DOJ Blocks Lance Armstrong Settlement; Cites Public Interest Concerns

In 2010, Lance Armstrong’s former cycling teammate, Floyd Landis, filed a lawsuit against Armstrong under the False Claims Act. In essence, Landis’s claims centered on the nearly 30 million in taxpayer dollars given to the team during its sponsorship by the U.S. Postal Service – and the subsequent revelation that Armstrong won his seven Tour de France titles while using performance-enhancing drugs. Landis asserts that the misuse of the USPS’s money amounted to fraud, thereby triggering False Claims Act liability.

In 2013, the government opted to intervene only in part, leaving several aspects of the case for the parties to work out individually. However, the DOJ maintained, in accordance with the statute, its right to approve or reject any settlement to come out of the lawsuit and just recently filed a strenuous objection over a settlement agreement between Landis, Armstrong’s former agent, and Armstrong’s former business partner.

Details of DOJ’s objection

The DOJ’s intervention in Landis’ False Claims Act lawsuit was limited to the allegations targeted at Armstrong individually. However, many other individuals were implicated in the suit. While choosing not to join the parts of the lawsuit directly targeting Armstrong’s agent and business associates, the DOJ felt it had no choice but to object to a $600,000 settlement reached between Landis, Armstrong’s agent Bill Stapleton, and Armstrong’s business partner at Austin-based Capital Sports and Entertainment, Barton Knaggs.

According to the details of the proposed settlement, Stapleton and Knaggs were to pay $500,000, as well as an additional $100,000 to cover Landis’s attorneys’ fees in the matter.

Court’s analysis

In an opinion rendered on April 9, 2015, United States District Judge for the District of Columbia Christopher R. Cooper reached what he deemed to be a potentially “counterintuitive” result, holding that the government is within its rights to object to a False Claims Act settlement in which it elected not to intervene. Specifically, the court reviewed the language of the FCA as it pertains to voluntary dismissals of FCA claims. Relying on the plain language of the FCA, the court opined that voluntary dismissals of FCA claims require both the consent of the court and the Attorney General.

Notwithstanding, the defendants urged the court to look beyond this plain language and disallow the government to effectively block a settlement in which it is not a party. Defendants specifically assert that this veto power infringes on a relator’s “right to conduct non-intervened FCA actions,” thereby forcing relators to engage in unnecessary additional litigation.

However, the court pointed to several holdings across a number of circuits holding just the opposite, specifically finding that a relator may not seek voluntary dismissal of a qui tam action without consent by the DOJ. In citing a recent Sixth Circuit holding on the same issue, “the public interest would be largely beholden to the private relator, who— absent ‘good cause’ government intervention—would retain sole authority to broadly bargain away government claims.”

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