US judge denies Armstrong request, federal whistleblower case headed to jury trial

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A U.S. federal judge has denied a motion filed by Lance Armstrong’s legal team seeking to negate any damages suffered by former team sponsor U.S. Postal Service, meaning the False Claims Act (FCA) lawsuit may now proceed to a jury trial.

The federal whistleblower lawsuit, first filed by former USPS teammate Floyd Landis in 2010 and joined by the U.S. government, on behalf of the USPS after Armstrong’s doping admission in 2013, seeks damages on its $32.3 million sponsorship of the team between 2000 and 2004.

Because the False Claims Act, a civil statute, authorizes the United States — and whistleblowers suing on its behalf — to seek civil penalties plus treble damages for a violation of the FCA, Armstrong and former team management Tailwind Sports could be liable for nearly $100 million.

The government alleges that Armstrong and Tailwind Sports defrauded the USPS through active concealment of Armstrong’s PED use, constituting an “implied false certification that Armstrong was in compliance with the anti-doping provisions of the sponsorship agreements.”

While the total cost of the Postal Service sponsorship from 1995 to 2004 was over $42 million, the ruling noted that the government’s claims are based on invoices submitted within the FCA’s statute of limitations.

Armstrong’s attorneys have long argued that the U.S. Postal Service suffered no damages and received more in value from the sponsorship than the $32.3 million it paid, based on media impressions during his Tour de France reign.

However the government presented an expert declaration indicating that there were some 1.5 billion negative media impressions “connecting Mr. Armstrong’s doping scandal to the USPS” between 2010 and 2014.

On Monday, U.S. District Judge Christopher Cooper denied Armstrong’s request to dismiss the case with a summary judgment.

“Because the government has offered evidence that Armstrong withheld information about the team’s doping and use of (performance-enhancing drugs) and that the anti-doping provisions of the sponsorship agreements were material to USPS’s decision to continue the sponsorship and make payments under the agreements, the Court must deny Armstrong’s motion for summary judgment on this issue,” Cooper wrote.

Saying that both sides “missed the mark” in terms of damages, Cooper said the argument must be decided by a jury at trial.

“Damages in FCA cases are generally measured based on the ‘benefit of the bargain’ received by both parties,” Cooper wrote, citing a 1976 False Claims Act case that went to the Supreme Court. “Under this approach, ‘the government’s actual damages are equal to the difference between the market value of the [products] it received and retained and the market value that the [products] would have had if they had been the specified quality.'”

“The Court concludes that the monetary amount of the benefits USPS received is not sufficiently quantifiable to keep any reasonable juror from finding that the agency suffered a net loss on the sponsorship, especially if one considers the adverse effect on the Postal Service’s revenues and brand value that may have resulted from the negative publicity surrounding the subsequent investigations of Armstrong’s doping and his widely publicized confession,” Cooper wrote. “Determination of damages must therefore be left to a jury. Accordingly, the Court declines to grant Armstrong summary judgment on damages and will set the case for trial.”

Armstrong could not be reached for comment.

A few key passages from the Memorandum Opinion:

• The Court recognizes that calculating the government’s damages in this case is fraught with considerations of fairness and culpability. 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. 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 government here will be likewise entitled to present admissible evidence regarding the negative publicity the Postal Service received following the disclosure of Armstrong’s PED use, just as Armstrong will be permitted to present admissible evidence of the sponsorship’s positive benefits. 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. The Court will, therefore, deny Armstrong’s motion for summary judgment on the issue of actual damages.

• Armstrong challenges the government’s common-law fraud claim on the same grounds as he does its FCA fraud-in-the-inducement theory: That the government cannot prove as a matter of law that USPS relied upon Armstrong’s misrepresentations or fraudulent behavior. As previously noted, however, the government has offered evidence raising a genuine dispute as to whether USPS officials relied on the defendants’ doping denials when making decisions regarding the sponsorship. See supra Section III.B.2.a. This material dispute alone saves the government’s common-law fraud claim at this stage of proceedings. The government does not have to show, as Armstrong argues, that it took additional steps to investigate the doping allegations or otherwise confirm the truth of Armstrong’s denials. Therefore, the Court will deny Armstrong summary judgment on the government’s common-law fraud claim.

• Armstrong raises multiple challenges to the government’s unjust enrichment claim. He first maintains that he could not have been unjustly enriched because he was not a party to the sponsorship agreements and thus not obligated to USPS in the first place. He further contends that he properly earned his salary by training, riding for the team, and appearing at sponsored events. Finally, Armstrong argues that even if he were legally obligated to USPS, the remedy of restitution is unavailable because the government would need first to reimburse Armstrong the value of any benefits it gained from his services, which it cannot do. As a threshold matter, a number of cases in this district have held that a contractual relationship with the defendant is not necessary for a plaintiff to recover on a claim of unjust enrichment. See, e.g., United States v. Honeywell Int’l Inc., 798 F. Supp. 2d 12, 25–26 (D.D.C. 2011) (permitting an unjust enrichment claim against a company that supplied defective materials to a manufacturer when only the manufacturer had a contract with the government).

Armstrong, like the Honeywell supplier, was obligated to USPS because the sponsorship agreements placed restrictions on his behavior and provided the funds for the majority of his salary.  Additionally, while USPS does not dispute that Armstrong rode and trained for the team, “[Armstrong] cannot immunize himself from an unjust enrichment claim by performing services that [USPS] never desired in the first place[,]” which includes riding and training while using banned substances. Lastly, as previously discussed, the amount USPS benefitted from the sponsorship agreements remains disputed and does not entitle Armstrong to summary judgment on his unjust enrichment claim.

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