FROST: The Role Of Racing Attorneys

Tim Frost

WILMETTE, Ill. — This month, we’ll take a look at the legal aspects of racing and their impact on the economics of the sport.

Each year, the legal community gathers for The Racing Attorney Conference. This event is hosted by the North Carolina Bar Ass’n and the Indianapolis Bar Ass’n. The location rotates between Charlotte and Indy, attracting the leading lawyers from the epicenters of stock car and open-wheel racing.

Periodically, the event presents the TRAC Star Award for outstanding achievement in the field of motorsports law. This year’s recipient was Steve Newmark, president of Roush Fenway Racing, for his efforts with the NASCAR Team Owners Council, Race Team Alliance and the formation of the Charter System.

While the emphasis is on the law, the conference presents ample opportunity for education, development and networking. The agenda differs annually, and this year’s topics included new team startups, track risk and safety, talent contracts, venue and events, sponsorship, eSports, intellectual property and accounting.

When forming a race team at any level, the organizational aspects are similar to most business — what type of legal entity, drafting the agreements and filing the proper paperwork with the government.
Where to locate is also an important decision as certain states have recognized the importance of the vibrant and growing motorsports industry.

North Carolina offers race team incentives for aviation fuel tax, tangible personal property tax and an engine lease sales tax exemption. Indiana has a headquarters relocation tax credit, motorsports sales tax exemption and various incentive tax credits.

For example, NASCAR teams and drivers who base their airplanes in North Carolina may be eligible for refunds if they are flying to a motorsports event, including races, sponsor functions and testing. The state of Indiana has offered incentives to Dallara — the sole Indy car supplier Indy car chassis and aero kits..

In order for a driver to race, he or she must typically have a competition license. Each series has its own specific requirements, but typically drivers must be 18 years old, pass a driving ability test, be physically and mentally competent and execute various authorizations and releases. They are subject to various rules, regulations and policies, including personal conduct and substance abuse. Drivers must also hold a current ACCUS — FIA license and meet immigration requirements if applicable.

The classification of minor applies to a person who has not yet reached 18 years of age. This has been in the spotlight as more drivers have been rising through the ranks at younger ages. Basically, if a minor wishes to participate in a professional race, he or she must meet specific requirements for emancipation. The minor and the parents appear before a court and demonstrate the individual has the maturity to understand the hazards and risks of racing and has substantial prior experience in the sport.

The interaction among stakeholders in motorsports involving business and legal issues may lead to disputes. The best way to resolve these matters is to perform due diligence on the front-end. This means do research, background checks and disclosures and obtain guarantees. Be specific in the definition of category exclusivity, key deliverables and payment schedules.

Unfortunately, sponsor payments may cease, or drivers do not perform on the track.  There may be a remedy for breach of contract. The front-end expenses incurred by a race team during the offseason may present a different view than the sponsor for an upcoming set of current races. An important factor during dispute resolution is to maintain confidentially.

Drivers are subject to an increasing complex set of demands off the track. They must comply with needs of the team, sponsors and series. These are specified in a complex set of legal contracts and agreements. A larger part of their interaction involves social media. This promotional platform reaches a larger audience. Their actions need to control the flow of messaging while still being authentic. They must meet the contractual nature of specific moral clauses and proper disclosures of endorsements and testimonials.

The intersection of law and business matters are always important to teams, drivers, series officials and sponsors on and off the track.