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HomeMotorsportsMcLaren vs. Alex Palou: What the million-dollar lawsuit is about

McLaren vs. Alex Palou: What the million-dollar lawsuit is about

McLaren is demanding 23 million dollars in damages from Alex Palou: How the two-time IndyCar champion’s lawyers are arguing against it

The messy split between Alex Palou and McLaren is one of the wildest contract sagas in recent motorsport history. Next year will see a showdown in a British court

A commercial judge at the Business and Property Courts of England and Wales will decide how much compensation McLaren will receive following Alex Palou’s U-turn last summer, which saw him break both the driver and promotional contract he had signed to race in the IndyCar series and as a reserve driver in Formula 1.

Autosport, has seen the documents submitted to the court by both sides and notes that Palou does not dispute the breach of contract, but disputes the amount of compensation claimed by McLaren.

The reason given by Palou for the separation is that he has “lost confidence in the promise of a future Formula 1 race cockpit”, which McLaren rejects as “unfounded”.

Palou had already completed test drives in older Formula 1 cars as a member of the McLaren driver program, had been used in the first free practice session at the 2022 US Grand Prix and was scheduled as an official replacement driver for the 2023 Miami Grand Prix. This was part of an arbitration agreement following an earlier contract dispute between McLaren and its current IndyCar team Chip Ganassi Racing (CGR).

In that case, which was heard in an American court, Ganassi retained Palou as an IndyCar driver until 2023 and he won his second title for the team. Aside from references to his last Ganassi contract, a three-year deal he signed last August to part ways with McLaren, CGR is not involved in this lawsuit in any way.

Plaintiffs are McLaren Indy LLC and McLaren Racing Ltd, defendants are Palou himself and his American company ALPA Racing USA LLC, which markets his services as a racing driver.

Palou’s legal team reveals reason for separation

In the written statement of claim, Palou’s lawyers explain: “In 2022, [Palou] signed a series of agreements in the belief that [McLaren] shared his ambitions to race in Formula 1 in the medium and long term.”

Later, a reason for the U-turn is given: “As a result, [Palou] lost confidence and trust that [McLaren] would truly support his ambitions to race in Formula 1 and instead decided to continue with CGR in the IndyCar Series. “

The defense continues, “The real point of contention between the parties is the issue of damages that [Palou and his company] must pay [McLaren] as a result.” In this context, it says: “[McLaren’s] claims for damages are insufficiently specified, misleading in many respects and vastly overstated.”

Another detail in Palou’s defense is that his CGR contract does not prevent him from accepting a Formula 1 cockpit elsewhere should an opportunity arise.

How much compensation is McLaren claiming from Palou?

In total, McLaren is demanding 23 million US dollars (currently around 21.3 million euros) in damages from Palou. McLaren is claiming lost income and expenses associated with his replacement and alleges that Palou’s U-turn led to a renegotiation of the commercial contract with sponsor NTT Data.

The damages are estimated at $6.9 million, split between an annual sponsorship fee of just over $3 million and $3.9 million for appearances at three Formula One races and “sponsorship of the Indy Series Development Center”.

McLaren also claims it will lose $1.5 million in “team support” over three years through sponsorship from engine supplier General Motors, which says it relies on “three full-time A-level drivers”. In addition to the commercial deals, a further $7 million is claimed in expected prize money, merchandise and sponsorship deals “as a result of his status as a two-time IndyCar champion”.

In relation to Formula One, McLaren puts Palou’s opportunities under the old car testing program at $3.5 million – as this time “would otherwise have been available for employment” – as well as a further $2.8 million in wasted expenses for “driver support” in testing, the Formula One simulator and other activities. Finally, the company is demanding repayment of 400,000 dollars paid as a signing bonus and reimbursement of legal costs.

The bulk of Palou’s lawyers’ response – a dozen pages of pleadings – consists of disputing these claims and figures. And that’s the crux of the case, where every single point must be examined to reach a verdict on the final amount. A judge will have to decide exactly what the outcome will be.

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