Michael Jordan, Heather Gibbs headline Friday in NASCAR trial

Michael Jordan took the stand on Friday afternoon in the Western District of North Carolina to close out the first week of the 23XI Racing and Front Row Motorsports v NASCAR antitrust lawsuit trial to much fanfare.

Jordan, who co-owns 23XI Racing with Cup Series driver Denny Hamlin and longtime business associate Curtis Polk, are suing NASCAR and CEO Jim France and the 15-month process reached the trial phase this week.

As a refresher, the court has determined that NASCAR is a monopsony, or in layman’s terms, a buyer’s monopoly. The Sanctioning Body is the only purchaser of premier Stock Car racing teams in the market and the question for the jury is whether or not that market power was used to hurt competition and depress the earnings of race teams during the charter extension negotiation period.

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Basically, 23XI and Front Row allege that they would have earned more revenue from NASCAR if not for anticompetitive behavior from France that also took on the form of preventing competition from emerging in the marketplace.

Ultimately, 13 of 15 teams in the Cup Series signed the charter extension after over two years of contentious negotiating but the team owned by Hamlin and Jordan did not, alongside FRM owner Bob Jenkins.

“Someone had to step forward to challenge NASCAR,” Jordan said during his time on the stand.

Much of his one hour made the case that NASCAR should be operated more like the National Basketball Association, where he made his claim to fame, in which the league and teams split revenue closer to 50 percent but also share growth responsibilities more evenly.

“If you share responsibility, the healthiness of the sport can grow,” Jordan said. “It needed to be looked at from a whole different perspective. That’s why we’re here.”

The rebuttal from NASCAR, which was made in court on Friday from defense attorney Lawrence Buterman, is that NASCAR is privately-owned by the France family and is not a stick-and-ball league in which the teams effectively own the sport.

Jordan told Buterman that such privately owned sports ventures are ‘rarely successful.’

And yet, Jordan bought into Hamlin’s vision, and even put up the most money to launch what was originally called ‘Michael Jordan Motorsports with Denny Hamlin.’ He is the majority owner and has put $35 to $40 million into the race team.

He did so despite Polk, who has managed many of his affairs for 35 years, telling Jordan that NASCAR was ‘risky to (his) brand and image’ and risked the loss of tens of millions of dollars ‘but you want to do it so I’m doing my best to manage it.’

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To wit, Jordan is a professed life long NASCAR fan and was entirely bought-in to Hamlin’s vision that the NASCAR team could at least make a projected $900,000 profit.

Has the team made a reasonable profit?

“Yes.”

Despite the profits, which Jordan claims is a matter of how professionally run the team is while having his star power to lean on, he doesn’t think the charter system’s current construction is equitable. Jordan said he entered NASCAR with optimistic eyes but found the ‘nature of the business to be unfair’ as he spent more time understanding its economic model.

So then, why did Jordan continue to purchase these charters at continually increasing prices? The third charter cost $28 million after the second cost 13.5 and the initial one cost $4.7 million.  

“There was a discussion between me and Denny about being successful… people who know me know I like to win and I will pursue anything to win and getting a third charter improves our chance to win the championship.”

Jordan said he was ‘very invested’ in the sport and there were so few charters available and struck while the opportunity persisted itself … even amidst the contentious charter negotiations they ultimately didn’t sign.

Even in this moment, where his party has sued NASCAR, Jordan believes a refined business model that is an equal partnership would benefit all involved.

“The thing I’m hoping for is you create more of a partnership between two entities,” Jordan said. “If that’s the case, it becomes a more valuable business. If you can ever compromise on the things that matter, you can grow your business.”

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As part of the trial, and the cross examination with Buterman, NASCAR got opportunities to continue to build their case as well.

Throughout the week, NASCAR has painted Polk as an outsider who came into NASCAR with Jordan and Hamlin with no other interest beyond eventually getting to the point to where 23XI Racing would sue the Sanctioning Body.

It produced discovered documents where Polk expressed that he found races ‘boring as shit’ and painful to watch.’ As Buterman told the jury through his cross-examination, Jordan and Hamlin genuinely love racing but Polk doesn’t.

Therefore, he doesn’t view it in any other way beyond a business opportunity. Buterman asked Jordan if his longtime manager enjoyed racing like the other partners do.

“Obviously not,” Jordan said.

Buterman presented evidence that showed a text where Polk told Jordan ‘our plan is to be a pest and have a mosquito bite every week,’ during charter negotiations with NASCAR. His plan was to leak financial proposals to the media.

