Judge Orders Trek, LeMond to Settlement Conference

LeMondbike

Trek and Greg LeMond have been ordered by the judge presiding over their case to hold a settlement conference in a last-ditch effort to avoid going to trial. U.S. magistrate judge Janie Mayeron ordered that the two parties to meet at a St. Paul, Minnesota, courthouse on January 28 for the purpose of perhaps negotiating a settlement.

As a prelude to the meeting, counsels for both parties are to meet on or before January 18 for a “full and frank discussion of settlement.”

However, if Trek and LeMond do not come to a settlement at the settlement conference, each attorney is required to submit a confidential letter to the judge. In it the attorneys must each give a progress report including outstanding issues and analyze their case’s merits and weaknesses.

While the roots of the conflict began with LeMond criticizing Lance Armstrong’s association with Dr. Michele Ferarri, a known proponent of EPO use for cycling, for business purposes, the conflict began when Trek informed LeMond that it would not renew its 13-year licensing agreement with him when it expires in 2010. LeMond filed suit on March 20 claiming that Trek had promoted Armstrong ahead of his brand and asked the court, essentially, to require Trek to continue to make and promote LeMond bicycles. On April 8, Trek sued to sever all ties with LeMond.

Trek cited multiple reasons for severing the relationship including dilution of the LeMond brand name due to mass-merchant line of parts bearing the LeMond name. And while there has been wide-spread belief that the brand never sold well, industry statistics show LeMond was the fifth largest road bike line in the U.S. in 1999.

Whether the case settles out of court seems to be up to LeMond and what his greatest priority is. If protecting his brand and his income is his greatest priority, then the case will get settled behind closed doors; terms of the settlement are likely never to be known. If LeMond’s greater desire is to attempt to expose Lance Armstrong as sporting fraud, then this case is bound for a jury and the fireworks will be considerable.

LeMond’s choice may be pivotal. Should he pursue an open trial, the number of companies will to do business with him will shrink considerably. Certainly any players that consider themselves risk-averse would shy away from any association.

An out-of-court settlement would end the mudslinging and let LeMond get back to his mission of marketing a line of bicycles bearing his name. The business climate has changed significantly for the bike industry since LeMond negotiated his deal with Trek in 1995. The market consolidation taking place then has largely dried up. However, there is one notable exception.

Dorel, the parent company for Pacific Cycle and Cycling Sports Group, is the cockroach that ate Cincinatti of the bike industry. Dorel’s cycling brands include Mongoose, Schwinn, GT, Cannondale, Pacific, Roadmaster, Dyno and Sugoi.

And they are still buying. Recent purchases have included Australian distributor Gemini Bicycles as well as UK distributor Hot Wheels and Circle Bikes. Dorel also acquired the Iron Horse at auction for a measly $5.2 million following the bike brand’s demise amid multiple lawsuits and finger-pointing. Oak trees aren’t a shady as the deals made to try to keep the brand operational.

If LeMond were to go quietly, it wouldn’t take a science fiction author to imagine a deal with Dorel that could place the LeMond name in the mass market, the sporting goods chains or the IBD before the end of 2010.

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12 comments

  1. Touriste-Routier

    I would imagine any settlement agreement would include a gag order, not only disallowing disclosure of the terms, but also from disparaging one another. This is typical boilerplate, but I speculate there would also be discussions in regards to a gag order concerning what Lemond would be allowed to say about Armstrong. Depending on what Lemond’s true motives are here, this is likely to strongly influence the decision regarding settlement, especially considering that Armstrong, who is not a party to the suit, would not be likely to be held to (nor agree to) the same gag order.

  2. Fausto

    I am glad to hear that Lemond bikes were selling good in 1999….why did Trek tell dealers and distributors that they would be no longer supporting the brand in 2004? Why did they not inculde the Lemond Brand in Trek World in 2007?

    The judge also ruled on the evidence presented so far and toss out much of Trek’s case. Remember the story about Greg taking $2,500,000 in discounted bikes? The judge said there was no basis for this and tossed it out. The judge also tossed out the claims about PTI.

    So far the Judge has been very negitive against Trek’s case. He even noted in a footnote regarding Trek’s sole surviving claim that he had “reservations” regarding its “viability” and invited LeMond’s attorneys to file a motion knocking it out as a matter of law when the record is more developed at trial. He also questioned it at the summery hearing and even called one of their footnotes on “Best Efforts” misleading…..also known as lying. Something you don’t do to a federal judge.

  3. JZ

    Fausto, have you read the Court’s Memorandum Opinion? I have and it doesn’t say what you think it says. For example, regarding LeMond’s use of free and employee-priced bikes as grounds for termination, the court didn’t say there was no basis for Trek’s claim as you suggest but, rather, held that Trek had waived its claim for any wrongdoing on LeMond’s part because Trek had allowed it to happen for ten years and never complained.

