McLaren vs. Palou: A $20.7M lawsuit over broken promises and disappearing messages

Closing arguments were presented Wednesday in McLaren Racing's breach of contract suit against IndyCar star Alex Palou, who signed two different contracts with the team before deciding not to leave Chip Ganassi Racing because he presumed McLaren would never give the Spaniard a seat in Formula 1. The five-week trial in London's High Court began in late September and it is unclear when a ruling will be issued. McLaren initially sought almost $30 million in damages, but that number was reduced to $20.7 million as the racing juggernaut seeks to reclaim money allegedly lost in sponsorship, driver salaries and performance earnings. Palou has won three consecutive IndyCar titles and the Indianapolis 500 since this saga began. He has four IndyCar titles in the last five seasons. Palou first signed with McLaren in 2022 to drive for its IndyCar team in 2023, but Ganassi pushed back and exercised an option on Palou for the 2023 season. The matter was decided through mediation, with McLaren covering Palou's legal costs. Palou could not join McLaren until 2024 but was permitted to be the reserve and test driver for the F1 team in 2023. When McLaren signed Oscar Piastri for its F1 team, and Palou's performance with Ganassi in IndyCar was so dominant, the driver decided he did not want to move to McLaren's IndyCar team and reneged on his contract. Palou has maintained his contracts with McLaren were "based on lies," and he'd never have a chance to race in F1. His counsel has also accused McLaren Racing CEO Zak Brown of destroying evidence by deleting WhatsApp messages related to the case. The damages McLaren contends it lost revenue when Palou backed out ahead of the 2024 season and the team had to scramble to find another driver. McLaren wanted Indianapolis 500 winner Marcus Ericsson, who had already committed to Andretti Global, so it instead used four different drivers that season. Because none were as accomplished as Palou, McLaren argued both NTT Data and General Motors reduced their payouts to the team because McLaren did not field a driver of the caliber it had promised. Palou's attorneys have argued that McLaren driver Nolan Siegel is funded by his wealthy father and that covers any financial losses from sponsors. McLaren said it views Siegel only as a promising young driver it did not sign for money. "McLaren has been happy to settle with Mr. Siegel in Car #6 because recruiting a pay driver for that seat was itself a step taken to mitigate any losses (including such losses as might otherwise flow from the fact that Mr. Siegel is one of the worst drivers on the grid)," Palou's side argued, according to court documents. "By recruiting Mr. Siegel, McLaren Indy has in fact mitigated its loss entirely. That is in turn precisely the reason why McLaren has proven happy to sit back and take Mr. Siegel's money for as long as the contract provides for the same, as opposed to continue shopping in the driver market for an even better driver." Siegel finished 22nd in this season's standings, better than only five other full-time drivers. Palou's F1 chances Palou claims he owes nothing and was misled over potential F1 opportunities. McLaren's lineup has won two consecutive constructors' championships in F1 and Lando Norris and Piastri are currently 1-2 in the driver championship standings. Both are younger than Palou, who figures his window has closed on a seat in F1 as he turns 29 in April. Palou's defense has also argued that because the driver remained with Ganassi, and Ganassi said the IndyCar team would mitigate his legal losses, it comes at the expense of Palou's salary. He's been the best driver in IndyCar the last three years but is not among the highest paid. "As we have seen the big numbers that have been claimed in this matter is something that I do not have as a person, as a driver," Palou testified. "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." Disappearing messages? Palou's defense has zeroed in on McLaren personnel's use of the disappearing messages function on WhatsApp. The messages self-delete under that setting and thus communication related to the Palou saga has vanished. "In an ordinary case, the court can place weight upon the contemporaneous documentary record as representing the best evidence of what occurred," Palou's lawyers said. "(F)rom the very beginning, McLaren's approach has been to carefully curate the documentary record in such a way as to try and inflate the value of their claim, whilst simultaneously deleting and destroying or otherwise suppressing any evidence which might be adverse to their claim." A buyout clause The case revealed that Palou had options in his McLaren contract that would permit him to be a reserve driver for another F1 team in 2027 so long as he did not race for another IndyCar team. His revised McLaren contract was set to run for the 2024, 2025 and 2026 seasons. Palou's defense argued that an agreement had been reached in which Brown would let Palou out of his contract to drive for an F1 team with a release fee of $2 million to $2.5 million, skeptically noting the $20.7 million sought by the McLaren executive. "Losses of the magnitude now alleged by McLaren are simply not credible, and each alleged head of loss falls apart under proper scrutiny," the lawyers wrote.