By David Lee
February 17, 2015
DALLAS (CN) – Lance Armstrong had a rough weekend, as an arbitration panel ruled he must pay $10 million in sanctions to a Dallas insurer, and a federal judge struck several of his defenses in a $100 million whistleblower lawsuit filed by his former teammate Floyd Landis.
The arbitration award was made public Monday after Dallas-based SCA Promotions petitioned in county court to confirm a three-member panel’s findings. In a 2-1 split decision, the panel said Armstrong must pay the penalties because “perjury must never be profitable.”
The dispute began 11 years ago when Armstrong and his management company, Tailwind Sports, sued SCA Promotions for refusing to pay him a $5 million bonus for winning the Tour de France in 2003, due to suspicions that he had doped.
The dispute went to arbitration in 2005 and Armstrong won, resulting in a 2006 settlement awarding him $7.5 million .
SCA sued Armstrong, his agent William Stapleton and Tailwind in Dallas County Court six years later, after the Union Cycliste International stripped Armstrong of his seven Tour de France victories and banned him from the sport for life, citing the U.S. Anti-Doping Agency’s “reasoned decision” that accused Armstrong of running the most sophisticated doping program in sports history.
Armstrong confirmed the accusations in January 2013 in a televised interview with Oprah Winfrey. The interview featured excerpts from sworn testimony Armstrong gave during his lawsuit against SCA that implied he lied while under oath.
Armstrong tried unsuccessfully in 2014 to persuade the trial judge and appellate courts to stop additional arbitration in SCA’s lawsuit and halt his inevitable deposition under oath .
In its 2-1 ruling, the arbitration panel condemned Armstrong for “almost certainly” carrying out “the most devious sustained deception ever perpetrated in world sporting history.”
“Justice in courts of law and arbitration tribunals is impossible when parties feel free to deliberately deceive judges or arbitrators,” the 25-page arbitration award states. “The case yet again before this tribunal presents an unparalleled pageant of international perjury, fraud and conspiracy. Tailwind Sports Corp. and Lance Armstrong have justly earned wide public condemnation. That is an inadequate deterrent. Deception demands real, meaningful sanctions.”
The majority consisted of Chairman Richard Faulker and SCA-appointed arbitrator Richard Chernick. The dissent was from defendant-appointed arbitrator Ted Lyon, who wrote the $10 million award “is not based on the law.”
“The final decision by the panel reminds me about the ‘do right rule,” Lyon wrote. “It doesn’t matter what the law is, let’s just do what is right. Arbitrators, like judges, don’t have that luxury, and the panel exceeded its authority by indulging itself here.”
Lyon said SCA “has been found by the panel to have engaged in the business of selling insurance in Texas without a license,” exposing SCA to possible liability for treble damages and attorney fees.
“Armstrong was seeking $10 million in damages and attorneys fees, opening SCA up to a potential liability of over $22 million,” Lyon wrote. “No party in this case came here with clean hands.”
The arbitration panel’s award is the second time Armstrong has been ordered to return money to an insurer. In November 2013, Armstrong settled a lawsuit by Acceptance Insurance over $3 million in race bonuses paid to him.
SCA’s petition came four days after Armstrong suffered a blow in Landis’ lawsuit when a federal judge in Washington, D.C. tossed several of his affirmative defenses. Landis sued Armstrong, former U.S. Postal Service Pro Cycling Team manager Johan Bruyneel and Tailwind in 2010 under the False Claims Act .
The United States joined the lawsuit in April 2013, months after Armstrong’s lifetime ban was handed down. The Postal Service sponsored Tailwind’s cycling team from 1996 to 2004, when Armstrong was the lead team rider and won six consecutive Tour titles. The agency paid $31 million in sponsorship fees between 2001 and 2004 alone.
Landis claims Bruyneel knew team members were using banned drugs and that Armstrong and Tailwind Sports, among others, knowingly flouted USPS sponsorship agreements signed in 1995 and 2000. Landis could receive up to 30 percent of any recovery as a whistleblower.
Landis was stripped of his 2006 Tour win and banned from the sport for 2 years after he tested positive for banned substances .
In response to a joint motion to strike filed by both sides, U.S. District Judge Christopher R. Cooper on Feb. 12 barred the defendants from asserting six affirmative defenses.
He was not persuaded by Armstrong’s argument that the False Claims Act requires dismissal of Landis’ claims considering a “relator convicted of criminal conduct arising from his role in the alleged FCA violation.”
“Here, Landis has entered into a deferred prosecution agreement, he has not been convicted,” the 12-page opinion states. “The possibility that Landis may be subject to conviction and that the government would choose to prosecute him falls short of Section 3730(d)(3)’s unambiguous language with respect to dismissing a relator.”
Cooper also barred the defenses that Landis’ allegations are vague, uncertain or unclear, and of failure to plead fraud under Federal Rule of Civil Procedure 9(b).
“The court previously ruled at the motion to dismiss stage that that Rule 9(b) defenses were waived by Armstrong and the non-intervened defendants,” the opinion states. “While defendants assert that they have not waived these defenses with respect to arguments that may be developed based on additional discovery, the government correctly notes that ‘[i]f a party fails to raise a Rule 9(b) objection in the first responsive pleading or in an early motion … the issue will be deemed waived.'”
Cooper also barred the defense that Landis filed the lawsuit in bad faith, which bars him from recovery anything. The judge ruled the defendants’ request for attorneys’ fees is “too early in this litigation” and not an affirmative defense – it only becomes applicable if the defendants win.
Cooper refused to strike Armstrong’s six remaining affirmative defenses, including arguments that the federal government suffered no injuries, received “full payment for services rendered” and failed to mitigate its alleged damages.
“A showing of damage is necessary to obtain treble damages, which are based on ‘the amount of damages which the government sustains because of the act of [the defendant],'” the opinion states. “Consequently, and in light of the high bar for striking a defenses and the significant discretion of the court in deciding whether to do so, the court will permit defendants to maintain these defenses at this point in the litigation.”
The judge declined to strike the affirmative defense of the federal government’s publicly disclosing its claims before the filing of the lawsuit, in violation of a sealing order in place. He concluded that doing so “at this state of the litigation is unlikely to generate significant additional efficiencies.”
Armstrong’s attorneys did not respond to requests for comment.
From Courthouse News.