January 29, 2013

By Oliver Herzfeld

Following cyclist Lance Armstrong’s recent, but less than fully contrite, admission to Oprah Winfrey that for more than a decade he (i) used performance enhancing drugs, and (ii) repeatedly made false public statements denying that he did so, on January 22, 2013, a federal class-action lawsuit was filed in California against Armstrong and his book publishers, Penguin and Random House. The suit accuses the defendants of fraud and false advertising in connection with Armstrong’s books, Every Second Counts and It’s Not About the Bike because they include repeated false denials of Armstrong’s use of banned substances. According to the complaint, the books were sold “based upon the false belief that they were true and honest works of nonfiction when, in fact, [the d]efendants knew or should have known that these books were works of fiction.” The plaintiffs are not limiting their requested remedy to the purchase price of the books. Instead, they are seeking “any statutorily permissible damages, attorneys’ fees, expenses and costs.” And, based on prior cases, additional claims and causes of action may be brought against the defendants.

Are the readers’ claims likely to stand up in court? The answer is “it depends.” Armstrong is certainly exposed to consumer fraud claims since the facts suggest he may have intentionally lied and mislead his readers into buying books they otherwise would not have purchased. Other potential claims such as unjust enrichment could be rendered moot if the publishers agree to issue refunds. Still other types of claims would likely be dismissed as too speculative. For example, last April, author Greg Mortenson was sued for fabricating portions of his best-selling books Three Cups of Tea and Stones Into Schools that were advertised as nonfiction accounts of the author’s efforts to build schools in Asia. In that case, the judge dismissed the lawsuit, ruling the plaintiffs’ racketeering allegations and other claims were too speculative, “overly broad” and “fraught with shortcomings.”

With respect to Armstrong’s publishers, the plaintiffs may have more of an uphill battle since pursuant to First Amendment principles, publishers are not legally responsible for verifying the accuracy of every book’s contents and all the factual claims made by their writers. There are some limited exceptions to the preceding broad legal shield, such as when a publisher establishes a duty of care by carrying out its own investigation or analysis of a product or service and explicitly holds itself out as having done so, but that does not appear to be the case here. Nonetheless, Penguin and Random House could potentially be held liable for false advertising if they independently republished any of Armstrong’s false statements in their advertising or other marketing materials to promote sales of his books because such materials may be deemed “commercial speech” to propose a commercial transaction and, therefore, subject to only a limited measure of protection under the First Amendment.

Based on the foregoing, to minimize the time, cost and expense of litigation and avoid the risk of an adverse ruling, the most likely outcome in this case is that Armstrong and his publishers will settle with the plaintiffs – without admitting any wrongdoing. That is precisely what the publisher of The Beardstown Ladies’ Common-Sense Investment Guide did in 2001 to settle a class action lawsuit claiming the reported investment record of the retired Illinois women was false and misleading. In response to that lawsuit, Hyperion, a division of Disney, took the Beardstown books out of print and settled with an offer to exchange any such book for certain other Hyperion titles. Similarly, in 2006, after author James Frey admitted that portions of his memoir A Million Little Pieces were less than truthful, his publisher, Random House, agreed to settle readers’ legal claims by paying $2.35 million which included customer refunds, lawyers’ fees for both sides, and a donation of $180,000 to the American Red Cross, the Hazeldon addiction treatment center and First Book. Given the current widespread sense of betrayal and extreme negative sentiments towards Armstrong, I believe he and his publishers may consider themselves fortunate if they are able to compromise and settle their readers’ legal claims on similar terms.