Lance Armstrong Headed to $100 Million Trial Over U.S. Government Sponsorship

2012-38 REP Lance Armstrong H

Armstrong on Oct. 22 removed his Tour de France wins from his Twitter bio.

Lance Armstrong's next big trek may be to a federal court in the nation's capital as a judge there on Monday rejected the disgraced cycling champion's bid to defeat a lawsuit over sponsorship money.

Floyd Landis, one of Armstrong's former teammates, filed a qui tam action that asserted Armstrong had made false claims while receiving tens of millions of dollars from the United States Postal Service. After Landis filed a lawsuit, the federal government intervened, and now, Armstrong is facing the possibility of forking over nearly $100 million in actual damages, calculated at three times the total amount of the USPS' sponsorship payments.

In a summary judgment opinion, U.S. District judge Christopher Cooper rules that the government has put forward a viable theory of liability under the False Claims Act.

First, there's the possibility that Armstrong committed fraud in the inducement of the sponsorship money. The issue here is whether the USPS relied upon Armstrong's statements when coming to sponsor him in 2000. Multiple USPS executives testified that had they known about the doping, they wouldn't have continued the sponsorship. Armstrong argued that the purportedly fraudulent statements on his website and elsewhere occurred after the sponsorship decision was made, but Cooper rules that the cyclist hadn't incontrovertibly proven the USPS disregarded his statements.

Second, there's the possibility that submission of payment invoices, coupled with active concealment of Armstrong's PED use, constituted an implied false certification. Armstrong attempted to argue there needed to be specific representations, but without Supreme Court guidance on the topic, the judge points to precedent in the DC Circuit that allows the government to move forward on this theory.

Perhaps the biggest issue on summary judgment was over damages.

The government points to $32.3 million in sponsorship money paid, while Armstrong contends the damages are zero because of the alleged benefits that the USPS received from the sponsorship.

Judge Cooper notes that typical False Claims Act cases involve a government supply contract where the benefits are more easily calculable. 

"Calculating the benefit of the bargain becomes more difficult in cases where the market value of the product or service involved is not readily ascertainable," he writes. "This is particularly true with contracts for personal or professional services like those provided by the cycling team here.

"As both the government and Landis point out, giving Armstrong 'credit' for the benefits he delivered while using PEDs could be viewed as an unjust reward for having successfully concealed his doping for so long," states the opinion. "It could also, in theory at least, encourage other government contractors to behave similarly. But by the same token, disregarding any benefits USPS received from the sponsorship could bestow the government with an undeserved windfall. The same could be said of Landis, whose role in this entire affair some would view as less than pure. In the end, the Court will avoid the types of moral and policy judgments that both sides invite, and instead apply the law as it interprets the D.C. Circuit to have instructed."

The judge looks to evidence submitted about Armstrong's promotional value during the years in question.

For example, the cyclist presented USPS sales figures to contend the sponsorship generated approximately $24.4 million in new revenue from 1998 to 2000. The government raised disputes about the relevance and reliability over these figures.

Armstrong also presented estimates of the dollar value of "earned media" exposure.

"For example, one report indicates that CBS devoted roughly 27 minutes of coverage to the USPS team during its three-hour broadcast of the 2001 Tour de France," states the opinion. "The report valued this coverage at $436,085 by calculating the price of purchasing 27 minutes of paid advertising on CBS (at $30,000 per 30- second spot) and reducing it by 75% to reflect the fact that general broadcast coverage is less effective at influencing consumers than targeted commercials."

All told, Armstrong claimed that the earned media derived from the sponsorship was approximately $103.5 million from 2001 to 2004. If the judge accepted this, then the benefits would outweigh the payments Armstrong received. The judge, though, hears from the government which offered contradictory evidence and testimony that Armstrong's earned-media valuation may be inflated.

"[M]oreover, the earned-media valuations do not account for the subsequent negative media coverage surrounding Armstrong’s suspected doping and his resulting lifetime ban from cycling competitions in 2012," writes the judge, adding that the government is entitled to present such evidence.

Setting up the forthcoming trial, Cooper writes, "Should the government prove liability, it will then be up to the jury to weigh the evidence on both sides of the scale and decide whether the government can prove it sustained actual damages and, if so, the corresponding amount."

Here's the full opinion.