Alex Palou ordered to pay McLaren $12.2m after reneging on IndyCar contract

“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,” said McLaren in a statement.

McLaren said that it would now seek to reclaim its legal costs from Palou.

During the case, Palou said that his current team, Chip Ganassi Racing had agreed to cover the costs of the case, including damages but that, as a result, he was not one of the best-paid drivers in IndyCar, despite his success.

Palou said that he was effectively repaying the team by taking a reduced salary, and would be doing so for many seasons to come.

“The big numbers that have been claimed in this matter is something that I do not have as a person, as a driver,” he said. “There is no way I would have had the amount of money and expenses just to be here today.

“Although there is that indemnity, as a driver, I know I am not being paid the amount of other drivers. I am not in the top three of the highest paid drivers and I am not going to be for the foreseeable future… for this indemnity.

“I am going to have to pay for it with my base salary in the future and I am already doing it.”

Palou had always accepted that he had breached his contract with McLaren’s IndyCar team, which he had initially agreed to join in 2023, amid a tough season with CGR.

The contract was then deferred to 2024 after a dispute with CGR but, late in 2023, Palou decided to stay where he was and renege on the McLaren deal.

Palou said that he had only signed for McLaren because it offered a route into Formula 1 and that Brown had assured him that this was the “primary idea” It was “what I understood,” Palou told the court. “That would be the goal.”

But when the team signed Oscar Piastri in 2022 and then extended his deal a year later, Palou said that he became “upset, worried and angry” that the team had signed a different rookie driver.

“I thought I had the right to terminate an agreement that was based on lies and false impressions,” he said.

But Brown denied stringing the driver along when he gave evidence in a sometimes heated exchange with Palou’s barrister, Nick De Marco KC. At a different point of the hearing, De Marco accused Brown of speaking “absolute rubbish” to which Brown pithily replied: “I think you are talking rubbish”.

Despite the flying accusations, Mr Justice Picken praised both Brown and Palou for their assistance in the case.

“That Mr Brown was keen, and able, to stand his ground was clear,” his judgement said. “He is, after all, a competitor. However, in my view, Mr Brown was straightforward enough.

“I am clear that he did not set out to give evidence that was untrue, on the contrary, I formed the impression that he was generally doing his best to assist the Court in what he had to say in evidence.”

The judge went on to say: “I found Mr Palou to be an honest and engaging witness in much the same way as I found Mr Brown also to be.”

“His point was that Mr Brown sought to persuade him that he retained a realistic prospect of promotion to F1 even after Mr Oscar Piastri was signed for the 2023 season… this is probably what Mr Brown did, indeed, do. The extent to which it happened is probably a matter of impression, however. In short, it is understandable that Mr Palou and Mr Brown might have different (yet entirely honest) views as to which of them thought what concerning Mr Palou’s F1 dream.”

Palou, and two associated companies were, however found liable for McLaren’s damages in the case.

Brown told the court how he felt that he had to scramble to renegotiate Pato O’Ward’s IndyCar contract with McLaren to avoid the risk of losing a second high profile driver. “That gave Pato a tonne of leverage,” said Brown, who signed a contract giving the driver a $5.1m increase in base salary.

He also explained how he had to cut the fees being charged to NTT, the lead sponsor on the No6 car that Palou was due to drive, and how he was unable to recruit an “A level” driver to replace Palou and therefore lost a $500,000 deal with GM.

Palou grinned in court when he was referred to as “a generational talent, a GOAT”. Without him, McLaren said, its IndyCar team had underperformed — and would continue to do so, costing it $4.1m in prize money and sponsorship bonuses.

“If Mr Palou had joined the Arrow McLaren team, then, he would have won races and, indeed, that he is likely to have won championships and the Indy 500,” Mr Justice Picken wrote in his judgement. “To repeat, Mr Palou is an exceptional talent. Just as significant as that is the fact that Mr Palou won his first season racing for CGR. This, despite driving with a new team, for which he had three race wins and 8 podiums in his first season.”

Palou’s future remains tied to CGR and, in a statement, the driver said that he was looking forward to the upcoming season, while also welcoming the dismissal of some of McLaren’s claims.

“The court has dismissed in their entirety McLaren’s Formula 1 claims against me which once stood at almost $15m,” he said.”

“The court’s decision shows the claims against me were completely overblown. 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.”

Palou had claimed during the hearing that he should not be liable for any damages, partly because the team recruited Nolan Siegel to drive the No6 car, and that he is paying more for the drive than McLaren said it had lost from Palou’s contract decision.

“I’m disappointed that any damages have been awarded to McLaren,” added Palou. “They have not suffered any loss because of what they have gained from the driver who replaced me.

“I am considering my options with my advisors and have no further comments to make at this stage.”