According to new court records, McLaren is suing Alex Palou for more than $30 million in damages, and Pato O’Ward has benefited from the disagreement by receiving more than $10 million as part of a reworked and extended contract in IndyCar and Formula One as a result of Palou’s decision to stay at Ganassi.
The court issue is over the amount of compensation McLaren is due to after Palou breached a contract with the team to stay at Chip Ganassi Racing.
Palou’s lawyers requested in his defence brief last year that McLaren show the fact and extent of any harm allegedly caused by Palou, and McLaren has attempted to do so in court documents reviewed by The Race this week.
Palou and his legal team have the right to respond to McLaren’s assertions. In its defence filing last year, the Palou side challenged several of McLaren’s accusations. Some of those assertions remain the same in the new documents, while others have been drastically modified.
Here’s a summary of everything we’ve learnt thus far and from the court case.
WHAT HAS HAPPENED SO FAR?
McLaren has presented its case for damages against Palou and his racing corporation, to which Palou has responded in defence, admitting violations of the driver contract but challenging some of McLaren’s charges. McLaren has now changed its claims to incorporate additional components.
There is currently no court date or estimate for how long the lawsuit will last.
Palou has already participated in Chip Ganassi Racing’s livery and sponsor reveal with DHL, as well as testing for the team in 2024.
McLaren signed Dale Coyne driver David Malukas in place of Palou once it became evident that Palou would not be coming, thus McLaren is simply looking to recuperate the losses it believes it has incurred as a result of Palou’s choice to stay at Ganassi rather than attempting to force Palou to join after all. Malukas is expected to miss the season opening owing to a hand injury sustained in a bike accident.
The lawsuit is being heard at the UK Commercial Court.
How O’Ward Benefited
McLaren claims it had to offer O’Ward a new contract to maintain his long-term services, both in IndyCar and as an F1 reserve driver, because Palou’s departure made it critical to keep O’Ward.
O’Ward’s contract was previously set to expire in 2025, but it has been extended for another two years.
McLaren believes that it was required to provide O’Ward $2 million for the 2024-25 season, during which he will become a McLaren F1 reserve driver, at least in 2024.
It alleges that an additional $4 million was required for 2026 and $4.2 million for 2027 to secure his services, for a total of $10.2 million.
McLaren claims this was required because Palou’s departure constituted a commercial threat, and the team wanted to remain competitive in IndyCar and F1, therefore O’Ward had to stay put for the long term.
Palou hasn’t got a chance to answer because this is a new addition to the allegation.
MALUKAS IS NOT ‘A-LEVEL’
According to the claim, McLaren planned to collect an additional $1.5 million from General Motors on behalf of engine supplier Chevrolet for having three drivers (including Palou) that GM would classify as ‘a-level’.
According to court records, GM does not consider Malukas to be one of the ‘a-level’ drivers, hence McLaren lost out on the $1.5 million.
Palou’s defence contested that he should be held culpable for McLaren’s failure to receive GM payments before the Malukas facts and the $1.5 million sum were added to the most recent filing.
Sponsorship Issues
McLaren brought long-time Ganassi backer and regular Palou vehicle sponsor NTT on board for 2023, claiming the arrangement was done with the expectation that Palou would drive the car.
McLaren claims it had to renegotiate its contract with NTT, resulting in a reduced yearly fee and smaller performance bonuses, totaling $5,381,000 in damages.
McLaren previously projected that appeasing NTT would cost $3,825,000 in renegotiation or compensation, but that figure has been reduced to $2,560,438.
It estimates that the overall loss from the NTT renegotiation and not having Palou available for sponsor and team publicity purposes is $7,941,438.
Palou’s defence urged McLaren last year to show how Palou was involved in the initial McLaren/NTT deal, as well as why the arrangement was renegotiated and why Palou would be liable for damages.
A new party was brought in.
The fresh and updated McLaren claim requests the inclusion of Palou Motorsport SL. That is the team Palou formed with his father last year to compete in the Eurocup-3 Championship.
McLaren claims to have given Palou’s contract signing incentive of $400,000 to Palou Motorsport SL after Palou requested it. McLaren has thus requested that Palou Motorsport be added to the case.
In their 2023 defence filing, Palou and his team claimed that the signing-on bonus was not for “performing any particular contractual obligation” and that McLaren should not receive it back.
PALOU’S GANASSI CONTRACT LENGTH IS REVEALED
According to a letter delivered to McLaren’s manager Zak Brown in August last year, Palou signed a new Ganassi deal for 2024-26, a contract term that Ganassi has not made public.
Aside from team owner Chip Ganassi’s statement that Palou would stay in his car immediately after winning the IndyCar title in September last year, there has been no word on a new contract for Palou. His previous Ganassi contract terminated at the end of 2023.
The amount that McLaren says it has lost
McLaren maintains that certain costs are now impossible to measure, thus an exact figure cannot be confirmed. However, the claim seen this week included little more than $31 million. That figure could still change.
The total is little over $31 million, up from $22 million when it filed the complaint last year.
McLaren modified the phrasing in its submission from ‘lost income’ to ‘lost profit’, as requested by Palou’s defence.
AN ASTON MARTINS LINK
McLaren claims to have an arrangement with the Aston Martin F1 team to provide them with a reserve driver. McLaren claims to have lost $35,000 since Palou did not take up this post by the end of 2023, as scheduled.
McLaren’s changed claim has eliminated a passage from Palou’s response that was previously mentioned, therefore this will most likely be addressed again when Palou responds to McLaren’s new claims.
McLaren also claims it lost approximately $3.5 million by using 8-12 days of running in older F1 cars for Palou when it might have rented the car and time out to others. It also claims to have spent approximately $868,585 on the older F1 car, a contemporary F1 car test, simulator time, and equipment for these operations for Palou.
Palou and his lawyers questioned their liability for the costs of Palou’s testing efforts in November.
What happens next?
Palou has the appropriate response to McLaren’s claims.
In response to McLaren’s original filing, Palou’s defence confessed to abandoning his contractual responsibilities with the team and that it was allowed to sue for damages, but labelled McLaren’s claims “inadequately particularised, misconceived in a number of respects, and vastly overinflated.”
The amount McLaren is claiming has increased.
Palou is due to begin the IndyCar season with Chip Ganassi Racing on March 10, which means his case will most likely continue after the season begins.
