FCA Alert : Lawyers & Attorneys for Whistleblower, False Claims Act & Qui Tam Defense : Kelley Drye & Warren LLP

Landis shocked the cycling world earlier this year when, in a series of a series of interviews with the Journal, he confessed to using performance enhancing drugs throughout his cycling career and alleged that many of his former teammates, most notably Armstrong, did likewise.  Armstrong, who has been dogged by accusations of doping throughout his career, has denied Landis’ allegations and maintains that he has never used banned substances.  Landis’ allegations are currently the subject of a federal criminal investigation lead by Jeff Novitzky of the FDA, who also investigated BALCO and allegations that Barry Bonds and Marion Jones used performance enhancing drugs.

But how can Armstrong’s use of performance enhancing drugs be tied to false claims for payment submitted to the United States government? Because the case is under seal, it is impossible to know for certain the theory of liability underlying Landis’s case, but it seems likely the link is the United States Postal Service, the title sponsor for Armstrong’s cycling team from 1996 to 2004. The Journal reports that the Postal Service paid $30.6 million to the team’s management company between 2001 and 2004, the years Landis and Armstrong were teammates. The Journal also notes that negative publicity associated with allegations of doping on the team and a failure by team management to discipline riders for doping violations would be deemed events of default under the contract governing the Postal Service’s sponsorship. Presumably, Landis will argue that the team’s solicitation of sponsorship money from the Postal Service is the claim for payment, that Armstrong’s repeated claims that he was riding clean were false statements, and that the Postal Service would never have paid the sponsorship money had it known that Armstrong and others on the team were using performance enhancing drugs.

While it may seem odd to rest a FCA claim on allegations of doping in professional sports, Landis’s suit actually fits in to a trend broadening the FCA beyond its original intended targets – unscrupulous government contractors who submit false or inflated invoices to the government – into a general catchall statute to police improper conduct, provided that the conduct can somehow be linked to federal funds. In recent years, for instance, federal prosecutors and qui tam relators have brought FCA cases against medical providers who receive kickback payments for referrals, drug companies who market their drugs for non-FDA-approved uses, engineering firms that improperly dispose of chemical waste, and educational institutions that pay recruiters bonuses based on the number of students they enroll, all of which have survived at least beyond the pleading stage in some courts.  In these cases, there is often no allegation that the misconduct itself caused the government to pay claims it otherwise would not have paid. In some cases, the defendants do not even receive federal funds or have any direct conduct with the federal government. 

It appears that Landis’ case is far-reaching and will likely face a number of legal challenges: 

• First, in an interview with the New York Times this July, Armstrong denied that he had any ownership interest in the team or involvement in the team’s management during the period of the Postal Service’s sponsorship. If that is true, Armstrong may not have had knowledge of the terms of the sponsorship agreement, which would make it difficult for Landis to establish that Armstrong’s denials concerning performance enhancing drugs were made with the purpose of getting the Postal Service to sponsor the team. 

• Second, the FCA’s statute of limitations provides that suits must be brought within either six years of the date of the FCA violation, or three years from the date the violation would have been discovered with reasonable diligence. According to the Journal report, Landis commenced his action earlier this year, but the Postal Service’s sponsorship of the team ended in 2004. Thus, almost the entire time period of Postal Service’s sponsorship falls outside of the FCA’s six year statute of limitations period. Moreover, since allegations of Armstrong’s drug use have been around for many years, and Landis himself was apparently aware of Armstrong’s doping since 2004 at the latest, Landis cannot reasonably argue that the suit was commenced within three years of the date the violations would have been discovered with reasonable diligence.

• Third, it will be difficult for Landis to establish the extent of the United States’ damages, or whether in fact the United States has suffered any damage at all. While Landis will likely argue that the United States would not have agreed to sponsor the team at all had it known of Armstrong’s alleged doping, some courts have held that the appropriate measure of damages in an FCA case is the amount of money the government paid on the false claim, less the value of what was actually received. Presumably, the Postal Service bargained for and obtained something of value when it secured title sponsorship rights to the team, and it may be difficult to demonstrate how the value of that sponsorship was affected by Armstrong’s doping, especially when revelations of doping did not occur until more than five years after the Postal Service’s sponsorship ended.