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New court documents reveal that McLaren is seeking over $30million in damages from Alex Palou, and that Pato O’Ward has benefited from the dispute by earning over $10m as part of a reworked and extended contract in IndyCar and Formula 1 that happened as a result of Palou deciding to stay at Ganassi.
The court dispute centres on the amount of compensation McLaren is entitled to after Palou breached a contract he signed with the team to stay at Chip Ganassi Racing.
In his defence filing last year, Palou’s lawyers asked McLaren to prove the fact and extent of any loss allegedly caused by Palou, and McLaren has aimed to do that in the court documents seen by The Race this week.
Palou and his legal team have the right to reply to McLaren’s claims. The Palou side disputed a number of McLaren’s claims in its defence filing last year. Some of those claims remain similar in these new documents and some have been changed significantly.
Here’s a recap of what we’ve learned so far and from the court case.
WHAT’S HAPPENED SO FAR?
McLaren has outlined its case for damages from Palou and his racing entity, to which Palou has replied in defence admitting to breaches of the driver contract but questioning some of McLaren’s claims. Now McLaren has modified its claims and included other items.
There’s no court date yet or a timeline of how long the case will go on.
Palou has already been part of a livery and sponsor reveal with DHL for Chip Ganassi Racing and tested for the team in 2024.
McLaren signed Dale Coyne driver David Malukas in place of Palou once it became clear Palou wouldn’t be joining, so McLaren is merely looking to recoup the losses it feels it has incurred because of Palou's decision to stay at Ganassi rather than trying to force Palou to join after all. Malukas is set to miss the season opener due to a hand injury from a cycling accident.
The case is being heard in the UK Commercial Court.
HOW O’WARD BENEFITED
McLaren is claiming that it has had to offer O’Ward a new deal to secure his services in the long-term, both in IndyCar and as an option as an F1 reserve driver, because Palou not joining made it vital to ensure it kept hold of O’Ward.
O’Ward’s deal previously through 2025, but has been extended by two years.
McLaren claims it has been necessary to offer O’Ward $2m for 2024-25 - a period where he will become a McLaren F1 reserve driver, in 2024 at least.
It claims another $4m was needed for 2026 and $4.2m for 2027 to secure his services, a sum total of $10.2m.
McLaren says this was necessary because the loss of Palou posed a commercial threat and it needed to be able to remain competitive in IndyCar and F1 so had to ensure O’Ward stayed put long term.
Palou hasn’t had the chance to respond to this as it is a new addition to the claim.
MALUKAS ISN’T ‘A-LEVEL’
As part of the claim, McLaren says it expected to receive an extra $1.5m from General Motors on behalf of engine provider Chevrolet, for having three drivers (including Palou) GM would define as ‘a-level’.
The court documents state that GM does not rate Malukas as one of those ‘a-level’ drivers and therefore McLaren has lost out on that $1.5m figure.
Palou’s defence disputed he should be liable for McLaren not receiving GM payments, before the Malukas details and the $1.5m figure were added to the latest filing.
SPONSORSHIP ISSUES
McLaren brought long-time Ganassi backer and regular Palou car sponsor NTT onboard for 2023 and claims this deal was made with the assumption that Palou would be driving the car.
McLaren says that it had to renegotiate its deal with NTT, both in terms of a reduced annual fee and lower performance bonuses, adding up to losses of $5,381,000.
Having initially estimated it would cost $3,825,000 to appease NTT through renegotiation or compensation, McLaren has lowered that number to $2,560,438.
It reckons its total loss with the NTT renegotiation and not having Palou available for sponsor and team publicity-related purposes is $7,941,438.
Palou’s defence last year asked McLaren to show how Palou was part of the original McLaren/NTT deal, questioned why the deal was renegotiated and why Palou would be liable for damages.
A NEW PARTY IS BROUGHT IN
In the new and revised McLaren claim, it has asked for Palou Motorsport SL to be added. That’s the team Palou set up with his father last year, to run in the Eurocup-3 championship.
McLaren claims that it gave Palou’s contract signing-on bonus of $400,000 to Palou Motorsport SL, after being asked to do so by Palou. McLaren has therefore asked that Palou Motorsport be added to the case.
Palou and his defence claimed the signing on bonus was not for “performing any particular contractual obligation” in their 2023 defence filing and denied McLaren should get it back.
PALOU’S GANASSI CONTRACT LENGTH REVEALED
A letter McLaren claims was sent to its boss Zak Brown in August last year states that Palou had signed a new Ganassi contract for 2024-26, a contract length which hasn't been made public by Ganassi.
Aside from team owner Chip Ganassi saying Palou would stay in his car immediately after winning the IndyCar championship in September last year, there have been no details of a new contract for Palou. His previous Ganassi one expired at the end of 2023.
THE AMOUNT MCLAREN SAYS IT’S LOST
There are certain costs McLaren claims it cannot quantify currently, so an exact number isn’t possible to confirm. But a total of just over $31m is included in the claim seen this week. That number could yet change.
The total of just over $31m is up from $22m when it filed its lawsuit last year.
McLaren has changed the wording in its filing to replace ‘lost revenue’ to ‘lost profit’, something Palou’s defence had asked for.
AN ASTON MARTIN LINK
McLaren claims it has an agreement with the Aston Martin F1 team, whereby McLaren would provide it with a reserve driver. Because Palou did not take up this role at the end of 2023 as McLaren expected, it says it has suffered losses of $35,000.
McLaren's modified claim has removed a paragraph Palou's defence previously referred to - so this will likely be addressed again when Palou responds to McLaren's new claims.
McLaren also says it missed out on around $3.5m because it used 8-12 days of running in older F1 cars for Palou, when it could have rented the car and time out to other people. It also claims it spent around $868,585 providing the older F1 car, a current F1 car test, simulator time and equipment for these activities for Palou.
In their November defence, Palou and his lawyers questioned being liable for the cost of Palou’s testing activities.
WHAT HAPPENS NEXT?
Palou has the right reply to McLaren’s accusations.
In response to McLaren’s initial filing, Palou’s defence admitted to renouncing his contractual obligations with the team and that it was entitled to sue for damages but called McLaren’s claims “inadequately particularised, misconceived in a number of respects and vastly overinflated”.
Now the amount McLaren is claiming for has gone up.
Palou is set to start the IndyCar season with Chip Ganassi Racing on March 10, meaning his case will likely be ongoing after the season starts.
