PRUETT: Palou's contractual mess was months in the making

Joe Skibinski/Penske Entertainment

PRUETT: Palou's contractual mess was months in the making

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PRUETT: Palou's contractual mess was months in the making

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I picture a bunch of high-end lawyers laughing maniacally while thinking about all of the money they’re going to make while litigating the Alex Palou Contractual S*** Show.

If you’re curious as to how in the hell Chip Ganassi Racing announced it signed Alex Palou to an extension for 2023 at 3:55 p.m. ET on a Tuesday and McLaren Racing announced it signed Palou to drive for its team in 2023 less than four hours later on the same Tuesday, welcome to an ugly mess that has been brewing for months.

It’s worth taking a walk down (recent) memory lane to piece together the steps that got us to a place where a bad IndyCar version of “The Batchelor” is in motion and two teams have been given a rose by the same driver.

Joining CGR from Dale Coyne Racing in 2021, Palou was said to have signed a two-year deal to drive Ganassi’s No. 10 Honda. He won the championship on debut with CGR, and had the look of somebody who could take the baton from six-time champion Scott Dixon whenever he retires and lead the team for the next 15 years.

Having left for CGR at the conclusion of his rookie season after finishing 16th in the standings for DCR, we can safely assume the migration did not include an outrageous sum of money due to the lack of wins and championships for Palou to use as a negotiating tool. Simply put, Palou’s instantaneous rise at CGR — a shocking progression from relative anonymity to becoming the best driver in IndyCar in a 12-month span — was not something he or the team anticipated when that original contract was crafted.

Early into the current season, and with that new IndyCar title in hand, rumblings were heard about Palou wanting to re-do his contract and receive a bump in pay to reflect his new status as a champion. Such a request is not uncommon in other sports where young and high-caliber players seek revised contracts that include increased compensation which speak to the greater value they represent to the organization.

It’s unclear whether an amended salary figure was presented by CGR, but conversations between McLaren and Palou did come to light in May, and it’s believed the outreach was from the team to the driver, not the other way around. The inspiration behind contacting Palou and whether it originated from within McLaren, or was suggested to the team by his managers, is also unknown.

Beyond the rumored offer of a sizable salary upgrade, offers of McLaren Formula 1 testing made the rounds as one of the key reasons as to why Palou would want to exit CGR at the end of the season. Although the idea of moving from CGR to the Arrow McLaren SP IndyCar team was floated by some as the main enticement for Palou, his deep-seated dreams of racing in F1 have been mentioned as the biggest inspiration to join McLaren.

With those talks moving from the background into the realm of public conversation, questions about the McLaren offer were posed by the media to Palou in June, and in general, he said he was happy at CGR, had no intention of leaving, and made an effort — likely at the team’s urging — to diffuse the situation.

Palou’s initial Ganassi contract likely failed to account for the Spaniard winning the IndyCar title in his first season with the team. Richard Dole/Motorsport Images

As Palou smiled and deflected, Ganassi also refuted the notion that any of his drivers — in particular Palou and Dixon, who was also approached by McLaren — were available for any other team to acquire next season in an interview we did late last month. And while the problem appeared to be resolved, lingering rumors of Palou’s dissatisfaction persisted.

The main question during the first Palou-to-McLaren go-round was whether Palou’s contract contained clauses or provisions that would allow him to depart CGR. And while the driver and his team have refused to comment on contractual matters, the dueling announcements from CGR and McLaren tells us that one side believes there’s no wiggle room for Palou to walk out the door, and the other side is confident they’ve claimed a prized free agent from a bitter rival. But both things cannot be true at the same time.

That’s where lawyers from both sides will likely weigh in and present their cases in a court of law.

Where this gets weird is, CGR would not have announced it had Palou under contract for 2023 unless his signature was received on a piece of paper that binds him to drive for the team next year. That’s just common sense for a big and decades-old team with tons of experience signing heavy hitters like Michael Andretti, Juan Pablo Montoya, Scott Dixon, Dario Franchitti, and so on. A small and inexperienced team might jump the gun and say they’ve signed someone prematurely, but not a CGR or Team Penske or Andretti Autosport. Or McLaren Racing.

I have no doubt that both teams have contracts bearing Palou’s name, and that’s where another weird turn comes into play. I’ve heard on multiple occasions that while his original deal was for two years with CGR, it also came with a couple of team options if everything worked out and they wanted to keep him beyond 2022.

Stepping away from CGR for a moment, the x-years-plus-a-few-team-controlled-option-years contract is a popular one in IndyCar. Learning of Palou’s extension with CGR fell right in place with expectations for the team to pick up his option, and it’s believed another option exists to be exercised around this time next year for 2024. Returning to June, the conflicting messages had Palou sitting on a clause that would open the door for McLaren to retain his services, but in the little that Ganassi was willing to say, he was firm in stating all the doors were bolted shut.

