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ATLANTA � Like NASCAR driver Jeff Burton’s No. 31 car speeding around the track, a dispute between the stock car racing body and Burton sponsor AT&T has raced through the federal courts. On Thursday it made a crucial pit stop at the Eleventh Circuit U.S. Court of Appeals for oral argument, less than five months after NASCAR filed its lawsuit. Although the appeals court had agreed to expedite its consideration of the matter, the judges on the appellate panel seemed to question the need for the courts to give the parties a quick fix. Judge Edward Carnes asked NASCAR’s lawyer why his client couldn’t work the problem out with a new contract with the car’s owner. “NASCAR could have renegotiated the contract if they wanted to,” Carnes told NASCAR’s lawyer, David Gelfand of Milbank, Tweed, Hadley & McCloy in New York. On the other hand, Chief Judge J.L. Edmondson pushed AT&T on its claim that it needed a preliminary injunction, telling AT&T lawyer David Balser of McKenna Long & Aldridge he was concerned that in the end any harm AT&T suffered over not being able to place its logo on Burton’s car could be remedied with cash. “Only a civil servant can use this sentence � ‘it’s only about money,’” the chief quipped. The dispute arises from last year’s merger of AT&T and BellSouth Corp. Cingular Wireless, which has sponsored car No. 31 since 2001, was absorbed in the merger between the two companies that jointly owned it. Cingular has paid $150 million to the car’s owner, Richard Childress Racing, or RCR, to sponsor the car and display its colors and logo on the car’s body. In 2003, Nextel (which merged with Sprint in 2005 to become Sprint Nextel), signed a 10-year, $700 million deal with NASCAR to sponsor the Nextel Cup Series. NASCAR “grandfathered” Cingular into its otherwise exclusive telecommunications sponsorship deal with Nextel. After the AT&T merger became final in January, AT&T decided to retire the Cingular name and change the advertising displayed on Burton’s car. But NASCAR told Burton and car owner RCR that they couldn’t swap out Cingular’s logo for AT&T’s on the car, saying AT&T can’t take advantage of Cingular’s right to continued sponsorship. AT&T sued, and on May 18, Senior U.S. District Judge Marvin Shoob preliminarily enjoined NASCAR from interfering with AT&T’s ability to feature its logo and brand in the paint scheme of the No. 31 car. With lawyers gathered in his living room the following day, Shoob denied NASCAR’s request for a stay. The Eleventh Circuit also denied a stay, and RCR was able to switch the logo on car No. 31 to that of AT&T in time for a race in Charlotte, N.C., later that day. The Eleventh Circuit agreed to fast-track the case, setting up Thursday’s arguments before judges that also included Senior Judge Peter Fay. It’s no mystery why the litigation is important to the parties. In court pleadings, AT&T has cited market studies that suggest 72 percent of an estimated 75 million NASCAR fans consider racing sponsorships when making purchasing decisions. There are 13 races left in this season’s 38-race Nextel Cup Series. Shortly after Gelfand began his presentation on behalf of NASCAR, Carnes began asking about the duration of NASCAR’s agreement with RCR. If NASCAR renegotiated that annual contract for 2006 and 2007, knowing that the effect of a Cingular name change might be an issue, Carnes wanted to know, why didn’t it change the agreement on that point? “We didn’t think there was a need to do that,” responded Gelfand, insisting NASCAR’s position was made clear in its agreement with RCR.
It’s no mystery why the litigation is important to the parties. In court pleadings, AT&T has cited market studies that suggest 72 percent of an estimated 75 million NASCAR fans consider racing sponsorships when making purchasing decisions.

“Obviously there was,” said Carnes. “You lost a decision in the district court. And you may lose here.” But Shoob misread the contract, responded Gelfand, misinterpreting the grandfather clause as a sort of catch-all. Moreover, he said, AT&T was only an incidental beneficiary to the contract without standing to sue. “There is no promise anywhere made to Cingular in this contract,” said Gelfand. Peter Canfield of Dow Lohnes, who represents Sprint Nextel, seized on that line of argument in introducing himself, saying, “I represent an intended first-party beneficiary.” Cingular has benefited from NASCAR’s deal with RCR, said Canfield. But, he said, the law is clear that foreseeable benefit is not enough to give someone who’s not a party to a contract intended beneficiary status; there must also be intent of the parties to the contract. He also challenged Shoob’s conclusion that AT&T faced irreparable harm absent court intervention, a key requirement for issuing a preliminary injunction. The district judge was concerned that NASCAR fans might be confused if AT&T wasn’t allowed to put its logo on the car, said Canfield, but that’s a harm that’s both “correctable and compensable” through advertising. When Balser stepped to the lectern to speak for AT&T, Edmondson prompted him to discuss that issue of irreparable harm, leading to the chief judge’s comments that he was concerned AT&T could be compensated for any harm it might suffer. “We had spent $150 million associating Cingular’s brand with the No. 31 car,” insisted Balser, but Edmondson said he was especially concerned that injunctive relief might be inappropriate given the entities before him “seem to have a lot of money.” Balser responded that AT&T could lose customer goodwill without an injunction. Carnes sounded unimpressed. “I don’t see how loss of goodwill can’t be quantified just like anything else,” said Carnes. But then the judge appeared to answer his own question, noting that other Eleventh Circuit decisions support Balser’s point on loss of goodwill. Balser argued that NASCAR’s claim that an injunction harms its ability to regulate the sport is a “false” one. “This isn’t a case about whether it was proper to wave the yellow flag,” said Balser. Instead, it is one about NASCAR’s contractual obligations. “It has to stand by its contracts just like everybody else,” he argued. Carnes put to Balser the same sort of question he put to Gelfand, asking about the duration of AT&T’s contract with RCR and why AT&T wasn’t simply insisting that RCR negotiate with NASCAR. “Why are you not handling this as a matter of contract?” Carnes asked, noting that it looked to him like the parties seemed content to let the courts work it out. Balser responded that his client had sought the best deal with RCR that it could get. Carnes indicated he found that answer satisfying, but moved on to question Balser about his client’s ability to bring a claim based on a contract to which it’s not a party. “Here there’s no promise made by NASCAR to your client,” noted Carnes. Balser responded that NASCAR had promised RCR it would protect its sponsorship agreement with his client. But Carnes said that contracting parties’ knowledge that a third party would benefit from their agreement isn’t enough. Citing some cases to support his position, Balser maintained that it was within Shoob’s discretion to afford his client third-party beneficiary status. Gelfand then returned to the microphone for rebuttal but was briefly interrupted when Edmondson admonished Canfield for nodding his head during Gelfand’s argument. A more “sensitive” person might consider that arguing out of turn, explained Edmondson. “I know you’re just caught up in the moment,” the chief judge assured Canfield, who quietly apologized. Gelfand continued, arguing that AT&T could have avoided any possibility of confusing NASCAR fans by choosing not to run the car. “It’s a problem of their own making,” he said. The case at the 11th Circuit is AT& T Mobility v. National Association for Stock Car Auto Racing, 07-12299. Alyson M. Palmer is a reporter with the Fulton County Daily Report, a Recorder affiliate based in Atlanta.

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