24 January 2013

FCA Suit Against Lance Armstrong Raises Novel Questions about the Act’s Reach

Posted by Jonathan F. Cohn and Brian P. Morrissey

Amidst last week’s coverage of Tour de France-winning cyclist Lance Armstrong’s public acknowledgement that he used banned performance-enhancing substances during all of his Tour victories, numerous news outlets reported that Amstrong’s “doping” had also become the basis of a federal False Claims Act suit. The suit was brought under the FCA’s qui tam provisions by Armstrong’s former teammate, Floyd Landis, and alleges that Armstrong and other defendants defrauded the U.S. Postal Service, which paid millions of dollars to sponsor Amstrong’s team in six of his Tour de France wins. The contract between the Postal Service and the team allegedly prohibited team members from using performance-enhancing drugs. Landis contends that Armstrong’s use of banned substances violated this contractual term and, thus, constituted a false claim against the Postal Service.

Landis’s suit, filed in the U.S. District Court for the District of Columbia, remains under seal. However, the New York Daily News last week obtained and published a copy of the qui tam complaint. (News of this suit had emerged even earlier when a federal magistrate judge issued an order in December 2012 unsealing the record in a subpoena enforcement proceeding initiated by the Postal Service Office against Armstrong. Briefing filed in that case referenced the separate, sealed FCA action.)

Several media outlets reported that the seal on Landis’s qui tam complaint was set to expire on January 17, 2013. That date has come and gone, however, suggesting that the Department of Justice likely requested and received an extension of the seal. The Department may be continuing to consider whether its intervention in the case is appropriate, or it may be engaged in settlement negotiations with Armstrong. (It was reported last week that Armstrong offered the Department $5 million to resolve the case, and that his offer was declined.)

If the case proceeds to litigation, it would raise many novel questions regarding the scope of the Act. For one thing, few—if any—courts have been called upon to assess whether a false statement made to a Government agency to induce its assent to an advertising or sponsorship contract can be considered an actionable false claim. Moreover, there may be interesting arguments as to whether Armstrong’s alleged false statements can be considered material to the Postal Service’s decision to enter into that type of contract.

Separately, the suit raises several fascinating questions regarding Landis’s share of any recovery. Landis’s 2006 Tour de France victory was revoked because of his own use of banned substances. Consequently, because Landis was a member of Armstrong’s teams, a court may conclude that Landis was complicit in any alleged false claims made by the team to the Postal Service. Under the FCA, 31 U.S.C. § 3730(d)(3), a court has discretion to reduce the FCA award to any qui tam relator who “planned or initiated” the FCA violation that forms the basis of his complaint. Moreover, if Landis is convicted of a crime in association with his alleged doping, the Act would preclude him from receiving any proceeds from the qui tam suit entirely. Id.

Finally, several anecdotes appearing in the Complaint had appeared in the press prior to Landis’s filing suit. This could create obstacles to his recovery under the FCA’s original source bar. See § 3730(e)(4)(iii) (authorizing courts to dismiss FCA actions based on allegations “publicly disclosed” in the “news media” unless the qui tam relator is an “original source” of the information). In all events, the case bears watching as it moves forward.

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