Legal News

Gentlemen, Start Your Lawsuits!

By Chris Herring

The Formula One racing league, long known for its popular Grand Prix circuit, has become increasingly unpopular with a number of its own teams. So much so that eight squads recently announced their intention to leave F1 and form a rival league of their own — a move that The Associated Press called “the biggest crisis to engulf the sport since the championship began in 1950.”

For those not familiar with Formula One, it's a league based in Europe that hosts about half its races there. It's not related to the Indy Series, which backs the Indy 500, nor is it tied to NASCAR. The league's most decorated driver in recent history is Michael Schumacher.

In any event, the threat didn’t go over so well with the folks over at F1. In fact, they announced their intent to sue the teams that fled the league.

The entire fiasco stems from F1’s insistence that each team stay within a $60 million budget — the league’s equivalent of a salary cap — for 2010. That request, made by F1 president Max Mosley in an attempt to keep costs down during the recession, was seen as problematic by some teams. Their argument: it’s too late to put a salary cap on the sport since there hasn’t ever been one.

Just how would difficult would it be for the teams to spend less than $60 million? For some perspective, a NYT story said one team recently spent close to $500 million in a single season. In other words, it wouldn’t be all that easy for the league’s elite teams.

For an idea of how big a problem this is for F1, eight teams have threatened to leave the league; just 10 were in F1 to begin with. Among the eight teams that decided to fly the coop: defending champion Ferrari, McLaren, Toyota and BMW.

Already, lawyers are circling. Sidley Austin and Taylor Wessing are reportedly among the frontrunners to handle litigation for the case.

Full post as published by Law Blog - WSJ.com on June 19, 2009 (boomark / email).