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United States v. Tailwind Sports Corp.

United States District Court, District of Columbia

August 22, 2018

UNITED STATES OF AMERICA ex rel. FLOYD LANDIS Plaintiff,
v.
TAILWIND SPORTS CORPORATION et al., Defendants.

          MEMORANDUM OPINION

          CHRISTOPHER R. COOPER UNITED STATES DISTRICT JUDGE.

         This ruling marks the finish line of a lawsuit brought by Floyd Landis and the federal government to recover money paid by the U.S. Postal Service to sponsor a professional cycling team featuring Lance Armstrong. In 2010, Landis filed suit under the False Claims Act alleging that Armstrong and a host of associates had defrauded the Postal Service by misrepresenting and concealing the team's use of performance enhancing drugs. The United States intervened in the case in early 2013. After more than five years of active litigation, the original peloton of defendants has dwindled to two: the team's owner, Tailwind Sports Corporation, and its erstwhile manager, Johann Bruyneel. Neither has participated in the case since 2014.

         The government has moved for a default judgment on its False Claims Act claims against both defendants, which Landis joins, and on a separate common-law claim of unjust enrichment against Bruyneel. Landis has independently moved for an award of False Claims Act damages against both defendants. As explained below, the Court will grant both of the government's motions, impose $369, 000 in civil penalties against Tailwind and Bruyneel, and award $1, 228, 700 in restitution against Mr. Bruyneel on the government's unjust enrichment claim. The Court will deny Landis' motion for an award of damages.

         I. Background

         The Court has fully recounted the factual and legal background of the case in prior rulings. See, e.g., United States ex rel. Landis v. Tailwind Sports Corp. (“Landis II”), 234 F.Supp.3d 180, 186-90 (D.D.C. 2017). It will keep the details brief here.

         From 1996 through 2004, the United States Postal Service (“USPS”) sponsored a professional cycling team, which was owned by a series of corporate entities culminating with defendant Tailwind Sports Corporation (“Tailwind”). U.S. Compl. ¶ 2. Johan Bruyneel was the manager (or “directeur sportif”) of the team; Lance Armstrong and Floyd Landis were two of the team's riders. Id. ¶¶ 2, 7, 10. Under agreements entered into in 1995 and 2000 for the USPS sponsorship, Tailwind (or its predecessors) represented that the riders on the team would adhere to all relevant rules governing professional cycling, including prohibitions on the use of performance enhancing drugs. Id. ¶¶ 16-18. In addition, the 2000 agreement specifically included the use of performance enhancing drugs, or any negative publicity associated with such use, as events of default. Id. ¶ 20. Over the period of the sponsorship, USPS paid approximately $32 million to Tailwind. Landis II, 234 F.Supp.3d at 186. As is now well known, the riders on the USPS-sponsored team did not in fact adhere to the international rules prohibiting the use of performance enhancing drugs in cycling. In a 2013 interview with Oprah Winfrey, Armstrong admitted that he had used banned substances, including during the time period that USPS sponsored the team. U.S. Compl. ¶ 61.

         In 2010, Landis filed suit against multiple defendants, including Armstrong, Bruyneel, and Tailwind, on behalf of the United States under the False Claims Act. Landis II, 234 F.Supp.3d at 189. In 2013, the government intervened in the suit against Armstrong, Tailwind, and Bruyneel. Id. The defendants against whom the government did not intervene reached a settlement agreement with Landis, to which the government consented, and were dismissed in June 2017. See Order (July 5, 2017) [ECF No. 576]. Armstrong himself reached a settlement agreement with the government and Landis on the eve of the scheduled May 2018 trial. See Order (April 30, 2018) [ECF No. 594]. The only defendants that remain are Bruyneel and Tailwind, both of whom ceased participating in the case after their motions to dismiss were denied in 2014. The government and Landis now seek default judgments against both.

         II. Legal Standard

         Obtaining a default judgment is a two-step procedure. See, e.g., Bricklayers & Trowel Trades Int'l Pension Fund v. KAFKA Construction, Inc., 273 F.Supp.3d 177, 179 (D.D.C. 2017). First, the plaintiff requests an entry of default from the Clerk of the Court against a party who has “failed to plead or otherwise defend” the suit. Fed.R.Civ.P. 55(a). After obtaining an entry of default, the plaintiff seeks a default judgment from the Court. Fed.R.Civ.P. 55(b). Granting a default judgment is appropriate “when the adversary process has been halted because of an essentially unresponsive party.” Bricklayers, 273 F.Supp.3d at 179 (internal quotation omitted). “Default establishes a defaulting party's liability for the well-pleaded allegations of the complaint.” Boland v. Elite Terrazzo Flooring, Inc., 763 F.Supp.2d 64, 67 (D.D.C. 2011). Once liability is established, the Court “must make an independent evaluation of the damages to be awarded and has considerable latitude in determining the amount of damages.” Bricklayers, 273 F.Supp. at 179 (internal quotation omitted).

         III. Analysis

         The Court will first address the Clerk's entry of default against Bruyneel and Tailwind, before moving to whether the government and Landis have established liability and damages on the three claims raised against these defendants.

         A. Entry of default

         Defendant Bruyneel received a copy of the complaints and waived formal service of process by the government and Landis. See ECF No. 45, 62. Defendant Tailwind was properly served with process in 2013. See United States ex rel. Landis v. Tailwind Sports Corp. (“Landis I”), 51 F.Supp.3d 9, 34 (D.D.C. 2014) (holding Tailwind was properly served). Moreover, both defendants were clearly aware of the suit against them: they filed motions to dismiss in 2013. See id. at 20. After the Court denied those motions in June 2014, it directed both defendants to file an answer by late July 2014. See Minute Order (July 2, 2014) (directing Bruyneel to file an answer by July 18, 2014); Minute Order (July 2, 2014) (directing Tailwind to file an answer by July 27, 2014). Neither did so, and the Clerk of the Court entered default against both defendants in April 2016. See ECF No. 503. The defendants have not otherwise appeared in this suit since their motions to dismiss were denied in June 2014. Given the defendants' failure to respond or otherwise litigate this suit for over four years, default was appropriately entered.

         B. False Claims Act claims against Bruyneel and ...


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