Friday, April 27, 2007

War of words in lawsuit between AT&T, NASCAR

By Mark Aumann,
April 27, 200711:48 AM EDT

ATLANTA -- Is AT&T Mobility using an "ambush strategy" to wreck Nextel's exclusive title sponsorship agreement with NASCAR? Or is Sprint bent on "booting out" of the series a sponsor that was grandfathered in four years ago?

During Thursday's four-hour preliminary injunction hearing in a U.S. district courtroom, federal judge Marvin H. Shoob listened to arguments from lawyers representing AT&T Mobility, NASCAR and Sprint/Nextel.

At issue is the sponsorship of the No. 31 Chevrolet owned by Richard Childress Racing. Current sponsor Cingular was one of a handful of telecommunications companies given an exemption when Nextel became entitlement sponsor of NASCAR's premier series in 2003.

However, with the December acquisition of Bell South by AT&T, the Cingular brand is reportedly being phased out, which leaves Judge Shoob with what appears to be a difficult and complex ruling: Does NASCAR have the right under its exclusivity contract with Nextel to lawfully reject a paint scheme featuring AT&T and the globe logo?

Both sides presented compelling arguments supporting their positions during the hearing.

David L. Balser, an Atlanta attorney representing AT&T Mobility, used excerpts from three contracts -- the original sponsorship agreement between Cingular and RCR, the driver-owner contract between RCR and NASCAR and the title sponsor agreement between NASCAR and Nextel -- in an attempt to show the judge that under grandfather rights, AT&T can legally sponsor the car.

"There are only two limitations," Balser said, referring to the 2003 agreement. "We cannot improve our brand position -- from an associate to primary sponsor -- and we cannot move our sponsorship from the current team to another. But there's nothing in the contract that says we can't change our name.

"We're the same company, the same network, the same service and we're still the primary sponsor."

Balser pointed out that an amendment to the original agreement was added in 2006 which specifically deals with the potential acquisition of Alltel and Cingular, which was then dated April 4, 2005.

"They knew full well that the original terms did not prevent a brand change," Balser said.

However, NASCAR's outside counsel, David R. Gelfand, disagreed, saying AT&T seeks "to change the status quo, not maintain the status quo."

Gelfand provided a timeline that he said showed NASCAR has been "even-handed" in its refusal to grant re-branding to competitors of Nextel, describing a pattern of memos between NASCAR, RCR and Cingular dating back to the beginning of the Nextel agreement.

He also pointed to NASCAR's rule book, which contains a clause that states "NASCAR retains the right to refuse to permit advertising or paint schemes for any reason." Gelfand said by agreeing to abide by the rules, RCR and Cingular were bound by that rule.

"And despite knowledge of all these communications, Cingular renewed its sponsorship with RCR in 2004," Gelfand said.

But Balser challenged that point, claiming all of those instances dealt with "limited pass-through rights" -- referring to one-time special paint scheme sponsorships -- and not changes to the primary sponsorship.

The hearing turned contentious at times, given the relationship between the two major corporations and their ongoing efforts to gain an upper hand in the wireless market. Peter Canfield, outside counsel for Nextel, said "the harm to Nextel's investment would be great, indeed" if AT&T's re-branding was granted.

"Nextel's intention was not to benefit competing sponsors," Canfield said about the decision to grandfather Cingular and Alltel four years ago. "The expectation was that [those sponsorships] would be short-lived."

Balser produced a document he claimed was an internal Sprint e-mail from earlier this year, including a line that said NASCAR was willing to work out a compromise over the issue, but Sprint officials determined "no benefit would be superior to having AT&T booted out of the sport."

"They're trying to use our name change to drive us out of the sport," he said.

In NASCAR's defense, Gelfand brought to light an internal AT&T memo from February, attempting to show that AT&T was hoping to "force its way into the sport" by means of what he termed ambushing, a marketing strategy based on the encroachment of Nextel's exclusive sponsorship rights. He also showed the deposition of a former Cingular employee who testified that the company immediately began looking for loopholes as soon as the Nextel agreement was signed.

Judge Shoob set May 7 as the deadline for briefs to be submitted in the case. A decision is expected to follow.

source - NASCAR.COM

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