Press reports this week have picked up the story that the Australian sportswear company, Skins, has threatened legal action against cycling’s governing body, the Union Cycliste Internationale (the “UCI”).  Skins are seeking damages of USD$2,000,000 due to their alleged mis-management of the Lance Armstrong doping scandal.

Skins has been an official supplier and sponsor to a number of national federations and cycling teams, although notably has not sponsored Armstrong or UCI.  The statement made by Skins, and their letter before action can be found here.

Why are Skins suing?

The wording of Skins’ letter before action states:

“SKINS is particularly concerned by its brand image…it is firmly against doping…SKINS was under the illusion that professional cycling has been fundamentally reformed to contain doping and to minimise the risks of scandals with which the brand of any sponsor could be associated.”

Both Skins and UCI are Swiss entities and it is likely that if a court action were raised it would be heard before the Swiss courts.  However, the action raises issues about governing bodies’ potential liability to sponsors for perceived failings of governance within the sport.

Skins do not appear to have a direct contractual relationship with UCI.  As it cannot claim breach of contract the claim is likely to be based on principles of negligence.  If Skins raised this type of claim in the UK it would be necessary to show that UCI owed them a duty of care, that there had been a breach of that duty and that breach had caused the loss.  This raises the interesting question of whether UCI could be held responsible for any loss that Skins suffered as a result of any damage the scandal caused to its brand.

Could the UCI owe Skins a duty of care?

In order for a negligence claim to succeed it must be shown that a duty of care was owed.  The three-stage test set out in Caparo Industries v Dickman is that the damage must be foreseeable, there must be a “sufficiently proximate relationship” between the parties and it must be fair, just and reasonable to impose a duty of care.

Here the actual damage was caused by the actions of Lance Armstrong and the other members of the US Postal Service team.  As Skins did not sponsor the team it would be difficult to claim that Armstrong or the US Postal Service owed Skins any duty of care.  However the courts have also held that in certain circumstances a duty of care to prevent injury by a third party can be owed, provided that the conditions set out in Caparo are satisfied.  Skins would need to persuade a court that, as UCI are the body responsible for cycling’s anti-doping policy it was foreseeable that the sponsors involved in the sport would suffer a loss if they did not properly carry out this function.

If a duty is owed, did the UCI breach it?

The question of whether a duty of care has been breached is a factual one. In this case, the court would need to be satisfied that UCI failed to exercise reasonable care when implementing its anti-doping policy.  The US Anti-Doping Agency stated in its report that the US Postal Service team ran, “the most sophisticated, professionalized and successful doping program that sport has ever seen.”  However, Skins may be able to rely on some of the evidence produced as part of the USADA report suggesting that UCI was aware of allegations about Armstrong’s use of doping, but did not investigate them.

Did the breach cause the loss?

Finally, Skins would need to show that, but for UCI’s breach of their duty of care, Skins would not have suffered the loss.  The sum claimed by Skins is USD$2,000,000.  At this stage they have not explained how they reached this figure.

Calculating the loss that was suffered by Skins as a result of any negligence by UCI would be very complicated.  Any loss that Skins had suffered because of damage to its brand would be difficult to quantify.  Skins do not appear to have sponsored anyone directly involved in the doping program, nor could it have suffered a loss prior to the publication of the USADA report.  They may argue that if they had known about the breach they would not have sponsored cycling, however any benefit gained from the sponsorship would then need to be set off against their investment.

Conclusion

It is unusual for a company to threaten legal proceedings in such a public way.  The release of the letter before action, accompanied by the detailed statement from the Skins’ Chairman will be seen by many as a publicity stunt voicing Skins’ views on the scandal rather than a genuine claim for damages. 

As highlighted above, if Skins do raise an action it seems likely that they will do so in Switzerland. However if Skins were to raise proceedings in the UK on the same grounds, a court would no doubt be hesitant in finding that UCI owed a duty to Skins.  To do so would result in the governing body owing a duty of care to almost every stakeholder in the sport of cycling.  Finally, even if Skins could persuade a court that it was fair, just and reasonable to do so it would be very difficult to assess any loss that Skins might have suffered.