Ferko v. NASCAR CV-03-409-JM 10/10/03 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Francis Ferko and Russell Vaughn, as Shareholders of Speedway Motorsports, Inc.
v. Civil No. 03-409-JM Opinion No. DNH 03NH169 National Association of Stock Car Auto Racing, Inc., International Speedway Corporation and Speedway Motorsports, Inc.
O R D E R
Plaintiffs seek production of detailed financial
information of New Hampshire International Speedway, Inc.
("NHIS") with regard to the two NASCAR Winston Cup Series races
at its Loudon, New Hampshire racetrack. NHIS objects on the
basis that the documents are highly confidential and are not
relevant.
Background
The underlying suit involves a claim by plaintiffs,
shareholders of defendant Speedway Motorsports, Inc. ("SMI"), for
lost profits of SMI against International Speedway Corporation
("ISC"), SMI and the National Association of Stock Car Auto
Racing, Inc. ("NASCAR"). Plaintiffs allege a breach of contract
and antitrust violations by NASCAR for its refusal to sanction a second race in its Winston Cup Series1 at SMI's Texas Motor
Speedway.
SMI is a New York Stock Exchange listed company which owns
six tracks that host NASCAR Winston Cup events. Nine of the
thirty-six (25%) Winston Cup Series races for points2 are held at
SMI-owned tracks. Three of its tracks have two Winston Cup races
each and the Las Vegas, Infineon and Texas Speedways each have
one Winston Cup Series race.3
The defendant NASCAR is the sanctioning entity for Winston
Cup, Busch and Craftsman Truck Series races. It was started and
is controlled by the France family. According to SEC filings,
NASCAR and the France family are connected to ISC which operates
twelve race tracks including the following tracks which together
hold Winston Cup races: Daytona - 2 Cup races; Darlington - 2
Cup races; Talladega - 2 Cup races; North Carolina - 2 Cup races;
Richmond - 2 Cup races; Michigan - 2 Cup races; Chicagoland -1
Cup race; Kansas - 1 Cup race; Phoenix -1 Cup race; Homestead-
1NASCAR also sanctions the Busch Series and Craftsman Truck Series which are not at issue.
20ne of its tracks also hosts thenon-point "All Star" NASCAR "Winston" races in May.
3Texas Speedway also features open-wheel Indy-car, IRL racing.
2 Miami - 1 Cup race; Michigan - 1 Cup race; Watkins Glen - 1 Cup
race; and California - 1 Cup race. ISC-owned tracks host 46% of
Winston Cup races.
NHIS is a family-owned, privately held corporation which
operates the New Hampshire International Speedway in Loudon, New
Hampshire. It holds two Winston Cup Series races each year.
The entities which host two Winston Cup Series races at a
particular track, the number of such tracks each operates and the
number of other tracks with Winston Cup races operated by them
are:
Entity # Tracks With 2 Races # Other Tracks With 1 Race
ISC 6 6 SMI 3 3 NHIS 1 0
Of the three, NHIS is the only entity with only one track
featuring Winston Cup races and the only family-owned and
operated track. ISC and SMI are both NYSE listed companies.
Plaintiffs seek production of documents from NHIS under a
subpoena duces tecum served under Rule 45 of the Federal Rules of
Civil Procedure. Specifically, they seek:
7. Documents sufficient to show your itemized revenue, income, expenses, and costs for each NASCAR Winston Cup Series race held at New Hampshire International Speedway.
3 Document no. 1, Exhibit A, p.l. NHIS objected on the basis of
lack of relevance and of confidentiality of commercially
sensitive financial information.
Discussion
Fed. R. Civ. P. 26(b) (1) provides, in part that " (p)arties
may obtain discovery regarding any matter, not privileged, that
is relevant to the claim or defense of any party . . ." Fed. R.
Civ. P. 45(c) (3) (B) provides that:
(B) If a subpoena (i) reguires disclosure of . . . confidential . . commercial information •k -k -k
the court may, to protect a person subject to or affected by the subpoena, guash or modify the subpoena or, if the party in whose behalf the subpoena is issued shows a substantial need for the testimony which cannot be otherwise met . . . the court may order . . . production only upon specified conditions.
Fed. R. Civ. P. 26(c) authorizes protective orders for persons
from whom discovery is sought.
Plaintiffs concede that the documents at issue are
confidential commercial information. Nevertheless, they assert
that the documents are relevant and that they have a substantial
need for them. Plaintiffs' entire factual argument is summarized
by them as follows:
4 NHIS . . . is the only racetrack that provides recent, important insight into how (1) the addition of a second Winston Cup race affects the profitability of the first race, and (2) the profitability of the new second race compares to the profitability of the first.
Document no. 1, p.2. NHIS is correct. That statement by
plaintiffs does not demonstrate relevance or substantial need.
