Judge Rules Breach of Sponsorship Agreement Does Not Give Rise to Reverse False Claims Liability for Lance Armstrong
By Brian F. McEvoy
and Emma R. Cecil
A federal judge has granted summary judgment in favor of Lance Armstrong and associated entities on claims brought by Armstrong’s former teammate, Floyd Landis, pursuant to the FCA’s reverse false claims provision, 31 U.S.C. § 3729(a)(7). That provision imposes liability for the knowing concealment, or the knowing and improper avoidance or decrease, of an obligation to pay money to the government. In his complaint, Landis alleged, among other things, that Armstrong’s doping constituted a breach of his sponsorship agreement with the United States Postal Service (USPS), and that Armstrong concealed and failed to inform USPS about his violation of the sponsorship agreement’s terms prohibiting doping in order to continue receiving payments under the agreement and avoid any obligation to reimburse the government.
In a 2014 motion to dismiss, Armstrong had argued that, even if a breach of the sponsorship agreement created an “obligation,” it was a contingent obligation because the government had discretion in deciding whether to seek repayment, and such contingent obligations could not give rise to liability for reverse false claims. Sitting by designation, Judge Robert Wilkins of the D.C. Circuit Court of Appeals sided with Landis, ruling that Armstrong’s doping would have been a “total breach” of the USPS sponsorship agreements, thereby imposing an ‘obligation’ to reimburse the government for money previously awarded under the contract. Judge Wilkins reasoned that to hold otherwise would mean that a breach of contract could never be an ‘obligation’ until a formal demand was made or a lawsuit was initiated, and would allow those with knowledge of contractual breaches or other non-compliance to make false statements about those matters without penalty unless and until the government files a lawsuit.
On January 12, 2016, U.S. District Judge Christopher Cooper handed Armstrong a victory when, after reconsidering Judge Wilkins’ June 2014 ruling, he concluded that the sponsorship agreement created no legal obligation for Armstrong to repay USPS any sponsorship fees obtained as a result of materially false statements. In a lengthy analysis, Judge Cooper cited “black-letter law that one does not incur reverse-false-claim liability by violating, and affirmatively concealing one’s violation of, a statute, regulation, or contract that merely authorizes the Government to levy certain fines and penalties,” and found that the FCA’s reverse false claims provision “simply does not encompass contingent obligations that arise only because the government has prohibited an act whose commission may generate a relationship of indebtedness if the United States chooses to create one.” Instead, reverse-false-claim liability exists – at least in the D.C. Circuit – only where the legal instrument itself actually imposes a self-executing obligation to tender money or property to the United States, and not merely conditions indebtedness on the exercise of governmental discretion. Because this essential condition was not met here, there was no statutory obligation to repay, and Armstrong was entitled to summary judgment on Landis’ reverse-false-claims count.
Armstrong still faces direct false claims liability arising out of sponsorship money paid by USPS to his management company, Tailwind Sports. The case is Landis v. Tailwind Sports Corp., et al., Case No. 1:10-cv-00976
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