Jordan’s response?
(Thumbs up emoji)

At one point in negotiations, Jordan asked Polk ‘how is it going,’ and Polk said 8-9 smaller teams sent a proposal for a permanent charter system to NASCAR that asked for $11 million per chartered car. It’s 23XI and Front Row’s position that teams need $20 million per and only ended up getting $12.5 million in the 2025 agreement.

Polk said he wanted to have a meeting with them to ‘educate them on why that wouldn’t be acceptable to the teams.’

Jordan’s response?
(Thumbs up emoji)

Polk said eventually he was going to send a different letter to NASCAR with ‘alternative evergreen language.’

There was a moment of levity between Jordan and Buterman before the session ended.

Buterman: “Thank you for your time and thank you for making my nine year old think I’m cool.”
Jordan, to Buterman, who normally wears sneakers with his suit: “You’re not wearing your Jordans today.”
Buterman: “I’m not.”

Heather Gibbs

While Jordan was the headline witness, Heather Gibbs was arguably the most impactful of the day.  The daughter-in-law of team founder Coach Joe Gibbs preceded ‘Air Jordan’ the hour prior.

While on the stand, she spoke to her history in the sport, one in which she met the son of Joe … Coy …  and fell in love with him and their favorite sport. This was also the first time she had spoken publicly about the November 2022 death of Coy, in which ‘my husband didn’t wake up,’ the morning after their son Ty won the Xfinity Series championship at Phoenix Raceway.

Since then, Heather has been more involved with the day-to-day operations of Joe Gibbs Racing and in the charter negotiations. In this time, she said she fully understand now that the financial realities of the Cup Series are “very challenging for the teams,” especially for a family that has no other business to subsidize their losses.

Heather wrote a fiery letter to NASCAR leadership in response to league commissioner Steve Phelps’ assertion that team spending was reckless. She said the comment bothered her, and while she ultimately believed NASCAR needed a different economic model, heaped praise and respect for the France family.

 

Upon being given the deadline to sign the charters, one that several high-level team people continue to call a ‘gun to the head’ proposition because that’s what NASCAR leadership seemed to agree that it was in their own discovered words, Joe Gibbs told France ‘don’t do this to us.’

Heather said the final draft came in at 5 p.m. on September 6 and they were given until 6 p.m. to sign it, but independent of matters that they disagreed over, the document was also riddled with grammatical and syntax issues. NASCAR said they would fix these issues with side letters. Heather said the agreement didn’t guarantee any broadcast revenue in the seven-year extension period beyond the first seven years.

When Heather called France, she said his response to their concerns was ‘I’m done with the conversation’ and ‘If I wake up and I have 20 charters, I have 20 charters.’

So why did she ultimately sign it?

Heather said that in real time, she only could think of Coy and JD’s legacy, and that JGR not signing the charters and the risk of losing any kind of agreement was too much to bear.

In cross examination, Heather was asked about this continued issue of charter permanency, making the charters permanent rather than something that has to be negotiated every year, closer to a stick-and-ball league franchise.

She said she used ‘auto-renewal with terms’ to NASCAR as opposed to ‘evergreen’ or ‘permanent’ because there was something about the word ‘permanent’ that bothered Jim.

NASCAR team types each say, despite pushback from NASCAR, that permanent charters doesn’t mean permanent terms. The teams just wanted the asset to be permanent because that would increase it respective enterprise values.  

O’Donnell wraps up

All told, between the past two days, NASCAR president Steve O’Donnell spent just short of five hours on the stand between examination, cross examination and re-examination, including the first two hours of Friday morning.

After a Thursday that was spent on NASCAR’s reaction to SRX, and the possibility that it or the teams could launch a competitor to the Sanctioning Body, O’Donnell and his team’s lead lawyer (Chris Yates) spent considerable time addressing that topic. 

O’Donnell said there are over 1,000 tracks in the United States that a potential competitor could utilize. He says he has visited at least 125 of them. Of all the tracks in the country, only 30 have NASCAR sanctioned exclusivity clauses attached to them.

Examples provided included Hickory Motor Speedway in North Carolina, South Boston Speedway in Virginia, Barber Motorsports Park in Alabama, Road American in Elkhart Lake, Wisconsin, Pikes Peak International in Colorado and Kern County Raceway in Bakersfield California.

O’Donnell said such a series could partner with IndyCar and run on a street course.

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O’Donnell said his concerns about SRX’s emergence was a priority because he says he received a phone call from NBC Sports executive Sam Flood that basically questioned the viability of their rights agreement when CBS and then ESPN was getting a NASCAR variant.

O’Donnell said seeing Chase Elliott driving a NAPA sponsored car in a SRX race was alarming.

O’Donnell also claimed, falsely, that SRX is ‘coming back,’ thus NASCAR didn’t ultimately damage it. Instead, GMS Race Cars bought the physical assets from co-founder Ray Evernham for track day purposes but not the series’ intellectual property.