Once again, the only people who know the truth are Palou and the teams involved, and together, they’ve reached a mutual conclusion that makes no sense. Or, as it occurred to me a few seconds after the McLaren press release landed in my inbox, is there sense and intent to be found in this mind-boggling situation? Could this actually prove to be one whale of a tactic being deployed? Have we just witnessed the IndyCar driver contract equivalent of using the “nuclear option”?

That’s where I’m leaning. If Palou’s CGR contract is indeed a binding obligation, turning up the heat — blowing the situation up for all the world to see — by creating mass confusion and embarrassment for CGR by issuing a counter announcement hours after the first would be one hell of a ploy.

Racing teams are exceptionally deliberate when it comes to the timing of releasing major news. It tends to come on the hour, or at half-past, and takes multiple time zones into account to ensure the information hits the new news cycle. If sending out the Palou news at 12:18 a.m. UK (7:18 p.m. ET) says anything, it was that it came in reaction to the CGR release and not as a pre-planned distribution. This fact is but one of the reasons why it feels to me like there’s something beyond droll contractual matters driving this attempt to commence divorce proceedings.

Of the last few matters to touch on, Palou aired his grievances with CGR in a few social media posts on Tuesday which made it clear that he does not want to stay with the team. In those posts, he called out CGR for fabricating his quote in its press release and for failing to seek his approval to use the quote. He also revealed that he has informed the team — one would imagine in a formal manner — that he does not want to remain in their employment after 2022.

McLaren’s Zak Brown has made no secret of his interest in poaching the best drivers he can find in the IndyCar paddock. And as well as a likely pay bump, McLaren can offer the reigning series champion opportunities that Ganassi cannot – including a possible pathway to F1. Alexander Trienitz/Motorsport Images

The first part is an interesting one, and I had a friend theorize that the matter with the quote could be used to claim the team acted in bad faith and might be used as grounds to get out of a contract. Palou isn’t known for airing dirty laundry on social media, much less making accusatorial posts; it came across to me as part of a bigger strategy. The second part was also telling because informing the team you want to leave isn’t the same as having a green light to go. The one piece of the puzzle that wasn’t included by Palou was a statement saying he hadn’t signed an extension with Ganassi. He said plenty of other things, but my radar pointed to what wasn’t written.

Provided he hasn’t signed an extension with CGR, it sure seems like something that wouldn’t be left out while venting, so if we circle back to CGR’s announcement, I’m not sure if an improper quote and a craving to leave CGR would sway a judge to grant a release. Once again, the terms of that CGR contract is where this entire ordeal hinges in the favor of Palou’s current team or the one he covets.

Should I also make another mention of how Ganassi and McLaren CEO Zak Brown absolutely loathe each other? If we’re talking epic pissing matches, these are two hyper Type A personalities whom I can’t see backing down from each other in a financial or legal tug-of-war over drivers or any other valued personnel.

So where does all of this end up? Is Alex Palou wearing his CGR racing suit and driving the No. 10 Honda next year, or will he be dressed in papaya orange?

That’s the funny thing about these kinds of scenarios in sports. A team might have an all-star player under a multi-year contract that every court in the land would enforce, but as we’ve witnessed all too frequently in the NBA, NFL, and MLB, when that player wants to leave, it’s usually in the team’s best interest to make it happen.

We’ve seen players refuse to report to training camp, claim to be injured and unable to play, or altogether refuse to take part in games while hoping to get cut or traded to another team. It’s not something we see in motor racing on all but the rarest occasions, but is has happened. The late Justin Wilson comes to mind. Having grown tired of pleading for years for DCR to let him go, the big man eventually declined to strap into the team’s cars; DCR was forced to part ways with the Briton and sign someone else to fill the empty seat.

Holding onto a disgruntled star and trying to force them to fulfill their contract by playing or driving isn’t how championships are won. It’s one thing to have a situation turn sour behind the scenes, but when dirty laundry gets aired between the athlete and team, and when it involves a reigning series champion who wants to bolt, it’s damn hard to rediscover the same old magic and continue operating at your peak.

Neither side wants to lose here and an ugly fight for Palou seems inevitable. But the real problem isn’t one that will be settled by lawyers and judges. If the smiling champ has checked out mentally and is determined to say farewell to CGR in a few months or whenever his contract allows, it’s game over.

This stopped being a case of who was right, wrong, or standing on high legal or moral ground once the nuclear option entered the fray. Owing to the renowned chemistry between CGR’s drivers and crew, it’s time to explore a buyout and keep the environment under the tent from turning toxic.

Months of court appearances and a drawn-out saga among warring teams is everything IndyCar doesn’t need at the moment, and despite whatever ruling that might be handed down, there will be no winners here.

MX-5 CUP | ROUND 9 – ROAD AMERICA

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