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IndyCar champ Alex Palou admits breach of contract, tries to mitigate damages owed to McLaren

FILE - Alex Palou sits in his pit box during a practice session for the IndyCar Indianapolis GP auto race at Indianapolis Motor Speedway, Friday, Aug. 11, 2023, in Indianapolis. McLaren Racing is suing IndyCar champion Alex Palou for at least $23 million in damages — $400,000 of which is a salary advance paid to the Spaniard — over Palou's decision not to honor the contract he signed to join the team at the end of last month. (AP Photo/Darron Cummings, File)

(AP) — Two-time IndyCar champion Alex Palou concedes in court documents that he breached his contract with McLaren Racing when the Spaniard did an about-face and stayed at Chip Ganassi Racing.

The admission came in Palou’s response to a lawsuit filed against him by McLaren in September seeking to recoup at least $23 million in losses the team calculated Palou’s reversal cost the organization. Palou’s 20-page response was filed in the High Court of Justice Business and Property Courts of England and Wales Commercial Court. The Associated Press reviewed the filing Monday.

In the response, Palou says he changed his mind about joining McLaren ahead of the 2024 season when he “lost trust and confidence that (McLaren) genuinely intended to support his ambition to race in the Formula One Series and decided to continue racing with CGR in the Indy Car Series instead.”

Palou “therefore admits that he renounced his contractual obligations” with McLaren and “the real issue between the parties is as to the quantum of any damages which the Defendants are liable to pay,” the documents say.

The spat over the 26-year-old between two IndyCar teams began when Palou initially disputed a Ganassi claim that the team had picked up the 2023 option year on his contract. McLaren in July 2022 said it had signed Palou and had him earmarked for an IndyCar seat and a reserve driver role with its Formula One team. Chip Ganassi Racing said it had the contractual rights for Palou for the 2023 season.

Palou and Ganassi entered mediation and a resolution was reached a year ago in which Palou would drive for Ganassi in 2023 but was also McLaren’s reserve F1 driver when it did not interfere with IndyCar. He was able to participate in a practice session, tested for the F1 team both on track and in a simulator, and was the reserve driver for McLaren at F1’s Miami Grand Prix in May.

McLaren Racing CEO Zak Brown was contacted Aug. 8 and told by attorneys for Palou that Palou would not be joining McLaren and had instead signed a three-year extension with Ganassi. Palou won the 2021 and 2023 championships with Ganassi and is now signed there through 2026.

IndyCar driver Pato O’Ward last week was named Palou’s replacement as McLaren’s F1 reserve driver and participated in a practice session during the season-ending race weekend in Abu Dhabi. O’Ward is a full-time IndyCar driver for Arrow McLaren Racing.

The bulk of Palou’s response focuses on McLaren’s loss of revenue claims and attempts to mitigate what Palou will owe in damages.

The nearly $23 million in damages McLaren is seeking is broken down in future sponsorship tied to Palou joining McLaren, the costs of using him as a reserve F1 driver, how much McLaren spent developing Palou for F1 and a $400,000 advance on his 2024 salary. McLaren is not seeking repayment of legal fees it says it covered for Palou in last year’s fight with Ganassi.

McLaren has contended Palou signed two contracts: the first with McLaren Racing as the F1 reserve driver and a separate deal with Arrow McLaren to compete in IndyCar for the team while also serving as the F1 backup.

Among the damages McLaren is seeking is nearly $15.5 million in lost revenue under official partner agreements with sponsors NTT Data and General Motors that anticipated Palou would be the driver, including $7 million in revenue and prize money from IndyCar itself.

“This claim is embarrassing for want of particularity and speculative in the extreme,” the response said. “The performance of any team in a future Indy Car Series cannot be predicted with any degree of certainty. Driver performance is variable.”

The response also disputes McLaren’s claim to lost revenues that Palou “would otherwise have earned in relation to the Formula One Series.” It notes that claim would only be valid if Palou was actually McLaren’s F1 driver, and that Lando Norris and Oscar Piastri are under contract through 2025 and 2026. The response also claims that if Palou was an F1 driver, all the claims to IndyCar financial losses would be moot.

McLaren also wants to recoup all money spent on Palou when he was the test driver, both on track and in the simulator, and money it spent seeking a replacement for Palou. O’Ward became Palou’s replacement in the F1 role, while David Malukas was hired to fill the open seat in the IndyCar Series.