Court Rejects Armstrong’s Motion for Summary Judgment, ignoring Escobar, and Sets the Case for Trial Where Armstrong Faces Nearly $100M in Damages

On February 13, 2017, the District Court for the District of Columbia rejected motions for summary judgment filed by cyclist Lance Armstrong and his agents Capital Sports and Entertainment Holdings Inc. (CSE) in an FCA suit alleging the defendants violated the FCA by issuing payment invoices to the United States Postal Service (USPS) under sponsorship agreements while actively concealing Armstrong’s use of performance enhancing drugs (PEDs).  The Court rejected Armstrong’s motion because it found that the government raised genuine issues of fact regarding the applicability of two of its three theories of FCA liability, its common-law claims, and the issue of actual damages.  As a result, the Court will set the case for trial, where Armstrong may face nearly $100M in damages.  A copy of the court’s order can be found here.

Armstrong’s motion challenged each of the government’s three theories of FCA liability: (1) fraud in the inducement; (2) express false certification; and (3) implied false certification.  The Court rejected the government’s express-certification theory, finding that the invoices submitted to the government contained no express certifications of compliance with the terms of the sponsorship agreement, but found that the government offered sufficient evidence to create a genuine issue of material fact as to the fraud in the inducement and implied certification theories.

With regard to the latter, the Court found that the government offered sufficient evidence to create a genuine issue of material fact as to the implied certification theory based on United States v. Sci. Applications Int’l Corp., 626 F.3d 1257 (D.C. Cir. 2010) (SAIC).  Relying heavily on the SAIC opinion, the Court found that the government need only show that Armstrong withheld information about his noncompliance with material contractual requirements.  Because the government offered evidence that Armstrong withheld information regarding his PED use and that the anti-doping provisions of the sponsorship were material to USPS’s decision to enter into and make payments pursuant to the sponsorship agreement, the Court denied Armstrong’s motion for summary judgment.  In rejecting Armstrong’s motion, the Court emphasized that, “given the Supreme Court’s silence” on the theory of implied certification, “the standard announced in SAIC remains good law” which “the Court is bound to apply.”  Notably, the Court does not reference the Supreme Court’s June 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar, which upheld the implied certification theory of liability under the FCA while raising the standard for materiality.  The Court’s failure to discuss Escobar raises important questions about the circuit courts’ interpretation of Escobar’s heightened materiality standard and its applicability in cases like Armstrong’s.

In addition to rejecting Armstrong’s arguments regarding FCA liability, the Court rejected Armstrong’s request for summary judgment on the issue of actual damages.  While not contesting that nearly $33 million in claims were submitted to the USPS under the sponsorship agreement or that he lied about his use of PEDs, Armstrong argued that the government’s “actual damages are zero.”   Specifically, Armstrong argued that the government received the “benefit of the bargain” through positive media exposure and increased sales.  Although the Court stated that it “generally adopts” Armstrong’s “benefit of the bargain” theory, the Court found that the government raised “colorable factual questions as to what this benefit ultimately amounted to,” which must be decided by a jury. Because the government is seeking triple damages, Armstrong may be liable for nearly $100M should a jury find against him.

We will continue to provide updates regarding this ongoing litigation.  Previous blog posts regarding this case can be found here, hereherehereherehere, and here.