Government testimony on cost of negative publicity withstands Daubert challenge

BVWireIssue #184-3
January 24, 2018

A paramount issue in the high-profile Lance Armstrong litigation is the cost of negative publicity—how do you prove and quantify it? The court recently examined the questions in the context of the parties’ Daubert motion.

Celebrity cyclist gone bad: For years, the United States Postal Service sponsored the once revered cyclist, Lance Armstrong, and his team, hoping this association would result in greater sales and give the USPS brand an edge over competitors in the express delivery market. USPS paid about $32 million in sponsorship fees. Later, investigations confirmed Armstrong and other team members had used performance-enhancing drugs (PEDs) during the course of the sponsorship. Armstrong was stripped of his Tour de France titles and banned from competitive cycling for life. Floyd Landis, one of Armstrong’s former teammates and himself implicated in doping, sued Armstrong under the False Claims Act (FCA) for making false or fraudulent claims for payment against the U.S. government. The United States intervened. Under the FCA, the government is seeking three times the actual damages—$100 million.

Earlier, Armstrong filed a summary judgment motion, essentially arguing the U.S. suffered no actual damages. Although the court agreed that the record showed USPS received substantial benefits as a direct result of the sponsorship, the court decided to send the damages issue to trial. It found the value of the benefits USPS derived from the sponsorship was not sufficiently certain to keep a reasonable juror from finding USPS ultimately suffered a net loss, particularly in light of the bad publicity that has surrounded Armstrong since the doping disclosure.

The government is offering testimony from three experts: one who will testify “that there was a great deal of negative publicity,” a second who will testify to the general causal relationship between negative publicity about a sponsored celebrity athlete and negative consumer perception of the brand(s) associated with the disgraced athlete, and a third who will estimate the harm to USPS by way of event studies for publicly traded companies that have gone through similar events (e.g., the Tiger Woods scandal).

Armstrong claimed the testimony was irrelevant. Two of the government’s experts would not even provide number estimates of damages, leaving it up to the jury to speculate as to the damages amount. The court disagreed. It said that, for the purpose of determining relevance, there was no reason why the court had to consider each government’s expert “as walled off from the others.” Rather, the court found that each expert’s testimony was relevant to prove the government’s damages, “and together they provide a non-speculative framework for the jury to analyze damages.”

With a few limitations, the court admitted both parties’ experts.

An extended discussion of and the court’s opinion for United States ex rel. Landis v. Tailwind Sports Corp., 2017 U.S. Dist. LEXIS 195558 (Nov. 28, 2017), will be available soon at BVLaw.

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