Major financial details revealed in $30 million McLaren lawsuit against Alex Palou

Details of the ongoing $30 million lawsuit brought by McLaren Racing against IndyCar star Alex Palou have become public, revealing the estimated cost of Palou’s contractual defection.

On top of sharing the exact financial details about the loss of sponsorship McLaren faced with Palou backing out of his deal, it also reveals the salaries — or payments — of the other drivers on the team.

Alex Palou vs. McLaren: What you need to know about the lawsuit

McLaren Racing is in the process of suing IndyCar driver Alex Palou for an estimated $30 million in damages after the team signed Palou for a future racing contract, only for Palou to renege on his contract and return to Chip Ganassi Racing.

Back in 2022, Alex Palou signed a three-year contract with McLaren that would have seen him join the outfit’s IndyCar program through the 2024 through 2026 seasons, with a suggestion that McLaren would be keeping Palou in line for a potential Formula 1 seat in the future.

The Spanish IndyCar champion initially attempted to free himself of his CGR deal midway through the 2022 IndyCar season in hopes of securing testing sessions with McLaren’s F1 outfit.

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Palou and his lawyers claimed that a significant element of the McLaren deal centered around Palou’s belief that it would culminate in a Formula 1 ride — but when that option fell through with McLaren securing Lando Norris and Oscar Piastri for the foreseeable future, and Palou determined he’d be better off remaining with CGR.

Palou acknowledges that his return to CGR does constitute a breach of contract, but he also maintains that, because the deal never amounted to anything, McLaren therefore did not suffer any major financial losses.

McLaren, however, claims that Palou’s refusal to join the team resulted in a loss of $30 million due to losses of sponsorship and the hiring of other drivers to replace Palou.

Now, a new filing includes information on current Arrow McLaren’s IndyCar driver deals, as well as updated damage figures McLaren argues were occasioned by Palou.

New filings reveal Alex Palou impact at McLaren IndyCar

First and foremost, McLaren Racing has revealed the financial details regarding the contracts of its current IndyCar drivers: Pato O’Ward, Christian Lundgaard, and Nolan Siegel.

McLaren alleges that it had effectively hedged its bets on hiring Palou for the 2023 season, which meant it was forced to scramble in order to find talent for the team.

During that time, it hired and then fired David Malukas (who was unable to start the 2023 season with McLaren due to a wrist injury), leaving the team signing Callum Ilott, Theo Pourchaire, and then Siegel.

Further, the team states that it needed to promote Pato O’Ward to McLaren F1 reserve, something it would not have done had Palou been on the team. O’Ward’s overall deal is worth over $10 million.

McLaren alleges that, due to all the contractual finagling it had to do as a result of Palou’s departure, combined with the money it earns from Siegel (who is a pay driver), and excluding the $9 million the team intended to pay Palou over that three years, Palou ultimately cost the team $1,512,500 in lost profits, strictly tied to salaries, Indy Star reports.

The information states that Arrow McLaren paid over $150,000 in driver salaries when split between those drivers: Malukas earned $25,000; Ilott earned $50,000; and Pourchaire earned $87,500.

Nolan Siegel then stepped in; the American driver is revealed to have paid $1.25 million to compete in the final 10 races of 2024, and that he continues to pay for that seat in 2025. The current sum was redacted in public court documents.

However, the major issue is less the driver salaries and more the sponsorships that McLaren alleges it lost as a result of Palou’s departure.

Arrow McLaren says that it had negotiated the renewal of a deal with NTT Data and NTT, the companies that sponsor the IndyCar Series overall, and that it was forced to renegotiate “in a reasonable attempt by the claimants to mitigate their loss arising from the (actual or potential) damage to their relationship with NTT” — including the potential loss of the sponsorship overall.

Filings state that the renegotiation resulted in a $7,266,902 contraction of NTT sponsorship fees. McLaren also alleges that it lost $15,564,970 in sponsor benefits from NTT regarding its Formula 1 program.

Additional listed losses include $5.5 million in reduced sponsorship from non-NTT sources, and $1 million in performance-based revenue the team assumed it could have earned with Palou.

Palou’s legal team responded by saying, “Having regard to the further particulars and evidence adduced by the claimants, it is denied that the claimants have suffered any loss or damage.”

His team also states that it is “unusual” for IndyCar sponsors to negotiate deals with teams that heavily rely on an as-yet unconfirmed driver signing, and that McLaren’s contract with NTT did not include any clauses that stated the team would be paid more or less depending on its driver lineup.

Palou’s team has also raised questions about the driver’s financially responsibility for McLaren’s decision to promote O’Ward to an F1 reserve role, and whether or not McLaren is entitled to request the repayment of the signing bonus it provided Palou if its promise of an F1 seat was not met.

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