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Lance Armstrong

By Suzanne Bagert

Last week, Lance Armstrong ended an over 15-year cover up, and confessed to doping throughout his preeminent cycling career to Oprah Winfrey. Until now, the legal system has proven powerless to reign in Armstrong and his cohorts, and in fact, was often used as their sword against his detractors. Yet this confession promises to change that, and potentially gives rise to complex litigation by dozens of plaintiffs, numerous causes of action -- both civil and potentially criminal -- and even to defendants other than Armstrong himself.

To understand how one cyclist's doping confession can lead to complex litigation with international implications, we have to consider many factors. These include Armstrong's legendary story, the multi-million dollar business relationships that followed and reinforced it, the insiders club of wealthy pro cycling enthusiasts who finance and govern the sport, and the lengths and ferocity of the doping cover up that was led by Armstrong for many years in order to protect them all.

From the 1990s until last week, Armstrong had always vehemently and aggressively denied ever doping, and he viciously attacked anyone who suggested otherwise. We now know, by his own admission, that Armstrong was systematically doping all along - before he had cancer, through all seven Tour de France victories, and throughout the entire era of his cycling dominance. For all those years, Armstrong doped and covered it up with impunity from any sanction or liability imposed by any of cycling's governing bodies, or by the law. Why is he "coming clean" now?

In 2012, the United States Anti Doping Agency (USADA) commenced an investigation into the longstanding allegations that Armstrong had doped throughout his cycling career. Last October, USADA issued a detailed and reasoned decision finding Armstrong guilty of serial cheating through the use of performance enhancing drugs, and of being the ringleader of a massive doping conspiracy among those involved with his team. Based on this conclusion, USADA stripped Armstrong of all of his competitive results since August 1, 1998, and gave him a "life sentence" under the World Anti-Doping Code, making him ineligible to compete in sports that are signatories to the Code. This renders Armstrong ineligible to compete in pro cycling, and in elite triathlons, where he has recently set his sights for future competition.

USADA finally caught up with Armstrong, where the legal system never could. In fact, the legal system had failed miserably along the way, having allowed Armstrong to collect many millions of dollars in settlements as he abused the process to defend his realm. For example, when SCA Promotions refused to pay him, due to accusations of his doping, a bonus payment for winning the Tour that it had guaranteed, Armstrong sued and ultimately received a $7.5 million settlement. Armstrong also sued the Sunday Times for libel for referencing a 2004 book about Armstrong's doping, based largely upon interviews with Armstrong's former masseuse and assistant Emma O'Reilley. The case was settled in 2006, with the Sunday Times paying Armstrong almost $500,000, and after reportedly taking a terrible emotional toll on O'Reilley. Further, in 2012, the U.S. Justice Department (DOJ) suddenly dropped a two-year investigation into allegations of fraud, trafficking and witness tampering against Armstrong. The DOJ has never explained its reasoning for dropping the investigation.

The USADA report may have begun to clear the path for the legal system to finally handle Armstrong. However it is still difficult to win a case, no matter the other evidence, against a larger-than-life sport figure who aggressively maintains his innocence. One cannot help but wonder whether the DOJ lost its appetite for pursuing sports dopers after it lost the second Roger Clemens trial in 2012, and barely won its case against Barry Bonds the prior year with a one count conviction and a slap on the wrist.

Yet now, Armstrong's confession changes everything. The would-be plaintiffs do not have to prove the hardest part of the case. Armstrong has admitted it. There has been much speculation about Armstrong's motivations in admitting to doping at this point in time. It may be that he wants to compete in elite triathlons, and he hopes that coming clean will lead to a reduction in the USADA lifetime ban from competition. It may be that he has some true desire for authentic redemption. Whatever Armstrong's reason for coming clean, it is hard to imagine that any of Armstrong's lawyers advised that this would be a good move from a legal point of view.

The legal fallout from the USADA report and Armstrong's confession looks like the many-headed hydra of litigation:

• SCA Promotions wants its money back. SCA has announced that it will file suit for $12 million, to recover the $7.5 million settlement it paid Armstrong after insuring his bonus for winning the Tour de France, plus interest and attorney's fees. Armstrong lied under oath in the course of this case.

• The Sunday Times wants its money back. The paper is considering a suit to recover the monies it paid to Armstrong to settle the libel suit, which would presumably be on the order of $1-2 million.