The burden to show a substantial need for relevant documents in
the face of NHIS' claim of confidentiality is upon plaintiffs.
First, NHIS has provided its attendance figures and ticket
prices for the relevant period. To the extent any information
from NHIS is relevant it has thus been provided. Expenses in
connection with such disparate tracks in different geographical
locations under vastly different corporate organization and
management are so obviously disparate and irrelevant that
plaintiffs have studiously ignored them. The following are but a
few comparisons which undermine plaintiffs' claim of relevance:
NHIS SMI
Geographic Location New England Texas Seating Capacity 93,278 150,061 Track length 1. 058 1.5 miles Location Loudon, NH Ft. Worth Population 4, 635 457,652 Nearby City populations Concord 38,318 Dallas 1,188,580 Manchester 106,180
5 Ownership Family NYSE listed company Number of tracks 1 6 Winston Cup Series races 2 9
The differences in "marketing" a race at a track in rural New
Hampshire and urban Texas are obvious. The disparity in the
expense of maintaining tracks and facilities of such different
length and type with such different track banking (12 degrees vs.
24 degrees) in such different climates is also apparent. Wages,
ethnicity and cultural differences have not been addressed. The
ownership and management are vastly different.
Plaintiffs have made no effort to demonstrate the relevance
of a single type of financial information from NHIS. The fact
that it got its second Winston Cup race date six or seven years
ago is interesting but it certainly is not, in and of itself, a
demonstration of any relevant evidence as to what the Texas Motor
Speedway may anticipate if it got a second race.
In fact, a comparison of the profitability of tracks with
one race versus two races where the demographics and tracks are
similar is far more likely to provide relevant information. A
comparison of the profitability of SMI's and ISC's urban tracks
under the same or similar corporate organization are far more
6 relevant if anything is relevant.
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Ferko v. NASCAR CV-03-409-JM 10/10/03 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Francis Ferko and Russell Vaughn, as Shareholders of Speedway Motorsports, Inc.
v. Civil No. 03-409-JM Opinion No. DNH 03NH169 National Association of Stock Car Auto Racing, Inc., International Speedway Corporation and Speedway Motorsports, Inc.
O R D E R
Plaintiffs seek production of detailed financial
information of New Hampshire International Speedway, Inc.
("NHIS") with regard to the two NASCAR Winston Cup Series races
at its Loudon, New Hampshire racetrack. NHIS objects on the
basis that the documents are highly confidential and are not
relevant.
Background
The underlying suit involves a claim by plaintiffs,
shareholders of defendant Speedway Motorsports, Inc. ("SMI"), for
lost profits of SMI against International Speedway Corporation
("ISC"), SMI and the National Association of Stock Car Auto
Racing, Inc. ("NASCAR"). Plaintiffs allege a breach of contract
and antitrust violations by NASCAR for its refusal to sanction a second race in its Winston Cup Series1 at SMI's Texas Motor
Speedway.
SMI is a New York Stock Exchange listed company which owns
six tracks that host NASCAR Winston Cup events. Nine of the
thirty-six (25%) Winston Cup Series races for points2 are held at
SMI-owned tracks. Three of its tracks have two Winston Cup races
each and the Las Vegas, Infineon and Texas Speedways each have
one Winston Cup Series race.3
The defendant NASCAR is the sanctioning entity for Winston
Cup, Busch and Craftsman Truck Series races. It was started and
is controlled by the France family. According to SEC filings,
NASCAR and the France family are connected to ISC which operates
twelve race tracks including the following tracks which together
hold Winston Cup races: Daytona - 2 Cup races; Darlington - 2
Cup races; Talladega - 2 Cup races; North Carolina - 2 Cup races;
Richmond - 2 Cup races; Michigan - 2 Cup races; Chicagoland -1
Cup race; Kansas - 1 Cup race; Phoenix -1 Cup race; Homestead-
1NASCAR also sanctions the Busch Series and Craftsman Truck Series which are not at issue.
20ne of its tracks also hosts thenon-point "All Star" NASCAR "Winston" races in May.
3Texas Speedway also features open-wheel Indy-car, IRL racing.
2 Miami - 1 Cup race; Michigan - 1 Cup race; Watkins Glen - 1 Cup
race; and California - 1 Cup race. ISC-owned tracks host 46% of
Winston Cup races.
NHIS is a family-owned, privately held corporation which
operates the New Hampshire International Speedway in Loudon, New
Hampshire. It holds two Winston Cup Series races each year.
The entities which host two Winston Cup Series races at a
particular track, the number of such tracks each operates and the
number of other tracks with Winston Cup races operated by them
are:
Entity # Tracks With 2 Races # Other Tracks With 1 Race
ISC 6 6 SMI 3 3 NHIS 1 0
Of the three, NHIS is the only entity with only one track
featuring Winston Cup races and the only family-owned and
operated track. ISC and SMI are both NYSE listed companies.
