by Ben Vernia | June 23rd, 2014
On June 19, U.S. District Judge Robert L. Wilkins of the District of Columbia issued a lengthy order in U.S. ex rel. Landis v. Tailwind Sports Corp., a whistleblower suit against Lance Armstrong, his former cycling team and others, alleging the defendants submitted false claims for payment in violation of the anti-doping provisions of the team’s contract with the U.S. Postal Service.
The defendants include Armstrong, Tailwind Sports Corp. (and its predecessors, which managed the team), the team’s manager (Johan Bruyneel), the founder and principal owner of the company, Thomas W. Weisel, and others. Floyd Landis, the whistleblower, cycled with the team from 2002 to 2004, and Armstrong won the Tour de France – cycling’s most prestigious race – each year from 1999 to 2004.
In his 81-page opinion, Judge Wilkins reached the following conclusions:
- Landis had standing to participate in the case, even though the government had partially intervened;
- Tailwind Sports, LLC, which had merged with Tailwind Sports Corp., could not be sued because it no longer exists;
- Tailwind Sports Corp., which had been dissolved at the end of 2007, was timely sued even though the complaint was served more than 3 years after it was dissolved, because the suit began when the relator filed the case, not when the complaint was served (a question governed by federal, not Delaware law, he reasoned);
- The False Claims Act’s post-knowledge tolling provision did not apply to Landis, the relator, so claims submitted prior to 2004 were barred;
- The UK citizenship (and likely absence from the US) of Bruynheel, the team’s manager, made it inappropriate to rule, in a motion to dismiss, on whether the statute of limitations barred claims against him;
- The government’s knowledge of a French investigation into doping by the team was insufficient to commence the running of the limitations period;
- French investigators’ findings that doping had not occurred, coupled with the defendants’ denials of doping, excused – for statute of limitations purposes – the government’s failure to investigate the team;
- The Wartime Suspension of Limitations Act did not apply to False Claims Act cases, because the 1986 amendments to the law removed fraud as an “essential ingredient” of the allegation, as required by the Supreme Court;
- Landis’s post-Fraud Enforcement and Recovery Act (FERA) claims were dismissed without prejudice because of a lack of specificity regarding their dates of occurrence;
- “Claims under the False Claims Act,” for purposes of determining the effective dates of FERA, referred to civil or legal actions, not the submission of claims as defined under the FCA (here, Judge Wilkins differed with his D.C. District colleagues).
- Dismissed without prejudice the relator’s claims for submitting false claims, using false records or statements, and conspiracy, against Weisel, Tailwind’s founder, president, and largest shareholder, reasoning that the complaint insufficiently alleged one or more elements of each of those provisions;
- Denied the motions to dismiss of Armstrong and the other Tailwind defendants, concluding that they had waived them by inadequately challenging the complaint under 9(b);
- The alleged breach of contract (violating the no-doping clause of the sponsorship agreements) was an obligation to the U.S., for purposes of the reverse false claims provision (Judge Wilkins said that breach of the anti-doping clause might entitle the government to seek back all monies paid under the sponsorship agreements);
- The government’s discretion whether or not to enforce the provision did not make the obligation contingent (and therefore too vague to violate this section of the Act);
- As to Weisel, there were inadequate allegations of making a false statement;
- As to Armstrong, the government’s and relator’s complaints were “rife with allegations that Armstrong had knowledge of the doping, and that he made false statements to conceal the doping and the attendant obligation which would have resulted if the government had known of the doping.”;
With respect to the statute of limitations on the government’s False Claims Act and common-law claims:
With respect to particularity under Rule 9(b), Judge Wilkins:
Regarding allegations of “reverse false claims” (i.e., making a false statement to avoid repaying an obligation owed to the U.S.), Judge Wilkins concluded:
Judge Wilkins also concluded that although Landis had not adequately alleged veil-piercing (of Tailwind or its predecessors, or of Weisel’s investment bank), he would be permitted to conduct discovery on this topic.
Judge Wilkins granted Landis leave to amend his complaint as to each of the dismissed allegations except for those barred by the 6-year statute of limitations.