Court documents: Pato O'Ward lands 2-year, $10.2 million payday after Alex Palou lawsuit

With the results of McLaren Racing’s ongoing lawsuit against Alex Palou and his racing entity (Alpa Racing USA LLC) in UK Commercial Court uncertain, the suit presently has a clear-cut big winner:

Pato O’Ward.

The Arrow McLaren IndyCar driver – who months ago was also named McLaren F1’s reserve driver – landed a $10.2 million payday in the wake of Palou turning his back on the McLaren Racing family last summer, according to the McLaren’s amended claim it filed this month as part of the lawsuit. Copies were obtained and reviewed by IndyStar.

In the amended claim, McLaren Racing lawyers say that O’Ward was given a two-year extension to his current deal that runs through 2025, to which the 24-year-old Mexican driver will be paid $4 million (2026) and $4.2 million ('27). In addition, O’Ward received a $2 million “uplift” to his current contract – potentially representing his payday for serving as McLaren F1’s reserve driver – for 2024 and '25.

Together with McLaren Racing’s other claimed lost profits and “wasted expenditures” it says are directly related to Palou refusing to fulfill the three-year deal (2024-26) he signed with the team in October 2022 for IndyCar and F1, the team now says it’s out nearly $31.5 million after the two-time IndyCar champion’s change of heart – up from $22 million when the team filed the lawsuit last fall.

In the amended claim, McLaren Racing’s lawyers explain that with the IndyCar star’s contractual breaches, combined with signing a far more inexperienced driver as his replacement – third-year driver David Malukas – “it has been necessary to extend and revise" O'Ward's deal.

Insider: 9 reasons McLaren believes Palou owes eight figures for breach of contract

Essentially, the team claims, with both of O’Ward’s IndyCar teammates, Malukas and Alexander Rossi, unconfirmed beyond the 2024 season, and with a two-time champion and nine-time race-winner in Palou no longer on the roster through 2026, Arrow McLaren felt forced to ensure its foundational driver’s presence well beyond 2025 to guarantee the team’s long-term competitiveness and keep its several high-dollar sponsors happy.

McLaren: Renegotiated NTT deal even most costly than expected

Along with settling on the costs it believes it’s owed to replace Palou when he instead signed a new three-year deal with Chip Ganassi Racing, McLaren Racing also further specified what it believes to be its lost profits. The team says its renegotiated deal with NTT, a primary sponsor the team says it landed in the fall of 2022 under the expectation that Palou would eventually join Arrow McLaren, cost it $7,941,438 – more than $1 million more than its previous estimation ($6.9 million). Those increased losses, the claimants allege, largely stem from $5,381,000 in “reductions demanded to the annual sponsor fee which would otherwise have been payable under the NTT agreement” – a sum McLaren had previously estimated to be $3,075,000.

McLaren would go on to admit it overestimated what it believed would be the value of “additional sponsorship and other commercial opportunities” it offered to help placate NTT, in the form of branding at three additional F1 races, access to McLaren Paddock Club packages and the designation as the McLaren F1 Official Technology Partner – stated now as $2,560,438, down from $3,825,000.

Losing a two-time champ: How Palou's change of heart affects Zak Brown, Arrow McLaren

Arrow McLaren: GM confirms Malukas not an 'A level driver'

In this update, Arrow McLaren doubled down on its loss of $1.5 million in “team support” from General Motors as part of the pair’s engine manufacturer agreement. In the previous filing laying out its claims in detail, the team said it would have received $500,000 per year from GM on the grounds of employing three full-time ‘A level drivers' ― a threshold Malukas does not meet.

“In particular, while McLaren has recruited a replacement driver for (Palou), Mr. David Malukas, GM has confirmed that he is not an ‘A level driver’ for the purpose of the GM agreement,” the filing reads.

'Going to stay away from bikes': David Malukas in good spirits as recovery begins

$400,000 signing bonus funded Palou's race team

McLaren’s updated lawsuit added Palou Motorsport SL as a defendant. Palou Motorsport SL is a “private limited liability company” incorporated in Palou’s native Spain and is understood to be the racing team he and his dad launched in January 2023 in the Eurocup-3 series.

The filing states that Palou holds a 40% stake in the team, and around the time McLaren was set to pay its driver’s $400,000 signing bonus, Palou “identified (Palou Motorsport) as the appropriate entity for paying in a ‘new supplier form’ he was asked to complete by the Claimants for the purpose of administering payment thereof.”

Whether coincidence or not, reports claim average budgets for teams in Eurocup-3 to be 450,000 euros – or just over Palou’s bonus he elected for the team to receive.

'Playing the victim': Chip Ganassi backs Alex Palou in fight with McLaren

Palou's lawyers challenge McLaren's 'vastly overinflated' damages

In November, Palou admitted to the material breaches of contract McLaren claims but said he “lost trust and confidence in McLaren Racing’s promise of a future F1 race seat” – something McLaren, in turn, says was never on the table – and, in response, jumped ship.

While admitting the claimants have a right to sue for damages, the response calls what McLaren’s alleged damages to be “inadequately particularized, misconceived in a number of respects and vastly overinflated.”

Palou admits breach of contract: IndyCar champ rebuffed McLaren after road to F1 disappeared

Palou’s lawyers pushed back at the notion that most of McLaren’s damages were said to be “lost revenue,” instead of “lost profits” – a distinction McLaren’s lawyers addressed in this latest filing, in swapping all mentions of “lost revenue” to “lost profits.” Additionally, Palou’s lawyers disputed McLaren’s assertion that the teams’ contract with NTT was in any way contingent on the two-time champ joining the team. They also said McLaren asking for three years’ worth of missed team support from GM likely incorrectly predicts that the team would be unable to secure a third ‘A level driver' before 2026.

In reference to Arrow McLaren’s estimated $7 million in losses in sponsorship, prize money, merchandise sales while running a driver with less experience, Palou’s lawyers called the claims “speculative to the extreme.” Also, they noted, Palou never had an F1 contract, making it “too remote” to attempt to recover losses from a driver who had never been fully hired for a ride. Had he, they added, McLaren would’ve faced having to replace him in IndyCar anyway.

This article originally appeared on Indianapolis Star: McLaren gave Pato O'Ward 2-year extension after losing Alex Palou