Motorsport confirmed with multiple individuals associated with SRX that there is indeed no comeback in the works.

While the 23XI and Front Row side have spent the week painting the non-compete clauses as anticompetitive, NASCAR and O’Donnell have used their time to say it was just the byproduct of negotiations.

NASCAR got ‘good faith’ commitments from the teams, who in turn received guaranteed revenue and guarantee starting spots.

“It was about being all in together, working towards the best broadcast deal,” O’Donnell said.

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A key tenet of NASCAR’s defense is that the Sanctioning Body cannot reasonably be acting anticompetitively because charter payouts have increased from one term to the next, and enterprise value for a charter on the open market has increased from $1 million in 2016 to $45 million this past season.

“It shows that people believe in the sport,” O’Donnell said. “It’s been a challenge with the litigation but despite that, charter value has increased and private equity has increased the value of charters.”

That’s private equity partnership opportunities that were not permitted under the previous agreement but now permitted.

23XI and Front Row say their charters would be worth multiple times more, over $100,000 on the open market, if they were permanent, however.

O’Donnell said ‘in our minds, the charters were not originally put together to be permanent,’ citing schedule and car evolutions.

There was also a lot of talk with O’Donnell about a cost cap and cost floor, which was proposed as part of the 2025 charter negotiations but never came to fruition. NASCAR generally wants a cost cap to reel in the ‘reckless spending’ that is a well-documented part of its bargaining position with the race teams.

O’Donnell said it’s a 50/50 issue when talking to teams about a cost cap. He says that some teams that ‘are dominating’ may ‘not be enthusiastic’ citing Penske, Gibbs and Hendrick but middle teams are ‘more receptive’ to the idea.

He said that Formula 1 team enterprise value increased higher due to a cost cap system.

A cost floor was also proposed, but O’Donnell said a handful of teams reported to him that they are already below the proposed number and it would be a challenge for them to spend more and be efficient.

So much talk this week has focused on what the teams called its ‘four pillars’ proposal, and that can be seen below.

O’Donnell said that asking for $720 million, which is again the $20 million per chartered entry data point, ‘shocked me’ because the previous rights agreement was only $800 million per year. He said giving that amount to the teams would leave nothing for the tracks and inhibit overall industry growth.

He said IndyCar teams get 25 percent of revenue and that’s $2-2.5 million per car.

In re-examination, Kessler says IndyCar’s TV deal is $8 million per entry, which is $20 million or more to teams.

Kessler: “I think that’s 700 percent of 8.”
O’Donnell: “Okay.”

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O’Donnell also addressed Polk, the aforementioned business partner of Jordan, and said meeting with the 23XI Racing executive were ‘the most difficult meeting I’ve had with an individual in my 30 years in NASCAR.

Again, NASCAR has painted Polk as someone who intended from the start to intentionally disrupt the status quo with the goal of eventually bringing this lawsuit.

“Mr. Polk stuck to his messages,” O’Donnell said. “He did not have an appreciation for the sport. He was a businessman who said he could leave anytime. He threatened to kick me out of my own meeting … He wasn’t coming from a place of respect.”

Kessler seized on the ‘respect’ line in asking O’Donnell if NASCAR executives like Phelps have always been respectful of team owners, like Richard Childress.

This was, of course, a reference to discovered text messages between Phelps and Scott Prime where the former expressed repeated frustration with the owner of the legendary No. 3 car by calling him ‘a stupid redneck’ who ‘needs to be taken out back and flogged.’

That particular piece of evidence is barred from being used as an exhibit and NASCAR’s attorney’s, specifically Yates, objected to the question because the jury isn’t supposed to know about it an inflammatory reasons.

That is how O’Donnell’s lengthy time on the stand came to a close.

Off schedule

Charles R. Jonas

Kenneth D. Bell, the district court judge overseeing this case since last November has finally told the jury about the likelihood that this trial is seemingly going to go beyond its scheduled 10-days over two-weeks timeline.

After dismissing the jury on Thursday, Judge Bell told those in the room that both councils needed to speed things along because the jury was told two weeks and that it’s a burden on them.

“I don’t know that we’re going to finish next Friday,” Judge Bell told the jury. “That remains our goal. I am working to keep things moving.

“Everyone in this court room is paid to be here, some more than others, and while I recognize you all get a stipend, I acknowledge the burden this trial places on you and the court thanks your service.”

Bell thanked the jury for their attentiveness, and that he noticed that everyone locked in, and it was appreciated.

It seems more likely that the trial will end by December 15 or 16 as opposed to December 12.

 

 

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– The Motorsport.com Team