McLaren successfully secured over $12 million in damages after taking legal action against four-time IndyCar champion Alex Palou, who previously served as the team’s F1 reserve driver; CEO Zak Brown hailed the outcome as “entirely appropriate,” while Palou expressed disappointment over the court’s decision.
The compensation covers a range of commercial and contractual impacts stemming from Palou’s abrupt decision to remain with Chip Ganassi Racing rather than join McLaren’s IndyCar outfit, despite contractual obligations to join the team for 2024 and beyond while continuing to serve as their F1 reserve and test driver.
After McLaren signed Oscar Piastri to its F1 team for 2023, Palou backed out of his deal with the Woking-based squad, believing the team had no real intention of ever offering him a full-time F1 seat. Instead, he opted to stay with Ganassi in IndyCar, where he had been enjoying a dominant run.
Palou’s defence argued that McLaren misled him over its F1 promises and claimed the team had exaggerated or inflated parts of its damages case. Despite this, the court ruled largely in McLaren’s favour.
Breakdown of damages awarded to McLaren
A significant portion of McLaren’s awarded damages comes from a collapsed NTT IndyCar sponsorship agreement that originally centered on Palou. When he failed to join, the parties revised and ultimately terminated the deal. The court granted McLaren $5.38 million for the 2024–2026 seasons, along with $950,000 tied to the 2027 option year.
McLaren also secured just over $2 million in lost performance-based revenue beyond the sponsorship deal. A further $2–2.5 million could follow once officials finalise the remaining sponsorship loss figures at a later date.
McLaren also successfully claimed $1.3 million to cover a salary increase for Pato O’Ward, issued after Palou’s departure to ensure the team retained a high-calibre driver. The team secured an additional $500,000 to account for a missed General Motors payment linked to running an “A-level driver”.
However, the team did not succeed in recouping smaller amounts tied to Formula 1 sponsorship arrangements, Palou’s testing programme costs, or a disputed sign-on bonus McLaren claimed was effectively an advance salary payment. McLaren will also be looking for a legal cost reimbursement during a future hearing.
Brown pleased with the outcome
McLaren CEO Zak Brown expressed satisfaction regarding the outcome of the McLaren v Palou legal battle.
“As the ruling shows, we clearly demonstrated that we fulfilled every single contractual obligation towards Alex [Palou] and fully honoured what had been agreed,” Brown stated following the verdict.
“We thank the court for recognising the very significant commercial impact and disruption our business suffered as a result of Alex’s breach of contract with the team.”
Reactions from Palou and Chip Ganassi
Palou, meanwhile, was vocal in his criticism of the case’s outcome, arguing that the court had dismissed McLaren’s F1-related claims entirely.
“The court’s decision shows the claims against me were completely overblown,” he said. “The court has dismissed in their entirety McLaren’s Formula One claims against me which once stood at almost $15m.
“It’s disappointing that so much time and cost was spent fighting these claims, some of which the court found had no value, simply because I chose not to drive for McLaren after I learned they wouldn’t be able to give me an F1 drive.
“I’m disappointed that any damages have been awarded to McLaren. They have not suffered any loss because of what they have gained from the driver who replaced me.”
The four-time IndyCar series champion also thanked Otmar Szafnauer—former Aston Martin and Alpine F1 team principal—for his support and “expert assistance” during the legal proceedings.
Palou concluded that he is “considering my options with my advisors and have no further comments to make at this stage,” before adding: “I look forward to the upcoming season with Chip Ganassi Racing.”
Ganassi, Palou’s current employer, backed the Spanish driver, saying: “Alex has our full support, now and always. We know the character of our driver and the strength of our team, and nothing changes that. While we respect the legal process, our focus is exactly where it should be: on racing, on winning, and on doing what this organization has always done best, competing at the highest level.”
