Monday, October 1, 2012

Lance Armstrong and Morals Clauses

I was asked an interesting question recently, in the aftermath of Lance Armstrong's decision to no longer contest the doping allegations pending against him.  Would his failure to contest the allegations trigger a morals clause in any of his endorsement contracts and lead present or former endorsing companies to sue him?

It's an interesting question on a number of levels.

First, assuming his endorsement contracts do have morals clauses, the critical issue is what specific language they provide.  Do they have broad enough language to cover a situation where the conduct at issue hasn't been admitted, but is no longer being contested?

If the morals clause is broad enough to even be triggered, is it too late for the endorsing company to assert a claim?  The answer to this question depends on what the basis for the claim is and when the conduct at issue occurred.  For example, would the claim be for breach of contract, which has a statute of limitations of six years in many jurisdictions?  Would the claim be for fraud, based on Armstrong's misrepresenting at the time he signed a contract that he was not engaged in doping?  Fraud claims often have a shorter statute of limitations, typically three years.

The other fundamental questions is what the offending conduct is and when it occurred.  Armstrong won his first Tour de France in 1999 and his last in 2005.  If the basis for a breach of contract claim arises from doping during that period, it would appear that any claim would be barred based on the statute of limitations, unless a plaintiff could argue that the statute was tolled based on concealment of doping.

One final issue, regardless of the legal issues surrounding a claim based on a morals clause, is whether it is worth it for any company that endorsed Armstrong to bring a claim.  Would a company want to spend the time and money litigating to recover endorsement fees so long after the fact, and essentially having to prove that Armstrong doped?  Thus far, no company that endorsed him has taken such action.