunction has been lifted.

What does this mean for NASCAR, 23XI, and FRM?

First, it is likely that NASCAR will revoke the teams’ charters. This will have an extraordinary effect on 23XI and FRM. No charter means that the teams will run as open cars. This means that the teams will not be guaranteed a spot in the field and will have to qualify on time. While most weeks there are more starting spots than cars, the Daytona 500 is an event where several cars do not make the field.

More significant is the financial aspect. 23XI and FRM are sent to lose out on significant money from the revenue splits with NASCAR. Additionally, the charters themselves are worth tens of millions of dollars. In 2023 Spire Motorsports purchased its third charter for approximately $40 million. For 23XI and FRM, that each have three charters, that’s $120 million.

Finally, drivers and sponsors. It is likely that both sponsor commitment and driver commitment is dependent on the teams having charters. What will sponsors and drivers do if 23XI and FRM’s charters go away?

The latest decision gives all the leverage back to NASCAR. In my opinion, the preliminary injunction was 23XI and FRM’s best card, holding NASCAR’s charters hostage until 23XI and FRM received favorable terms.

NASCAR now holds the giant stick, and as we’ve seen in the past, it isn’t afraid to use it. I don’t believe that’s a bad thing. This lawsuit is not good for the sport. It pits Michael Jordan and Denny Hamlin (owners of 23XI) against NASCAR. For the sport to continue growing there needs to be collaboration, not consternation. With the charters back in NASCAR’s control, I would not be surprised if we see a quick resolution. 23XI and FRM cannot afford to continue field three-car teams without the charters.

However, I don’t see NASCAR walking away unscathed. 23XI and FRM have done something that no one else has ever been able to do. They demonstrated that NASCAR is not undefeatable. While this charter deal is done, teams will push NASCAR much harder on the next deal and likely get much better terms.

We wait and see where this lawsuit goes not. Hopefully 23XI and FRM will continue in the field as chartered teams.

Zech Yoder is a local resident, an attorney at Adler Attorneys in Noblesville, and a lifelong race fan.