Sparks flew in Judge Kenneth D. Bell’s courtroom on Monday after Denny Hamlin took the stand for his second day of testimony in the 23XI Racing and Front Row Motorsports v. NASCAR trial in the Western District of North Carolina courthouse.
In the conclusion of direct examination from Jeanifer Parsigian, Hamlin acknowledged that 23XI Racing, co-owned by Hamlin, former NBA superstar Michael Jordan and Curtis Polk, had turned a profit of more than $2 million in 2022 and more than $3.5 million in 2023.
Hamlin argued that the company’s profits should have been considerably higher than the stated 2.26 percent of revenue if not for what he termed the unfairness of the NASCAR Cup Series charter agreement 23XI signed with NASCAR after the launch of the team in 2021.
“Our costs were not covered,” said Hamlin, who testified that the profitability of the race team was dependent on outside sponsorship.
“I have spent 20 years in this sport trying to make it better and make it grow,” Hamlin added later in his testimony, when discussing 23XI’s decision not to sign the 2025 charter agreement.
“All I know is that we were right and they were wrong, and they needed to be held accountable.”
Under rigorous cross examination from NASCAR outside counsel Lawrence E. Buterman of Latham & Watkins LLP, Hamlin was quizzed about his initial pitch to Jordan for the formation of the race team, where he projected annual profits at $900,000.
Hamlin testified he relied on NASCAR’s projection of 40-perent savings with the advent of the Gen-7 race car, but Buterman pointed out that, in his pretrial deposition, Hamlin stated he had also done his own due diligence before outlining the benefits of the car to Jordan.
Further, Hamlin opined on a podcast with former-NASCAR-racer-turned curmudgeon Kenny Wallace that the Gen-7 car—portrayed in the lawsuit as burdensome to race teams—was actually “a net positive for the sport.”
Hamlin, who earns approximately $14 million per year driving for Joe Gibbs Racing while co-owning 23XI, testily explained that he felt obligated to “paint a rosy picture” of the sport in his public statements to avoid a potential summons to the NASCAR transporter for a tongue lashing.
All told, Buterman stated from discovery that the total investment from the 23XI principals in the race team has amounted to $23.9 million – far lower than the $45 million Hamlin claims to have invested using his own funds. An expert witness 23XI plans to call later in the trial pegged the value of the company at the close of 2024 at $160.2 million.
In texts to his partners introduced into evidence on Tuesday, Hamlin stated that a 10-percent annual profit would be a worthy target.
Yet, Buterman said, 23XI is seeking $205 million in damages for lost potential profit under the 2016 charter agreement, roughly a 900-percent return on investment.
“Do you think that’s fair?” Buterman asked.
Hamlin said he would leave it to the expert to answer.
At one point, Buterman quoted a past comment from Hamlin followed by the question, “Those are your words?”
“And I see what you’re trying to do with them,” Hamlin shot back, drawing a chuckle from Jordan, who was seated behind the plaintiffs’ rows of tables.
Hamlin was on firmer footing after the morning break when questioned on a letter he sent to NASCAR in September 2024 outlining eight conditions that would have to be met before 23XI would sign the 2025 charter agreement.
Hamlin had plausible reasons for each of the conditions, none of which he said were met.
Hamlin’s testimony concluded with one request from Parsigian on re-direct, asking him to read a passage of the letter to NASCAR in which Hamlin said he feared the new agreement would depress the value of charters.
On re-cross, Buterman asked Hamlin whether he was aware that the current value of NASCAR Cup charter was $45 million.
“I only know that we paid $28 million for the last one,” said Hamlin.
All told, 23XI bought three charters for $4.7 million, $13.5 million and $28 million, respectively.
In a day that included only two witnesses, the plaintiffs next called Scott Prime, NASCAR executive vice president of global strategy, who was involved in both the 2016 and 2025 charter negotiations.
On direct examination, the plaintiffs’ lead attorney, Jeffrey Kessler, made a major issue of NASCAR’s exclusive arrangements with race tracks, most notably those owned by Speedway Motorsports, Inc.
Through the introduction of text messages and the questioning of Prime, Kessler also established that there had been disagreement among NASCAR officials about potential provisions in the 2025 charter agreements, with commissioner Steve Phelps and president Steve O’Donnell arguing for more concessions to the teams.
Ultimately, 13 of the 15 chartered teams signed the agreement in 2024. Only 23XI and Front Row did not, choosing to file the antitrust action instead.