    You also state that the judge has been very negative against Trek’s case. I obviously wasn’t in the courtroom, but I don’t read that at all in the Court’s decision. The Court was pretty even-handed in its decision leaving the door pretty wide open for both sides at Trial. For example, regarding Trek’s argument that Lemond’s comments hurt trek, the Court stated that “sufficient evidence exists from which a jury could reasonably infer that Trek suffered damages as a result of LeMond’s public commentary.” That doesn’t sound so negative against Trek. On the flip side the Court said that “a reasonable jury could conclude from the evidence that Trek was not using its good faith ‘best effots’ to ‘maximize sales’ of LeMond-branded bicycles.” This is exactly the kind of language you would expect when a court is denying cross-motions for summary judgment.

    The Court did state in a footnote that Trek’s quotation from the factual section of a case was misleading, which I think is a fair statement, but is far from suggesting that Trek lied to the Court.

    I am not really for one side or the other, but one-sided and inaccurate interpretations really bug me. Personally, I hope it does go to trial just for the pure entertainment value regardless of who wins.

    As for the court ordered settlement conference, that is pretty standard procedure with most courts nowadays. Court dockets are jam packed and trials, especially jury trials, are extremely time consuming. As a result the court’s often do everything they can to get the parties to settle.

  4. Robot

    My reading of the court’s opinion was very much like JZ’s. In fact, the only way in which I differ with JZ’s view point is that I hope it DOESN’T go to trial. I’m really afraid that a spectacle like this will kill LeMond in the bike business, and I don’t want to see that happen. The guy has a lot to offer on a number of fronts if he can’t put this mess behind him.

  5. JZ

    Good point Robot. My hope for a trial sounds a little calous. I do believe a settlement would be in the best interest of both sides. Regardless of the outcome neither party would really walk away from a trial as the winner.

    I also agree with your hope that LeMond could put his obvious passion to better use. I have always felt that LeMond could offer so much more to professional cycling than bikes and the occasional potshot regarding doping.

  6. Fausto

    JZ, The Employee purchase issue was a key point of Trek’s case, as was the PTI issue. The judge tossed out both of these issues. Of the sole remaining claim the judge had made some very pointed questions of the validty of it durinng the summery judgement hearing. He also wrote this in Footnote 13

    13 The Court has reservations with respect to the viability of this claim and bases its denial of summary judgment on the record now before it. Whether this claim will survive a Rule 50 motion for judgment as a matter of law, when the record is more fully developed at trial, remains to be seen.

    No matter how you spin it this is bad news for Trek. If there is a trail it will be very difficult for Trek to overcome this.

    Here is Lemond’s Legal’s take on the latest.
    http://www.earthtimes.org/articles/show/wilson-sonsini-favorable-summary-judgment,1077885.shtml

  7. Fausto

    BTW, I do not hope for a trial. I see no winners if this goes to trial, just a ton of mud slinging. Given that Armstrong employees professional mudslingers Greg could win and still come out looking bad.

  8. JZ

    Fausto, I’m really not trying to spin it. I am just trying to give a fair, non-LeMond press release view of the Court’s decision. I don’t have a dog in the fight so to speak other than just being a fan of cycling and an interested attorney. I appreciate the link to LeMond’s attorney’s press-release statement. I think it overstates the court’s opinion, but that is exactly what I would expect LeMond’s attorneys to do. I know, I have been there and have drafted such press releases.

    I do agree with you that of all the statements in the decision, footnote 13 would give me the most heartburn as Trek’s counsel. The Court’s footnote 13 comment does seem a little inconsistent with the tone of the remainder of the decision. Again, I wasn’t in court, so obviously the court’s tone may have been entirely different. It should also be noted that should Trek lose on its claim for LeMond’s breach based on LeMond’s comments, there still remains the issue of whether Trek breached the “best efforts” provision of the agreement.

    Based on my admittedly limited view of all of the facts of the case, if this case goes to trial I could see a jury finding both that LeMond’s statements constituted an action that damaged Trek and that Trek failed to exercise its “best efforts” in marketing the LeMond brand. In other words, a mutual breach of the contract. That would raise some interesting damages issues.

    On a side note, LeMond’s attorney’s argument that LeMond’s statements were “words,” not “actions,” as the term is used in the contract regarding actions against Trek, brings a tear to my eye. That is just beautiful. Of course the Judge totally shot it down, but they at least tried.

  9. mark

    JZ, this comment “Regardless of the outcome neither party would really walk away from a trial as the winner” brings a tear to MY eye coming as it does from an attorney. I love the subtle distinction between “neither party” and “nobody.”

  10. fausto

    It will be interesting to see what the jury thinks did more damage to the Trek brand, Greg saying what most other cycling fans felt……or the Trek/Armstrong PR campaign to paint Greg as nuts?

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