This summer, ESPN rolled out another segment of the critically-acclaimed “30 for 30”, this time featuring cyclist Lance Armstrong. For cycling fans, this documentary provided some inside views about a doping scandal that rocked the sport. For those working with mediators, this documentary provided some inside views about two critical lessons that Armstrong learned from the settlement of his lawsuit with ex-teammate Floyd Landis and the United States Postal Service.
Armstrong and his teams dominated cycling’s marquee event, the Tour de France, winning consecutive years 1999-2005. His team was under the Postal Service sponsorship when he won his first Tour de France in 1999. His personal story of recovering from cancer to becoming a world class athlete helped build the Lance Armstrong Foundation cancer charity.
For years, Armstrong was dogged with allegations of using performance enhancing drugs during his cycling competitions. He always denied the allegations and went to extreme measures to conceal his use including lying about his PED use in a 2005 arbitration proceeding; suing the Times of London and one of its sources – a former team masseuse – for libel; and threatening other people with similar lawsuits for disclosing their knowledge of his doping.
His brand and hero status took an epic trashing when Floyd Landis, a former teammate, admitted that he had doped as member of the USPS-sponsored team and brought a lawsuit against Armstrong. Landis filed his complaint under the False Claims Act, which allows private parties to bring suit on behalf of the government and to share in any recovery. According to court records, the USPS contract paid the team about $32 million from 2000 to 2004. Armstrong received about $13.5 million.
In 2012, the U.S. Anti-Doping Agency found that Armstrong’s team “ran the most sophisticated, professionalized and successful doping program that sport has ever seen”. In 2013, Armstrong publicly admitted to using PED in an infamous interview with Oprah Winfrey. Armstrong was then stripped of his seven Tour de France wins.
Not long after the Oprah interview, the USPS intervened in the Landis lawsuit and sought about $100 million. They accused Armstrong of harming the government agency that spent tens of millions sponsoring his team. Armstrong defended the lawsuit by arguing that he didn’t owe the USPS anything because the agency made far more off the sponsorship than it paid. Armstrong found internal studies for the agency that calculated benefits in media exposure topping $100 million.
This is where Armstrong learned two critical lessons in mediation. In one of his interviews in the “30 for 30” documentary, he explained his reasoning for agreeing to the settlement. He agreed to pay $5 million, and Postal Service accepted this payment, even though he believed he had strong defense to the lawsuit. First, he had to acknowledge there was a 5% chance that Postal Service could win $100 million at trial. That would be devastating to his financial empire. He did not have the net worth to withstand such a large judgment. He decided 5% of $100 million made sense for settling the case.
Second, he recognized that spending at least a month in trial would not be a fun experience. He could better use his time and energy focusing on making money rather than sitting through the uncertainty of a high risk trial. His brand would be further damaged from the attention that the trial would receive. Armstrong would be better off working on his new business rather than paying attorneys and sitting in a court room.
These are the same two critical lessons that are used in virtually every mediation when resolving disputes. The parties must recognize that some compromise as a percentage of their exposure is a prudent decision. And, the parties must remember that only the attorneys enjoyed being in the courtroom. A trial is emotional difficult and stressful. The clients are better off getting back to business.
One final side note: Armstrong settled many disputes and lost millions after he acknowledged using PED during his cycling career. How could he afford those settlements? Well, Armstrong made a $100,000 investment in Uber when the company was worth $3.7 million. The company is now estimated to be worth $120 billion. Armstrong has declined to say how much his investment is worth today, but reportedly has said it’s “too good to be true” and “saved” his family. He now owns several businesses, including part ownership in the venture capital firm Next Venture, LP.