—- NASCAR Wire Service —-
AND: Denny Hamlin spent more than three hours on the stand in the morning, with NASCAR trying to poke holes in his testimony about how unfair NASCAR treats its teams.
Hamlin testified he makes approximately $14 million annually as one of the top drivers in the sport and stressed his co-ownership in 23XI racing is about investing in the sport and its future. As a 40 percent owner in his race team, he said he has invested $45 million into his team; under cross-examination he said he has put in more than $10 million so far and the rest he is on the hook for in loans.
Hamlin and NBA icon Michael Jordan started 23XI Racing in 2021, and in Hamlin’s prospectus, he projected a $900,000 profit in the first year. The team has made more than that, including more than $3 million in 2023.
The team built a $35 million shop that opened in 2024, which NASCAR attorneys noted he budgeted for $9-10 million, indicating he egregiously spends money. Hamlin said that was pre-COVID and didn’t include everything inside the facility.
— Fox Sports —
In the afternoon, the teams put NASCAR executive vice president Scott Prime, who heads NASCAR’s strategy, on the witness stand.
Kessler, the teams’ attorney, began to build his case for NASCAR’s anticompetitive practices by using Prime’s strategy memos and presentation decks to show how NASCAR was concerned over a possible LIV Golf-type situation in stock car racing.
One presentation showed NASCAR’s options to counter a potential breakaway series included a strengthened relationship with track ownership company Speedway Motorsports — which ended up coming to fruition (though Prime denied any knowledge of NASCAR’s sanction agreements with the SM racetracks).
…
Prime’s testimony will continue Wednesday.
— The Athletic —
AND – NASCAR statement after Day 2:
Today’s testimony confirmed that 23XI Racing purchased from another team a Charter, Denny Hamlin signed it agreeing to all of its contractual terms, got paid every penny due under the 2016 Charter – and now they want to claim they should receive a 900% return for supposed damages under the 2016 Charter.
Most of the testimony focused on the two-and-a-half-year negotiation over the 2025 Charter which 23XI and Front Row Motorsports did not sign. They made a choice to forfeit their Charters instead of signing them as 32 Charter holders did.
The 2016 agreement was itself a multi-year negotiated agreement that delivered many fundamental wins for race teams, including guaranteed starting position in every race, contractually secured payments of over $300 million a year to teams and a valuable long-term asset they can buy, sell, or lease at will – as Front Row has done on several occasions. 23XI and Front Row both kept buying Charters at ever-increasing prices even though they now say that the 2016 Charters were unfair to the teams.
Based on witness testimony and exhibits entered into evidence today, several key points about Denny Hamlin and 23XI were revealed:
1. 23XI has been profitable and the owners continue to do well financially:
- Mr. Hamlin alone is making $14 million by driving for Joe Gibbs Racing.
- Mr. Hamlin and Mr. Jordan are charging their own team $1 million in rent for their $35 million Airspeed facility.
- 23XI made profits of approximately $2.5 million in 2022 and $3.4 million in 2023, before the team began paying rent last year for the Airspeed facility owned by Mr. Hamlin and Mr. Jordan and paying legal fees for this litigation.
- 23XI spent $28 million to acquire a third charter in 2024 after acquiring two charters for $13.5 million (2021) and $4.7 million (2020).
- According to Plaintiffs’ own expert, 23XI was worth at least $160.2 million just four years after it began racing.
2. Mr. Hamlin made it clear he “took care of his people,” but 23XI pays its drivers only approximately 22% of its revenues even though its counsel pointed out that athletes get paid far more on a percentage basis in other sports.
3. Exhibits also showed Mr. Hamlin’s business partners believe he is an elite driver, but was a cost control problem for 23XI.
4. When Mr. Hamlin pitched Mr. Jordan on building a team, he projected a 10% ROI. And now, 23XI’s owners want at least $205 million in damages, a 900% return on investment (ROI). His comments on the witness stand show he believes that NASCAR should subsidize their racing operations while they keep all their own sponsorship revenues.
5. Mr. Hamlin acknowledged that none of the alleged anticompetitive claims brought in his lawsuit against NASCAR were raised during negotiations for the 2025 charters, including in the 8-point letter that was the subject of much of today’s events.
The trial continues on Wednesday.
For more information and details, see this list of media members covering the trail from court. Reddit also has a daily mega-thread for developments.
We will have daily recaps of the process and updates as needed.
For previous posts and information, see the 2024 Antitrust Lawsuit page.