Plaintiffs seek production of documents from NHIS under a
subpoena duces tecum served under Rule 45 of the Federal Rules of
Civil Procedure. Specifically, they seek:
7. Documents sufficient to show your itemized revenue, income, expenses, and costs for each NASCAR Winston Cup Series race held at New Hampshire International Speedway.
3 Document no. 1, Exhibit A, p.l. NHIS objected on the basis of
lack of relevance and of confidentiality of commercially
sensitive financial information.
Discussion
Fed. R. Civ. P. 26(b) (1) provides, in part that " (p)arties
may obtain discovery regarding any matter, not privileged, that
is relevant to the claim or defense of any party . . ." Fed. R.
Civ. P. 45(c) (3) (B) provides that:
(B) If a subpoena (i) reguires disclosure of . . . confidential . . commercial information •k -k -k
the court may, to protect a person subject to or affected by the subpoena, guash or modify the subpoena or, if the party in whose behalf the subpoena is issued shows a substantial need for the testimony which cannot be otherwise met . . . the court may order . . . production only upon specified conditions.
Fed. R. Civ. P. 26(c) authorizes protective orders for persons
from whom discovery is sought.
Plaintiffs concede that the documents at issue are
confidential commercial information. Nevertheless, they assert
that the documents are relevant and that they have a substantial
need for them. Plaintiffs' entire factual argument is summarized
by them as follows:
4 NHIS . . . is the only racetrack that provides recent, important insight into how (1) the addition of a second Winston Cup race affects the profitability of the first race, and (2) the profitability of the new second race compares to the profitability of the first.
Document no. 1, p.2. NHIS is correct. That statement by
plaintiffs does not demonstrate relevance or substantial need.
The burden to show a substantial need for relevant documents in
the face of NHIS' claim of confidentiality is upon plaintiffs.
First, NHIS has provided its attendance figures and ticket
prices for the relevant period. To the extent any information
from NHIS is relevant it has thus been provided. Expenses in
connection with such disparate tracks in different geographical
locations under vastly different corporate organization and
management are so obviously disparate and irrelevant that
plaintiffs have studiously ignored them. The following are but a
few comparisons which undermine plaintiffs' claim of relevance:
NHIS SMI
Geographic Location New England Texas Seating Capacity 93,278 150,061 Track length 1. 058 1.5 miles Location Loudon, NH Ft. Worth Population 4, 635 457,652 Nearby City populations Concord 38,318 Dallas 1,188,580 Manchester 106,180
5 Ownership Family NYSE listed company Number of tracks 1 6 Winston Cup Series races 2 9
The differences in "marketing" a race at a track in rural New
Hampshire and urban Texas are obvious. The disparity in the
expense of maintaining tracks and facilities of such different
length and type with such different track banking (12 degrees vs.
24 degrees) in such different climates is also apparent. Wages,
ethnicity and cultural differences have not been addressed. The
ownership and management are vastly different.
Plaintiffs have made no effort to demonstrate the relevance
of a single type of financial information from NHIS. The fact
that it got its second Winston Cup race date six or seven years
ago is interesting but it certainly is not, in and of itself, a
demonstration of any relevant evidence as to what the Texas Motor
Speedway may anticipate if it got a second race.
In fact, a comparison of the profitability of tracks with
one race versus two races where the demographics and tracks are
similar is far more likely to provide relevant information. A
comparison of the profitability of SMI's and ISC's urban tracks
under the same or similar corporate organization are far more
6 relevant if anything is relevant. The Presiding Judge, Judge
Schell, has already ruled that the financial data of SMI's other
tracks4 have not been shown to be relevant. Document no. 1, Exh.
C. Judge Schell's order is therefore a further support for the
lack of relevance here.
Where, as here, it is well within plaintiffs' ability to
extrapolate the Texas track's profitability there is no
substantial need for the commercially sensitive financial records
of a rural New Hampshire track. Finally, the fact that SMI has
made overtures to buy the Loudon track is justification for the
concerns of NHIS. As Judge Schell said:
(t)he prejudice in reguiring the Speedway to turn over sensitive business materials to a competitor (even though there is a Confidentiality Agreement in place) outweighs any relevancy and NASCAR's need for the information.
This derivative action on behalf of SMI is at least the
eguivalent of getting highly sensitive information into the hands
of a competitor.
The motion on the record presented to me is wholly
unsupported and, in fact, is so lacking in any factual
4Three of these tracks have two Winston Cup races each and two others have one each.
7 presentation that it verges on the frivolous. The motion
(document no. 1) is denied.
SO ORDERED.
James R. Muirhead United States Magistrate Judge
Date: October 3, 2003
cc: Stephen J. Dibble, Esg. Daniel A. Small, Esg. Gene R. Libby, Esg. R. Peter Taylor, Esg.