IndyCar News: McLaren partially victorious in case vs. Palou
In a landmark ruling that underscores the high-stakes world of motorsport contracts, the UK High Court has ordered IndyCar champion Alex Palou to pay McLaren Racing over $12 million in damages for breaching his multi-year agreement to join the team.
–by Mark Cipolloni–
The decision, handed down today by Judge Simon Picken, highlights the significant commercial disruptions caused by Palou’s last-minute decision to stay with Chip Ganassi Racing, including lost sponsorships and increased costs for retaining key drivers. While McLaren hails it as a partial victory, the case sets a precedent for accountability in the cutthroat arena of racing deals.
Instead, he chose to remain with his current team, Chip Ganassi Racing. Palou admitted to the breach early in the proceedings, so the case focused on the extent of damages owed to McLaren, who initially sought around $20-30 million for commercial losses and disruptions.
The case was heard in the UK High Court (Commercial Court) in London, with the final judgment handed down on January 23, 2026, by Judge Simon Picken. McLaren described it as a partial victory, as the court awarded them damages totaling well over $12 million, though some claims were rejected. Palou was backed by Chip Ganassi Racing throughout the proceedings, and Ganassi has indemnified him against the losses, meaning the team will likely cover the costs.
Key Details of the Judgment
The court recognized the “significant commercial disruption” caused by Palou’s breach, including impacts on sponsorship deals, team performance, and driver retention. Here’s a breakdown of the awards and rejections:
| Category | Amount Awarded | Details/Reasons | ||
| Core Contract Seasons (2024-2026) | $5.38 million | Compensation for the direct breach during the main contract period, covering lost opportunities in IndyCar operations. | ||
| 2027 Option Year | $950,000 | Damages for the optional extension year, acknowledging potential future losses. | ||
| Lost Performance-Based Revenue | Just over $2 million | Tied to reduced earnings from performance incentives that McLaren argued would have been higher with Palou on the team. | ||
| Sponsorship Losses (NTT Deal) | $2-2.5 million (to be finalized) | McLaren’s deal with NTT was revised and eventually terminated due to Palou’s absence; the court agreed this caused quantifiable harm. | ||
| Driver Retention Costs (Pato O’Ward) | $1.3 million | McLaren had to increase Mexican driver Pato O’Ward’s salary to retain a top-tier talent as a replacement, which the judge deemed a direct consequence. | ||
| General Motors Payment | $500,000 | McLaren would have received this for fielding an “A-level driver” like Palou; replacements did not qualify, leading to the loss. |
Rejected Claims:
– Smaller sums related to F1 sponsorship impacts.
– Costs for F1 testing programs.
– A sign-on bonus that McLaren had advanced to Palou.
In total, the base damages exceed $12 million, with McLaren set to pursue additional interest and legal expenses (potentially millions more) at a future hearing.
Palou’s defense argued that McLaren had misled him about F1 career prospects to secure the deal and that the damage claims were “vastly inflated.” While the court dismissed the F1-related portions (amounting to nearly $15 million in initial claims), it largely sided with McLaren on the IndyCar-specific impacts.
Statements and Reactions
– McLaren Racing CEO Zak Brown: “This is an entirely appropriate result for McLaren Racing. As the ruling shows, we clearly demonstrated that we fulfilled every single contractual obligation towards Alex and fully honored what had been agreed. We thank the court for recognizing the very significant commercial impact and disruption our business suffered as a result of Alex’s breach of contract with the team.”
– Reactions on X (formerly Twitter) were swift, with motorsport journalists and fans noting the outcome as expected given Palou’s admission of breach.
This resolves a multi-year saga that began in 2023, allowing both parties to move forward—Palou continues with Ganassi, where he has won multiple IndyCar championships, and McLaren has strengthened its lineup with drivers like O’Ward.
Chip Ganassi Racing Press Release
The following are statements from NTT INDYCAR SERIES driver Alex Palou (pictured) and team owner Chip Ganassi following the judgment issued this morning in a London court regarding McLaren’s lawsuit against Palou.
Alex Palou:
“The court has dismissed in their entirety McLaren’s Formula One claims against me which once stood at almost $15m. I’d like to thank Otmar Szafnauer for his expert assistance.
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.
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.
I am considering my options with my advisors and have no further comments to make at this stage.
I look forward to the upcoming season with Chip Ganassi Racing.”
Chip Ganassi:
“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. We’re locked in on chasing another NTT INDYCAR SERIES championship and defending our 2025 Indianapolis 500 victory. That’s where our energy is, and that’s where Alex’s focus is, on the track, doing what he does best: winning.”
