Arbitration Panel Awards $10 Million In Sanctions In What Some Might Argue Is a Re-“Cycle”ed Proceeding

On February 16, 2015, SCA Promotions, Inc. filed its Original Petition for Confirmation of Arbitration Award against Lance Armstrong and Tailwind Sports, Inc. The petition seeks to confirm a February 4, 2015, arbitration award against Armstrong and Tailwinds in favor of SCA that includes $10 million in sanctions. Beyond the general public interest surrounding the award, it excites additional attention from those of us who, along with our clients, resolve commercial disputes in arbitration because the award was issued in what might be argued to be a “re-opening” of a prior arbitration among the parties before the panel.

The underlying arbitration concerned whether Armstrong and Tailwind should be sanctioned for perjury in a prior arbitration proceeding among the parties. The panel awarded SCA $10 million in sanctions after finding that Armstrong had engaged in “an unparalleled pageant of international perjury, fraud and conspiracy” and had “used perjury and other wrongful conduct to secure millions of dollars in benefits” from SCA.

The prior arbitration concerned an agreement that required SCA to pay Tailwind a specified amount of prize money if Armstrong won the Tour de France in 2002, 2003, and 2004. Armstrong won all three races, and SCA paid the prize money for the 2002 and 2003 victories. But SCA withheld payment for the 2004 victory because there were allegations that Armstrong might have cheated.

In the arbitration that resulted from the dispute, both Armstrong and another Tailwind representative testified under oath that Armstrong never used performance-enhancing drugs in his career and had won the 2002, 2003, and 2004 Tour de France races legitimately and without cheating.

In 2005, before conclusion of the arbitration, the parties entered into a settlement agreement. The agreement provided that the arbitration panel retained and had exclusive jurisdiction over disputes arising under the settlement agreement and prior prize agreement.

Then, in 2013, we all know what happened. But as alleged by SCA, Armstrong admitted to Oprah Winfrey in a television interview that he used performance-enhancing drugs in every Tour de France race he had won, that he had lied under oath in the prior arbitration with SCA, and that he had tried to intimidate and harass witnesses who had otherwise tried to tell the truth about him and his conduct. Based on those admissions, SCA filed suit against Armstrong and Tailwind, asserting various claims, including fraud, unjust enrichment, civil contempt, and conspiracy.

In June 2013, SCA moved to reconvene the prior arbitration. SCA sought sanctions against Armstrong and Tailwind for perjury in connection with arbitration and also sought forfeiture of all prize money paid to Armstrong because Armstrong had been stripped of all of his Tour de France titles.

Armstrong and Tailwind argued that the panel lacked jurisdiction to hear the dispute or issue sanctions. The panel disagreed based in part on the language of the parties’ prior settlement agreement that retained the panel’s jurisdiction.

Following unsuccessful challenges by Tailwind and Armstrong Texas courts, the panel conducted an evidentiary hearing on September 4 and 5, 2014. On February 4, 2015, the panel rendered its award, including the $10 million sanction.

So, what do you think? Does this award offend the finality of arbitration awards that is attractive to many claimants and respondents? Regardless of your position, you might pay close attention to dispute resolution provisions of settlement agreements to ensure the language is consistent with your and your client’s positions on the finality of awards.

Copies of SCA’s Original Petition for Confirmation of Arbitration Award and the award at issue (which is attached to the Petition) can be found here.