On the third day of the 23XI Racing and Entrance Row Motorsports v NASCAR antitrust trial, testimony was concluded from Government Vice President and Chief Technique Officer Scott Prime and commenced for FRM staff proprietor Bob Jenkins.
Prime spent the second half of Tuesday on the stand, examined by 23XI and FRM legal professional Jeffrey Kesseler after which cross-examined by a pleasant legal professional earlier than being reexamined by Kessler.
First a recap of Prime’s testimony from Tuesday is within the hyperlink beneath.
On Wednesday, Kessler continued his examination of Prime and their trade was sometimes contentious, with the legal professional even apologizing to Prime and the court docket for elevating his voice.
“It’s okay — I perceive there are passions,” Prime mentioned in response.
Kessler’s preliminary line of inquiries to open the morning surrounded the goodwill provision, which is principally the clause within the constitution settlement that stops staff house owners from competing in one other competitor sequence or proudly owning one with out NASCAR approval.
Kessler: “Why not name it what it truly is?”
Prime: “I am not a lawyer.”
Kessler: “It ought to be referred to as anti-competitive will.”
This bought an objection from the NASCAR bench and Kessler moved on.
Particularly, anybody who has a ten p.c possession stake in a staff is topic to the goodwill provision. Additional, if a staff proprietor or partial staff proprietor decides to go away the Cup Collection, that particular person should wait 12 months earlier than proudly owning a automobile in a distinct sequence or possession in a distinct sequence.
Kessler: “And also you assume that is goodwill?”
Prime: “I do.”
Then consideration was turned to the NextGen automobile, with Kessler searching for to color its mental property restrictions as a software utilized to restrain commerce and forestall competitors — one of many pillars of the lawsuit.
In beforehand found paperwork, Prime had expressed concern that the earlier technology of automobile, identified inside the neighborhood as Gen-6, had an ‘elevated threat to NASCAR of copycat sequence’ resulting from looser Mental Property restrictions.
In different phrases, NASCAR was involved that groups may search to race their vehicles in non – NASCAR sequence or race vehicles just like these used within the Cup Collection. When requested about it, Prime mentioned that was by no means some extent of competition.
“It was by no means a difficulty with the groups,” Prime mentioned. “They understood the Subsequent Gen automobile design and all of the protections that went with it, sure.”
Kessler: “Did groups vote … had been they requested in the event that they wished restrictions?”
Prime: ‘My understanding is that there was by no means a difficulty with the groups…’ and that they wished protections and a level of value containment. ‘They understood the NextGen’s protections and endorsed it.’
Kessler identified that the groups haven’t got a proper vote below constitution guidelines.
Throughout the negotiations over what turned the 2025 constitution extension, an electronic mail on February 10 from Prime to Phelps mentioned he was ‘fairly disappoint(ed)’ over the choice from the race groups to stop negotiating with NASCAR and as an alternative had been ‘pressured to recommit our power to exploring all our choices.’
The groups wished 4 issues earlier than that time — 1) 45 p.c of trade income, 2) not having to pay into the Driver Ambassador Program, 3) 30 p.c of recent income the place staff IP was leveraged and everlasting charters.
That wasn’t agreed upon and Prime, by means of the found paperwork, was involved that the groups would look to hitch or in any other case create a ‘breakaway sequence’ after which contemplated choices that included the next:
Scale back charters to 32 and supply them ‘first come first serve’ amongst the preexisting 36, which Kessler likened to musical chairs, and was a tactic to create shortage and competitors. An alternative choice was a tough deadline, which is kind of what occurred on September 6, 2024. One other thought was Challenge Gold Codes, the place NASCAR would take the game vertical, and runs races impartial of groups and hires drivers and fields vehicles themselves.
That’s detailed on the hyperlink beneath.
“You precisely mirrored our choices,” Phelps replied over an electronic mail. “They’re enjoying with fireplace. A lot of choices however all have the identical theme: Decide a date and so they can signal or lose their charters. It’s that easy.”
Kessler mentioned that was an instance of what inspired the lawsuit.
“Solely a monopolist may say this,” Kessler mentioned. “Solely a monopolist has the facility to say, ‘Take my supply and in case you don’t take it, you’ll now not be on this enterprise, and another person will take your house.’”
For his half, throughout pleasant negotiations, Prime mentioned there was extra to that electronic mail, which is true. These choices had been simply ‘Path 1’ and the ‘Path 2’ was the continued efforts to ‘discover a center floor with the groups,’ which is definitely what occurred.
Regardless of the deadline passing, NASCAR didn’t enter into an settlement with any new staff house owners for the 2025 season.
Prime’s place was that NASCAR simply wanted to have contingency plans within the case the groups former their very own breakaway sequence.
