Hillman Sues Circle Sport-Levine for Charter

mcdowell promo picWe all knew coming into the season that Charters would change the way the back end of NASCAR operates. I talked about all the charter maneuverings before the Daytona 500. In the direct lead up to the charter announcement, there were moves among some of the smaller teams to secure one of the coveted charters.

BK Racing shrunk to only two full time cars. So did Front Row Motorsports. The Wood Brothers were left out in the cold but in a proper old school mentality shrugged and got to work kicking ass anyways. Premium Motorsports shrunk to a single full time car and then leased their charter out to HScott for their Clint Boywer year (although, look how good that’s working out for them).

cslfr logoThe big move among the little teams was the merger between Joe Falk’s Circle Sport Racing #33 and the Levine Family Racing #95.

Circle Sport has been running full time long enough to score the charter. Just barely. That team purchased the points off of RCR back in 2012 and struck a deal to be an unofficial fourth RCR car for certain races when Childress wanted to get his Xfinity drivers seat time in Cup. Brian Scott and Austin Dillon picked up a few starts this way before they were officially rookies. Ty Dillon has a few, including a start in this year’s Daytona 500 with the new merged CS-LFR.

Levine Family Racing kind of got hosed by the charter system. They were one of those little teams that started out part time and was chugging along, surviving, getting better, and on the road to running full time. Even prior to the charter system, I expect they would have been running full time this year anyways.

So the two teams struck a deal. Falk’s charter and deals with RCR. Levine’s gear and driver. Seems like it’s a win for the two groups.

Problem is, a lawsuit dropped this week in North Carolina says there were more investors left out in the cold.

Back when I first wrote about the charters, I mentioned that Mike Hillman, owner of the #40 Hillman Motors car that was often run by Landon Cassill before he moved to Front Row, sounded pretty annoyed about all the work he put into his team to be left out in the cold.

Cassill @ Martinsville, 2013
Cassill at Martinsville, 2013

I felt he had every right to be annoyed by it and bitter. In among the preseason moves, if you follow the little teams, Premium Motorsports bought up most of the #40’s equipment and took Hillman on in a role with that team. Made it sound like the #40 was up the creek without a paddle without a charter. They entered in as an open team into the Daytona 500 with Reed Sorensen, but did not qualify for the race. They haven’t attempted a race since (although, not terribly uncommon for the part time teams to skip the west coast run).

See, the thing is, Hillman and Falk used to run their cars together. At various times during the last few years, Hillman and Circle Sport were listed as a single entity. In fact, as of the day of posting this, Hillman’s entry on Wikipedia still lists the team as Hillman-Circle Sport.

In 2012, Hillman and the #40 teamed up with Michael Waltrip for him to run the Daytona 500. Per the rules at the time, that classified the #40 as a MWR car and maxed out the four car limit. Hillman was out of the game and couldn’t run his own car. Falk bought the RCR points for the #33 that year and started running full time. Hillman got in on the deal with Falk in 2013, and it included some discounted ECR engines from Childress starting with Indy. The #40 car was half a season short of qualifying for a charter. Despite the two groups working in tandem to run in Cup, Circle Sport was the official name on the #33 so when the charters came down, it went to the #33.

Sorensen at Daytona
Sorensen at Daytona

The full details of the lawsuit spell out how the relationship between Hillman and Falk soured starting with last year. Hillman accuses Falk of leaving the #40 side of the partnership with more of the bills. Supposedly Hillman and Falk were planning on cutting ties at the end of 2015 anyways but neither ever officially signed off on the agreed upon terms. The biggest thing is that Hillman was totally unaware of any pending deal with Circle Sport and Levine. The details in the lawsuit certainly imply that the investors in the #40 car had to liquidate everything they had (to Premium) and are still left with a hefty amount of debt. The complaint straight up says “As a results of the circumstances described … the 40 points are of negligible value, the Partnership is unable to race full-time during the 2016 race season, Hillman and Hillman Racing have no ability to pay for the significant debt incurred in the 2013, 2014 and 2015 race seasons, and the remaining partners have been forced to liquidate many of the Partnership’s remaining assets.’’

Hillman is seeking cash damages, the rights to the #33 team, the #95 charter and all profits/benefits gained from the charter.

So those are the details in summary. What is going to come of all this?

It’s hard to tell. From the public information out there that NASCAR fans can find with a little Google-fu, the ownership ties between Hillman and Falk seem murky at times over the last few years. I’m sure more details of their ties will come out over the course of the lawsuit because right now, what details we have are from Hillman’s point of view. Falk has not commented on anything because the case is pending. Childress will definitely be roped into this because of the ongoing deals he had to supply equipment and the checks he cut to run his driver/car/crew under the #33 banner (now the #95 banner).

mcdowell at daytona 59
McDowell at the Daytona 500

I think that the biggest loser in this fight is Michael McDowell. He is considered one of the nicest guys in the garage and committed to making Levine a better team. He was slated to finally run the full season (or pretty close to it depending on the number of Ty Dillon races with RCR). The drivers concern themselves with what happens on the track. The owners worry about behind the scenes. That’s why the owner-driver fad in the 90s fell apart and frankly, I’m surprised Stewart has so much success in the dual role.

Whatever happens between Hillman and Falk, I really hope McDowell doesn’t have to suffer as a result.

I think whoever loses this lawsuit, is likely broken and out as a Cup level owner. Hillman already seems to be busted so if he loses, he’s no worse off in terms of Cup racing (his debt is a different matter though). If Falk and Levine lose, there are a couple ways I could see it going. Falk is likely out as a Cup owner either way. Levine may or may not be. One of the big questions at this point is what, if anything, Levine knew about the situation between Hillman and Falk. That could lead to more lawsuits. The only asset belonging to the #95 that Hillman seeks is the charter itself (which was originally the #33’s). So Levine could survive without it and run as an open team. Their assets and deals might not be affected, just their guaronteed spot. Which, of course, is a big deal in itself, so who knows what that means in the new charter environment.

How much debt Hillman has racked up running the #40 over the last couple years is likely to come out in the lawsuit. All their gear is liquidated already. So depending on how much debt they’ve already got, winning the charter from CS-LFR may not enable them to race. No gear, no money to buy more gear, no racing. But charters are worth a few million a pop. We know this because Kaufmann sold his from MWR to the #19 and #41 teams. The initial thought seems like that even if Hillman wins, he’d have to sell the charter to get out of (some) debt.

Then we get to play the game of “Who Wants to Buy a Charter?” (answer: Penske-Wood)

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