Fulton County Daily Report
May 30, 2007
R. Robin McDonald
Race car driver Jeff Burton came in fourth in a May 19 NASCAR event, but his No. 31 Chevrolet still won big that day -- on a different fast track.
Lawyers for AT&T, the car's sponsor, beat out their counterparts from NASCAR and Sprint Nextel in a legal race that led from the home of a U.S. District Court senior judge that Saturday morning to a three-judge panel of the 11th U.S Circuit Court of Appeals later that afternoon.
In lieu of a checkered flag, AT&T won the right to replace the Cingular trademark jack on Burton's car with the blue and white globe logo of AT&T. Cingular, a wireless telecommunications firm, was recently absorbed in the merger of BellSouth and AT&T.
"Very good lawyers were involved on all sides," said Northern Georgia District Senior Judge Marvin H. Shoob of the hour-long hearing in his living room. He said it was only the third or fourth time in 28 years on the bench he has had to make such an accommodation.
"The court was in an enviable position of having no interest in the outcome," he added.
What decals appear on a race car may not seem like the kind of weighty matter that would prompt a slew of corporate lawyers to disturb federal judges on a sunny spring weekend. But NASCAR's estimated 75 million fans and their fierce loyalties to the sponsors who support their favorite racers translate into hundreds of millions of dollars in advertising, lawyers for the parties have argued during the four months of this litigation.
NASCAR sponsorship is unique -- and lucrative -- not only because of NASCAR's ardent fans but also because an advertiser's message is integrated into the sport itself by using race cars as rolling billboards, NASCAR President Mike Helton testified during the case.
Since 2001, Burton's car has been sponsored by Cingular. Cingular has paid $150 million to the car's owner, Richard Childress Racing (RCR), to sponsor No. 31, paint it in Cingular's bright orange corporate colors and prominently display Cingular's jack on the race car's body.
In 2003, Nextel (which merged with Sprint in 2005 to become Sprint Nextel) signed a separate 10-year, $700 million deal with NASCAR to sponsor the 38-race Nextel Cup Series.
The legal brawl erupted soon after the AT&T merger became final in January, and AT&T decided to retire the Cingular name -- and change the advertising prominently displayed on Burton's car.
But NASCAR, concerned about jeopardizing its own agreement with Nextel, informed Burton and RCR that they couldn't replace Cingular's logo with AT&T's on Car No. 31.
AND THEY'RE OFF
AT&T sued, arguing that NASCAR had "grandfathered" Cingular and wireless firm AllTel (which sponsors driver Ryan Newman's No. 12 Dodge) into its otherwise exclusive telecommunications sponsorship contract with Nextel.
NASCAR has acknowledged that it authorized Cingular's continued sponsorship of No. 31 but disagreed that the grandfather clause allows Cingular to substitute AT&T's trademark for its own. NASCAR agreed in its contract with Nextel to bar AT&T and a list of other Nextel competitors as sponsors in the Nextel cup races.
The interpretation of that grandfather clause is at the heart of the litigation and of the weekend flurry of rulings. On May 18, the day before the Nextel All-Star Challenge, Shoob granted AT&T an injunction allowing it to replace Cingular's logo with the AT&T globe on Car No. 31.
In doing so, Shoob noted that NASCAR had made a promise to RCR, "to preserve and protect plaintiff's sponsorship agreement, not withstanding the exclusivity granted to Sprint Nextel.
"If NASCAR had intended to restrict the logos and branding on the No. 31 Car, it could have included such limitations in clear and unambiguous language," the judge wrote in his order. "[P]laintiff as a pre-existing sponsor is grandfathered in as long as it does not increase its brand position on the car or change teams."
Shoob also ruled that AT&T would suffer irreparable financial harm by paying "millions of dollars to sponsor a car that is racing under an outmoded brand" if it were not permitted to convert the Cingular logos to AT&T's.
NASCAR, which entered the legal fray to defend Sprint Nextel's exclusive sponsorship, had argued that Cingular had no right to change its brand, particularly to that of a competitor that was otherwise prohibited from NASCAR sponsorship. NASCAR lawyers also argued that Shoob's injunction could make NASCAR vulnerable to litigation by Sprint Nextel.
Shoob was not sympathetic, writing that "the burdens NASCAR may face if the court enforces the promises in the grandfather clause are the result of NASCAR's own making. NASCAR made a commitment to grandfather plaintiff into the sport. NASCAR cannot avoid honoring that commitment, because it may lead to possible unfavorable consequences."
Shoob signed his ruling at 1:30 p.m. on Friday, May 18.
MAD DASH TO APPEAL
NASCAR lawyers filed a notice of appeal and asked for an immediate stay of the injunction. Shoob said he invited the lawyers to his home Saturday in order to give AT&T's lead counsel, David L. Balser of McKenna Long & Aldridge, time to return from a West Coast business trip. Shoob added that it would have been "quite expensive" to open the Richard B. Russell Federal Building, turn on the air conditioning and post security guards.
