Alex Palou's lawyers seek to move Chip Ganassi lawsuit to federal court, plan countersuit

Nathan Brown
Indianapolis Star

As Alex Palou topped Chip Ganassi Racing’s qualifying efforts for the Gallagher Grand Prix on Friday afternoon, his attorneys were filing a motion to move the civil lawsuit against him by his own team to federal court, according to case documents filed Friday. Included in the notice filed by the attorneys of Palou and ALPA Racing, were the defendants’ stated plans to file a countersuit against Ganassi for, among other things, defamation.

The notice also confirmed that Palou and ALPA Racing were being sued by Ganassi for claims that included breach of contract.

Chip Ganassi Racing driver Alex Palou (10) sits in his pit box Friday, July 29, 2022, during qualifying for the Gallagher Grand Prix at Indianapolis Motor Speedway.

Suing the champChip Ganassi Racing sues Alex Palou over contract for 2023

Palou’s attorneys filed to move the case to the Indianapolis Division of the United States District Court for the Southern District of Indiana. On behalf of Palou and ALPA Racing, their local attorneys Andrew Hull and Riley Floyd of Hoover Hull Turner LLP in Indianapolis had a 30-day window from receipt of Ganassi’s complaint to file a notice of removal to federal court. Of note, the filing canceled Monday’s initial attorney conference that, according to the public case file, was set to be the first meeting between the two sides regarding the lawsuit filed July 26.

In attempting to move the case to the Southern District of Indiana, Palou’s attorneys pointed to two factors that help determine where cases can be heard: “diversity of citizenship” and the “amount in controversy.”

The notice states that though CGR is located in Indiana, Chip Ganassi himself lives and holds a business office in or around Pittsburgh – making the plaintiff in the case, they stated, “a citizen of the State of Pennsylvania.” Additionally, they state Palou is a citizen of Spain and that his Indiana residency is only temporary and done so via a non-permanent work visa. As this progresses, it’s also important to note that Palou and his now wife Esther sold the coffee shop they owned and ran out of Spain together midway through the 2021 IndyCar season and moved all of their belongings to their current residence in Carmel.

In regards to ALPA Racing, Palou’s personal racing entity, the filing states the company is incorporated, registered and located in Barcelona, Spain, with its only physical address there as well. As what Spain calls a “sociedad limitada”, attorneys for Palou and ALPA Racing argue that district courts treat “SL”s as foreign corporations. That information altogether, they argue, is evidence to move the case to federal court because the parties don’t share a common state citizenship in Indiana. Additionally, the practice is done to help prevent parties in such a case from attempting to defend themselves in what they might deem a biased court.

May 14, 2021; Indianapolis, IN, USA; Team owner Chip Ganassi during qualifying for the GMR Grand Prix at the Indianapolis Motor Speedway.

When it comes to the “amount in controversy”, federal courts typically claim jurisdiction over cases where more than $75,000 is at stake for either party. As Palou and ALPA Racing’s attorneys point out, CGR has motioned for “injunctive relief” and “specific performance” to both prevent Palou from driving for McLaren Racing in 2023, as the sides stated in a July 12 release, and enforce the team option for the 2023 season Ganassi stated earlier on July 12 that it had picked up to tie down the young Spanish driver for the next IndyCar season.

Such relief, the notice states, would be enforcing a contract worth more than $75,000, meaning also that Ganassi would be hoping to be awarded the value of Palou’s driving efforts for 2023, which similarly because of their contract together would be worth more than the threshold. In being forced to drive for Ganassi instead of McLaren, the notice states Palou would be set to lose more than $75,000.

To conclude this part of their argument, the notice reads, “Defendants currently anticipate asserting non-contractual counterclaims, including at least for defamation. The damages Defendants will seek on these counterclaims will exceed $75,000.”

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Last week, in Palou's lawyers' first public statement regarding the civil suit, Rachel E. Epstein of Quinn Emanuel Urquhart & Sullivan told IndyStar in a written statement that the defendants were "disappointed that (CGR) would attempt to keep Alex from an opportunity to compete in Formula 1" -- the first clear sign that Palou may very well be lined up to join McLaren's F1 team in 2023 or 2024.

"Alex has consistently given his very best effort to CGR and it is unfortunate that CGR would attempt to deny Alex this opportunity," the statement read. "We would hope the parties can resolve this amicably, but if not, we look forward to resolving this matter in a private arbitration, as CGR has requested."

Ganassi lawyers respond to "defective" removal notice

On Monday, Ganassi’s lawyers responded with a lengthy motion, demanding the case be remanded back to Indiana Commercial Court for what it called a “defective removal notice” that it states was “filed hurriedly” in an alleged attempt to slow down court proceedings that would’ve included a virtual attorney conference with Judge Heather Welch Monday morning.