Kessler requested the place they’d race since NASCAR’s monitor exclusivity clauses forestall such a division from racing on Cup Collection caliber amenities.
Prime mentioned there have been loads of tracks, citing quick tracks and avenue programs. He mentioned that NASCAR didn’t begin with superspeedways. Kessler mentioned this isn’t 1948. And regardless, Kessler mentioned it wasn’t sensible to anticipate a possible competitor to simply race on avenue programs since NASCAR misplaced $50 million over three years in Downtown Chicago.
Prime mentioned messages of ‘locking up tracks’ had nothing to do with a breakaway sequence however was simply part of a multi-year settlement to schedule races. The instance he gave was that TNT wished Atlanta on their slate as a result of it was in Turner Sports activities’ again yard.
Kessler mentioned that did not require the brand new exclusivity clause constructed into it for a number of years.
Kessler: “Has any monitor requested you to be excluded from every other occasions that might make them cash?
Prime: “I’ve by no means thought of the query.”
The Amanda Chart
Kessler turned his consideration again to a subject from the day earlier than, The Amanda (Oliver) Chart, which mirrored a sequence of twenty-two asks made by the race groups and confirmed solely a single ‘win’ for the groups as they negotiated with NASCAR.
Oliver is NASCAR’s chief authorized officer and the topic of a Could 20-21 textual content thread between Prime, O’Donnell and Phelps confirmed that the senior management disagreed to some extent with how CEO Jim France was posturing his method.
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O’Donnell: Lesa referred to as. “Spoke to Gary (Crotty, NASCAR authorized), Mike (Helton, president emeritus) and Jim (France). All of them thought assembly was productive and that we simply have to maintain making an attempt to maneuver the needle. Groups will not get every little thing they need and hopefully we will simply meet within the center. I simply listened as she did not wish to hear any opinions however I in fact did not maintain again. I simply requested for somebody within the mtg to level out how any of our positions are going to develop the game and place us for a giant rights renewal sooner or later.
Phelps: Productive? Madness. Take a look at the Amanda (Oliver, Chief Authorized Officer) chart – zero wins for the groups.
Phelps: The draft should mirror a center place of we’re lifeless within the water – they may signal them however we’re fucked shifting ahead. I really feel higher now. Thanks for that.
Prime: The method of ‘right here is a little more cash, fuck off all over the place else’ is a daring technique
O’Donnell: And one which Lesa mentioned each Mike and Gary thought is getting us shut. Near a snug 1996, fuck the groups, dictatorship, motorsport, redneck, southern, tiny sport.
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Regardless of the very best efforts for the leaders to influence France and the NASCAR board, the groups got a tough deadline of September 6 on September 6 to signal an extension settlement that carried solely that single win to the groups. They had been instructed to signal it inside an hour, though NASCAR did ultimately relent and gave the groups till midnight that day to signal it.
Prime referred to as it a ‘gun to the pinnacle’ supply and Kessler seized on that second within the questioning.
Kessler: “Gun to the pinnacle. Isn’t that what Jim wished?”
Prime: “I don’t know what Jim wished.”
13 of the 15 groups that compete within the Cup Collection signed by midnight, however 23XI and Entrance Row didn’t, and ultimately issued this lawsuit towards NASCAR.
For his half, Prime did say in a Could 20 textual content message to Phelps that he actually did attempt to get groups everlasting charters when he met with the Board of Administrators.
Prime: “No bueno with Jim on Charters. Can say OD and I put our greatest foot ahead but it surely was a brick wall. Ben (Kennedy) did not converse up in any respect, Gary simply rolled over on every little thing.
Phelps: “I heard from steve. I am sorry to listen to this – tremendous disappointing. I will converse with Lesa at 1:30.
However Prime mentioned repeatedly over the previous two days that NASCAR by no means thought of taking charters away groups, which is true to some extent, as a result of two deadlines handed and no charters had been issued to different events.
However Kessler wished to know what would occur if 23XI and Entrance Row, or every other staff, in the end didn’t signal earlier than the 2025 season.
“There was a deadline.”
What would occur in the event that they didn’t signal?
“There wanted to be a deadline set so NASCAR may put together for 2025.”
Kessler mentioned ‘you mentioned gun to the pinnacle and that’s what occurred proper?’
‘There was a deadline.’
Kessler once more requested what would occur?
“The constitution settlement would expire.”
So what would occur?
“Their phrases would now not be legitimate.”
He let it go, however his level was made, that NASCAR would certainly take the constitution away at a sure level … as a result of they don’t seem to be evergreen.
Bob Jenkins testifies
Bob Jenkins is the social gathering to this lawsuit that garners the least quantity of consideration in comparison with Denny Hamlin and Michael Jordan however he took middle stage for testimony and partial cross examination within the second half of Wednesday.