"We just met in the living room, and I heard from each side," the judge said. "I denied the stay."
"It was a pleasant conversation," Shoob continued. "The defendant didn't bring up any new issues."
During the hearing, Shoob said he also granted a motion by Sprint Nextel lawyer Peter C. Canfield, of Dow Lohnes, to allow the company to intervene formally in the suit. Until then, Sprint Nextel had been an amicus curiae supporting NASCAR.
Shoob said the lawyers left his house en route to the 11th Circuit Court to appeal his ruling.
Sutherland Asbill & Brennan attorney John H. Fleming, who represented NASCAR at the Saturday hearing, said NASCAR lawyers already had contacted the 11th Circuit Court before convening at Shoob's house and asked the court clerk to be on the lookout for a possible emergency motion to stay Shoob's injunction.
"The urgency was that the plaintiff was prepared to change the [sponsor's] name on the car in a race that evening in Charlotte, N.C., and, in fact, ultimately did," Fleming said. "Our view was that Nextel and NASCAR would be irreparably harmed if the change was permitted before we had a chance to talk to the 11th Circuit about it."
After leaving Shoob's Atlanta home at 12:30 p.m. Fleming immediately paged the 11th Circuit Court, which had already convened a panel of judges -- Frank S. Hull, Stanley F. Birch Jr. and Gerald B. Tjoflat. Fleming said NASCAR's motion for the emergency stay was at the 11th Circuit Court by 1:15 p.m.
In the emergency motion, NASCAR lawyers argued that if Shoob's order were not stayed, the impact on the value of Sprint Nextel's sponsorship would be "immeasurable and enormous."
"And NASCAR would be severely damaged in its ability to command for the sport a substantial sponsorship premium by offering category exclusivity," NASCAR lawyers wrote.
Sprint Nextel lawyers argued in a separate motion that Shoob's injunction order "will eviscerate Sprint Nextel's long-standing rights of exclusivity as the name sponsor of NASCAR's Nextel Cup Series of races. ... If that is now permitted, it will afford AT&T, for the first time during Nextel's sponsorship, an official NASCAR presence that AT&T's enormous resources could promote relentlessly and exponentially. ... The immense loyalty and goodwill that Sprint Nextel has earned and protected among NASCAR's 75 million fans would begin eroding immediately."
Balser said that by 2:30 p.m., he had filed AT&T's response. "We did make the argument that at that late hour, if they were to stay the [injunction] order at that point, the effect of that would be that we would not have been able to race the car," Balser said. By then, he said, Cingular's trademark decals had been replaced by AT&T's on No. 31's hood and side panel, and there would have been no chance to replace them a second time.
At 4 p.m., the appellate panel declined to grant an emergency stay of Shoob's injunction order. But the panel placed the case on an expedited schedule and will hear oral arguments in Atlanta in July.
'LIVE AND LET LIVE'
David Hart, a spokesman for Richard Childress Racing in North Carolina, said Shoob's ruling led to a lightning replacement of the sponsor decals on No. 31's hood and quarter panel before the Charlotte, N.C., race began.
By then, RCR owner Richard Childress had already told media gathered at the Charlotte track, "I am just really happy for AT&T that we are going to be able to re-brand our car to AT&T and carry on. ... It is just a great day for RCR and AT&T. ... We are really excited about the new look for the car."
Hart said swapping out Cingular's trademark for AT&T's, "was fairly quick. We had two of the guys who work in our paint shop and do decals on a regular basis… ready to go. As soon as we got word that we could move forward, we got them moving. … They peeled the decals off."
The new decals "looked great," said Balser.
He noted that "Burton was in contention for the lead most of the race."
Although Burton eventually finished fourth, Balser said AT&T's new logos received "quite a bit of visibility." Burton is currently ranked No. 2 in NASCAR's official driver standings.
But Richard L. Robbins, a partner at Sutherland Asbill & Brennan in Atlanta who is defending NASCAR, called AT&T's debut as a NASCAR sponsor on Car No. 31 "ambush marketing tactics" that "shouldn't be permitted."
"Judge Shoob is a great judge, but he got this one wrong," Robbins said.
Canfield, who represents Sprint Nextel could not be reached for comment.
Meanwhile, fans on NASCAR fan blogs have been weighing in on the legal brawl.
"I say let AT&T put their current logo on the car," wrote one fan at Kathy's Pit Stop. "I don't see what kind of tangible threat there is to Nextel if the AT&T globe is on the car. ... I really think it's ridiculous that Nextel takes the position they do with regard to 'other' cell phone providers. Live and let live!"
Wrote another fan: "I think each team should be able to have ANY sponsor that is willin' to pony up the cash!"
The case is AT&T Mobility v. NASCAR, No. 1:07-cv-623.