Ganassi’s attorneys referenced the urgency of their response to the removal to be heard and dealt with, noting that they hope to complete the discovery process in two weeks’ time in order to sit for a hearing on its motion for preliminary injunction on or before August 30. Before filing the “motion for immediate remand for defective removal notice” on Monday in the U.S. District Court for the Southern District of Indiana, Ganassi’s attorneys refiled its most important claims it had already submitted in Marion County Super Court.

Those included: a motion for preliminary injunction (for with Ganassi stated in court documents it “brings claims for breach of contract and breach of duty of loyalty/fiduciary duty”); the request for a prompt hearing on the motion for preliminary injunction before Aug. 30; and a motion for expedited discovery in order to prepare for the hopeful aforementioned preliminary injunction hearing. Additionally, Ganassi moved for a prompt status and scheduling conference before a district or magistrate judge – likely similar to the meeting that had been previously scheduled for Monday morning.

Among Ganassi’s attorneys’ arguments, they claimed lawyers for Palou and ALPA Racing filed a notice to remove the case without actually knowing for a fact whether the diversity of citizenship among all parties involved actually exists. Rather than plainly stating and listing the varied citizenship of all the parties on both sides, Palou’s lawyers’ wrote only that “complete diversity exists in this matter.”

“But as the court is well aware, ‘information and belief’ is insufficient for jurisdictional diversity assertions,” wrote Ganassi’s lawyers. In other words, Ganassi’s attorneys argue that Palou’s side is arguing off of belief, instead of known and understood concrete fact. Palou’s lawyers had stated they inquired whether any other notable parties other than Chip Ganassi himself existed as part of “Chip Ganassi Racing”, but after Ganassi’s lawyers never provided the proper information, Palou’s side moved to switch the case’s court location anyways.

“Defense counsel did not seek discover on these topics in the Indiana Commercial Court, and this Court lacks the power to order such a disclosure,” wrote Ganassi’s lawyers. Rather than disputing the information Palou’s lawyers did provide in their notice to switch courts, the Ganassi side simply argued that to enforce such a move, the defendants carried a heavy burden of proof – which Ganassi’s lawyers don’t believe was reached.

Also in Ganassi’s lawyers motion for immediate remand, they argue that the citizenship of Palou’s racing entity, ALPA Racing, was not properly defined and its Spanish presence wasn’t quite a slam dunk. In references to several court precedents, Ganassi’s lawyers poked holes in the Defense’s notion that Spanish “SL”s are both automatically seen as foreign corporations and that they’re different in nature to U.S. LLCs.

“Notably, (we) had asked defense counsel last week for member information and citizenship status of the ALPA entity, and defense counsel did not provide it, stating only, ‘ALPA Racing, SL, is a Spanish entity with all interests held by Spanish citizens’,” wrote Ganassi’s lawyers Monday. “That, of course, was not enough information for Plaintiff to file in federal court if desired, nor for the defendants to remove.”

As Ganassi continued to argue in its closing on its motion to remand, “The party seeking to (move courts) must get it right. At every level, of course, subject-matter jurisdiction must be confirmed.” Because Ganassi’s counsel says it considered filing in federal court but believed all the requisite boxes couldn’t be checked, the party claims, “That is still true today.”

“The improper filing of the Notice of Removal late on a Friday before the Commercial Court’s Monday morning status conference has the immediate impact of delaying prosecution of this action and protection of the plaintiff’s rights. In a routine damages case, perhaps time could be taken to sort out the issues of LLC members, and to also confirm whether a Spanish SL is, in fact, to be treated like an LLC.

“But that is improper in this setting in which the defective has the immediate impact (as potentially intended) of stopping the state court action without (this court) knowing if it actually has subject matter jurisdiction.”

In essence, for filing such a “defective” notice that, according to Ganassi’s attorneys, appeared to have been done large-in-part to slow down the court proceedings, the plaintiff ended the motion demanding Ganassi’s attorney fees related to work performed trying to counteract the court switch “should be assessed against the defendants.”

Palou's lawyers: Argument on staying in federal court to come Wednesday

Later on Monday, Palou’s lawyers filed a notice that detailed their plans to respond to Ganassi’s “motion for immediate remand” not later than end of day on Wednesday.

“Notably in its removal opposition, the plaintiff does not deny that diversity jurisdiction is proper and does not deny and of the facts on which the defendants’ removal was based,” wrote Palou’s lawyers Monday. To try and satisfy Ganassi’s claims of a lack of information regarding the varied citizenship of all the parties involved in the case, Palou’s lawyers requested that Ganassi’s lawyers provide a list of those involved in owning Chip Ganassi Racing, as well as their citizenship, by noon on Wednesday.