Disparaging the lawsuit brought by Michael Jordan-owned 23XI Racing and Front Row Motorsports as a “misguided attempt to dress up private business frustrations in antitrust garb,” NASCAR this week motioned a federal judge to dismiss the case altogether. NASCAR CEO Jim France, a co-defendant, separately filed a motion to dismiss, arguing that his inclusion is a “baseless” and “improper” attempt to add antitrust claims that require multiple defendants.
Although only two months old, the litigation pitting billionaire Jordan against the multi-billion-dollar enterprise that is NASCAR has generated numerous court filings, ranging from an aborted appeal by Jordan’s group to the U.S. Court of Appeals for the Fourth Circuit to fiery barbs over the impact of the Thanksgiving holiday on filing deadlines. Both sides have retained prominent counsel and appear willing to spend any amount necessary to prevail.
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The core of the case is fairly simple. 23XI Racing and Front Row Motorsports mainly object to NASCAR’s use of a particular style of charter system. By signing a charter, a team is guaranteed a starting position in NASCAR-sanctioned races. In exchange, the team agrees to refrain from competing in other circuits and relinquishes any potential legal claims it might have against NASCAR. The two plaintiffs argue that charters are anticompetitive and reflect NASCAR’s excessive control over the market for premier stock racing.
NASCAR’s motion to dismiss, which U.S. District Judge Frank D. Whitney will review, lays out the counterarguments.
First, NASCAR contends that the plaintiffs “confess” the charters are in fact equitable, even preferential, to these two teams. As NASCAR tells it, the charters’ broadcast revenue split is “undeniably fair and advantageous” to the 23XI Racing and Front Row Motorsports.
Second, NASCAR urges Whitney to find that, although the plaintiffs depict their case as about far-reaching principles grounded in justice and equity, when “stripped of its bluster” the complaint “reflects nothing more than dissatisfaction with business negotiations that didn’t go their way.”
To that end, NASCAR asserts 23XI Racing and Front Row Motorsports seek for the court to effectively “renegotiate” only “two terms” from NASCAR’s charter offer: a release of claims and a provision referring to covenants not to compete. And NASCAR says those terms don’t impact the plaintiffs because they didn’t sign charters.
Third, NASCAR says Jordan’s group neglects to consider that noncompete clauses are standard operating instruments in the modern sports industry.
NASCAR cites court rulings standing for the principle that noncompete clauses lawfully “make the product more appealing for broadcasters, fans and sponsors as they encourage investments in athletes and infrastructure.” These clauses provide certainty to television networks that star performers will participate. In other litigations, the PGA Tour and UFC have noted their ability to negotiate lucrative TV and sponsorship deals (which in turn provide money that golfers and fighters, respectively, receive) is predicated on guaranteeing that stars will participate.
Here, the noncompete clauses benefit the teams by giving them “exclusive rights to participate in all races.” At the same, the clauses ensure “that teams race with NASCAR” so media partners, sponsors and fans “know where to find their favorite stock-car drivers and teams.”
NASCAR also points out that these clauses are borne through “arm’s length negotiation” between NASCAR and teams, and that such a transactional approach “is common” in sports business and the business world in general.
To bolster this argument, NASCAR discusses a case the NBA won in 1994, a year when Jordan had retired from the NBA to pursue a baseball career in the Chicago White Sox organization. In Independent Entertainment Group v. NBA, the NBA refused to let players join a pro summer league promoted by another organization. The games in this league would have been broadcast on pay-per-view. The rival organization sued the NBA, arguing the league and its teams had unlawfully conspired to restrain the ability of players to play in another league during a part of the year when players were not playing NBA games.
U.S. District Judge A. Andrew Hauk rejected the lawsuit and sided with the NBA, noting (among other points), the collective bargaining agreement required exclusivity of players and that exclusive employment obligations are generally lawful under antitrust law. Hauk stressed the rival league was attempting to “free-ride on the NBA’s investment in its star players” and that, as shown in antitrust litigation involving the USFL and NFL over signing players, “exclusive employment agreements lawfully prevent such free-riding as a matter of law.”
NASCAR contends that same principle ought to apply with charters, which protect NASCAR’s investment in star teams.
Lastly, NASCAR argues that at least some and possibly all aspects of the antitrust claims are barred by antitrust law’s four-year statute of limitations. Some of the complaint refers to business developments from before 2020 and are thus, arguably, barred.
As for France’s motion to dismiss, it essentially raises the same substantive points but adds the argument that he should not be a defendant.
Part of Jordan’s case involves claims under Section 1 of the Sherman Act. Section 1 refers to competing entities joining hands to illegally restrain competition. NASCAR obviously can’t conspire with itself, but France’s inclusion creates the possibility of a conspiracy. France argues his inclusion is nonsensical because there “are no allegations that Mr. France conspired with any third party—and Mr. France is incapable of conspiring with NASCAR.”
France cites precedent for the principle that when a corporate officer’s alleged liability is “solely based on his position within a company,” legal claims “against that officer must fail if the claims would also fail against the entity.”
The briefs were authored by Tricia Wilson Magee and other attorneys from Shumaker, Loop & Kendrick and Latham & Watkins. Jeffrey Kessler and other attorneys for Jordan’s group will have the chance to respond in their own court filings.
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