• The U.S. Postal Service (USPS) wants its money back, times three. The USPS reportedly expended $32 million in its sponsorship of the Thom Weisel/Armstrong owned team from 2001 - 2004. Floyd Landis, one of Armstrong's former teammates and the stripped winner of the 2006 Tour, has brought a qui tam suit under the False Claims Act to recover these monies on behalf of USPS. The False Claims Act provides for treble damages, bringing the value of this suit to well over $100 million with interest. Additionally, the DOJ has the option of joining this civil suit, which seems probable, considering that Armstrong's confession makes the case considerably easier to win.

• It is unclear which of Armstrong's other personal and team sponsors will want their endorsement payments back. For years, big brands lined up to stand with Armstrong, including Nike, Giro, Trek, Oakley, Credit Lyonnais, Anheuser-Bush, the USPS, the Discovery Channel, Radio Shack, FRS energy drinks and Honey Stinger energy foods. These sponsors generally have the right to recover their sponsorship dollars based on a "morals clause" that is typically included in a sponsorship contract. This category of contingent liability could easily exceed $100 million.

• In the criminal realm, based on what Armstrong actually admitted, there is a statute of limitations issue regarding Armstrong's culpability for crimes such as perjury, witness tampering, and fraud. However, because of the multiple jurisdictions at work and numerous instances of wrongdoing, it would be difficult to flatly conclude that the statute of limitations will shield him across the board. Moreover, Armstrong's confession was extremely damaging to his credibility in an environment where there is evidence that of more recent crimes. Will the DOJ revive its criminal investigation? Are there any other criminal claims that survive? If the government were to make a conspiracy or RICO claim, could a more recent "last act" in the conspiracy be used to net the whole lot of defendants?

• Armstrong maintains that he did not dope in the 2009 and 2010 Tours, but there is blood evidence that indicates that he did, and after his years of belligerent lies regarding the 1999 - 2005 Tours, why would anyone believe him? Allegations arising from those more recent tours might not be protected by the statute of limitations.

• Who else will get caught up in the Armstrong juggernaut? What we do not know from Armstrong's confession is who helped him, who knew, and who was complicit in the deceit. In his confessional, he refused to name any of the others who knew about the epic doping program, or those who made it possible by financing, providing, procuring, and disappearing the necessary drugs and the apparatus. There are also aspects of Armstrong's confession that seem implausible, and many believe that aspects of his confession still echo significant untruths. If Armstrong does testify before USADA or in a criminal investigation, where will it lead?

• Could Nike and Oakley be viewed as complicit in the doping? Did Nike make a $500,000 payment to the Union Cycliste Internationale (the UCI), to cover up a positive EPO test? Did Nike know about the doping all along? Does an Oakley employee making threatening phone calls to a witness about baseball bats to the head mean that Oakley is implicated in the cover up?

• Who at the team level was complicit? How aware of the massive doping operation was team owner and Silicon Valley bigwig Thom Weisel? Could knowledge of the doping program be used to pierce the corporate veil?

• Was UCI complicit? Was it bribed by Armstrong and Nike?

• Finally, how many individuals who Armstrong tried to ruin will bring defamation suits against him?

This outline of potential cases clearly represents hundreds of millions of dollars in potential civil liability, through dozens of different lawsuits filed in different venues, courts and jurisdictions, against potentially multiple defendants. If such litigation proceeded on a disjointed basis, the inefficiency would likely be debilitating to the resources available in Armstrong's estate, and the team's. It would also leave the existing resources increasingly diminished for the most personally aggrieved plaintiffs, who are least able to aggressively pursue their cases. It seems that consolidation of the cases, which all arise out of the same general set of facts, may be appropriate, and would be a reasonable way to protect the interests of all the plaintiffs. This could conceivably be accomplished through the guidelines of the Manual for Complex Litigation, the operation of Bankruptcy, or both working in concert.

As for Armstrong, his confession has set table for his own financial ruin and that of his team through civil liability, and he has exposed himself to potential criminal liability. Meanwhile, if what he wants is to be reinstated and allowed to compete in pro sports, he has not gone far enough. Both USADA and the World Anti-Doping Agency (WADA) have stated, in no uncertain terms, that reinstatement is not even on the table for discussion unless Armstrong testifies under oath, and undoubtedly, unless he gives a full and unfettered testimony, giving up his many enablers and co-cheats, a direct vector to some very powerful captains of industry and regulators of the sport at its highest level.

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This page contains a single entry from the blog posted on January 23, 2013 4:29 PM.

The previous post in this blog was Armstrong Comes Clean; The Legal and Economic Fallout of an Athlete's Mea Culpa.

The next post in this blog is Week in Review.

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