There, Jenkins mentioned he loses $6.8 million per yr and has by no means turned a revenue below the race staff banner and doesn’t draw wage for his possession of the staff both. Beneath cross-examination, Jenkins mentioned he solely attends a dozen races a yr and goes to the store 6-7 instances a yr.
He says he spends $4.7 million a yr on automobile parts now below the NextGen mannequin the place he spent $1.8 million earlier than below the earlier technology of automobile.
Particularly, he cited that when the NextGen got here out groups had been allowed to restore the elements and items themselves and now the elements must be despatched again to the NASCAR-mandated vendor to restore.
Jenkins mentioned it prices him $30,000 per week to get an undamaged automobile refurbished. So why does he do it?
“That appears like one thing my spouse would say,” Jenkins mentioned. “I simply imagine in it. It’s why I really feel so strongly about altering this method. There are 150 staff at that race store who imagine in me to make this work.”
The second the aforementioned ‘take it or depart it’ supply got here in on September 6 of final yr, he was at dinner along with his mother and father, having no thought this was coming. He didn’t even have cell service.
When he left the restaurant, he says he had dozens of texts and cellphone calls.
“There was a whole lot of ardour, a whole lot of emotion, particularly from Joe Gibbs, he felt like he needed to signal it,” Jenkins mentioned. “Joe Gibbs felt like he let me down by signing. Not a single proprietor mentioned, ‘I used to be joyful to signal it.’ Not a single one.”
Jenkins referred to as the ultimate settlement ‘backwards’ in some some ways.
“It was insulting, it went thus far backward,” Jenkins mentioned. “NASCAR wished to run the governance with an iron fist, it was like taxation with out illustration. NASCAR has the precise to do no matter it needs.”
Jenkins testified to that whereas additionally saying that constitution system, which was first launched in 2016 was conceptually sound, however simply wanted refinement that didn’t in the end include the 2025 doc.
And that’s to say nothing of the well-documented course of that led as much as the 13 groups signing it however two others that sued NASCAR as an alternative.
“If we ever do get this proper, NASCAR groups shall be beneficial.”
“This isn’t about bashing the France household. They’ve made a whole lot of nice selections. This constitution isn’t certainly one of them.”
“I feel it was a step ahead but it surely wasn’t truthful.”
Throughout his cross-examination, Jenkins obtained the identical line of questioning from NASCAR legal professional Lawrence Buterman that Denny Hamlin obtained on Tuesday. How may he sue NASCAR for putting non-compete clauses of their schedule and constitution contracts whereas putting non-compete clauses in his driver contracts.
Like Hamlin, Jenkins mentioned it’s as a result of he’s not a monopoly and that drivers have choices for the place to signal.
Buterman questioned Jenkins’ claims of losses and accused him of hiding earnings by means of his different corporations. For instance, Jenkins has ceaselessly provided potential sponsors or pay drivers the prospect to donate to the Lakeway Christian Faculties he based as an alternative.
Matt Tifft paid $2.6 million to race for Entrance Row in 2020 however was given that very same possibility and would have paid $500,000 to the varsity earlier than a well being situation ended that season prematurely. Chandler Smith paid $1.5 million this yr to race for FRM’s Truck Collection staff.
Jenkins testified that, regardless of the choice, no sponsor or driver has donated to Lakeway.
Buterman, like he did with Hamlin, then requested why Entrance Row solely pays its drivers 8.5 p.c of staff income whereas claiming that NASCAR underpaid groups at 25 p.c of Sanctioning Physique income.
He repeatedly referred to as it ‘apples and oranges’ since groups incur bigger bills just like the $350,000 NextGen.
“A basketball doesn’t value $350,000,” Jenkins mentioned. “You don’t wreck a $350,000 basketball.”
Buterman questioned the losses Jenkins mentioned he incurred regardless of selecting to run Lengthy John Silvers on vehicles that didn’t have sponsorship for 5 races. Lengthy John Silvers is a franchise he owned and gave to his 4 sons.
The NASCAR lawyer mentioned Jenkins selected to run that automobile unsponsored versus taking much less.
Jenkins mentioned the sponsorship prices what it prices, and he couldn’t promote these 5 races for much less, after which flip round to Love’s and justify making them spend extra. It might unravel his complete enterprise.
Buterman mentioned Entrance Row is simply asking NASCAR for extra money to compensate for a enterprise that was shedding cash even earlier than the constitution system was instituted.
He mentioned that Jenkins was an advocate for smaller discipline, and eliminating open entries simply to present his staff a bigger break up of the NASCAR pie, to which Jenkins mentioned a extra unique entry level raises the worth of everybody contained in the system.
Jenkins additionally mentioned that open groups are typically slower field-filler that ‘don’t add worth’ to the sequence aside from the Daytona 500.
His cross examination will proceed on Thursday.
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