In a case with important considerations for False Claims Act cases, Lance Armstrong will face claims at trial that he fraudulently obtained funds from the United States Postal Service because of alleged violations of his sponsorship contract. On February 13, 2017, a D.C. federal judge ruled on competing motions for summary judgment setting the stage for a trial on the issues of implied certification and potential damages.
Armstrong argued that because the invoices sent to the Postal Service did not contain representations about the services rendered, the implied certification theory outlined in the Supreme Court case Universal Health Services, Inc. v. United States, ex rel. Julio Escobar and Carmen Correa (“Escobar”) was inapplicable. Specifically, Armstrong argued that the Escobar implied certification test was inapplicable because Armstrong’s invoices did not make “specific representations about the goods or services provided . . . ” The D.C. district court agreed that the invoices merely requested payment and made no other representations, but held that the lack of a representation of the services in Armstrong’s invoices was not dispositive of the implied certification issue at summary judgment. Whereas the Supreme Court limited the holding in Escobar to its facts and expressly declined to “resolve whether all claims for payment implicitly represent that the billing party is legally entitled to payment,” the D.C. Circuit had already explicitly addressed such omissions in United States v. Scientific Applications International Corp. In that case, the D.C. Circuit said that a claim for payment “need not include ‘express contractual language specifically linking compliance to eligibility for payment,’ . . . [but] ‘[r]ather, all the government must show is ‘that the [claimant] withheld information about its noncompliance with material contractual requirements.’” In other words, Armstrong’s material omission that he was using performance enhancing drugs when he signed the sponsorship agreements was sufficient to allege implied certification, even though the invoices or demands for payment themselves did not make any representations.
Unsurprisingly, Armstrong and the government took diametrically opposed positions on the issue of potential damages—with Armstrong arguing that the government was not harmed at all by his doping scandal and the government replying that the doping scandal made Armstrong’s sponsorship arrangement completely worthless. Instead, the court ruled that potential damages at trial should be calculated as the “benefit of the bargain,” the difference between what the Postal Service paid Armstrong in sponsorship payments and the value of the services it actually received—taking into account a fact-intensive inquiry of both the benefits received by the Postal Service and the negative publicity generated by the doping scandal.
The False Claims Act case was initiated by Mr. Armstrong’s cycling teammate, Floyd Landis, in 2010 and the suit was joined by the Department of Justice in 2013. Armstrong’s use of performance enhancing drugs is not at issue in the case, as he publicly admitted to doping starting in the mid-1990s and shared his methods of avoiding detection in anti-doping test procedures in a highly-watched interview with Oprah Winfrey in early 2013.