Kadisco: Josh Kadis is a technologist.

LeMond v. Trek at the precipice

Posted on 20. Nov, 2009 in Bike industry

So there’s this big lawsuit that could turn into a really big deal. A short version of the backstory:

1995 – Trek and Greg LeMond begin a licensing agreement where Trek will design, produce, and distribute a line of bikes with the LeMond name. Trek retains all the intellectual property.

1999 – Trek and LeMond extend the contract shortly after Lance’s first Tour win. The deal was set to run through 2010.

2001 – LeMond begins to publicly question the cleanliness of Lance Armstrong’s Tour de France victories.

2004 – Trek alleges that LeMond’s statements about Armstrong are a violation of their contract; LeMond sues Trek to keep them from terminating the licensing agreement.

2007 – Trek reportedly informs LeMond that they will not extend the agreement when it expires in 2010.

2008 – LeMond sues Trek again, claiming that Trek did not “exert their best efforts regarding the LeMond brand” as the contract stipulated. Trek countersues, arguing that LeMond’s statements about Armstrong damaged both brands and that LeMond was circumventing Trek dealers by selling his personal allotment of bikes on the gray market.

Last week – Trek’s argument is essentially unchanged from the 2008 countersuit; LeMond’s is basically that his statements about Armstrong did not violate the Trek agreement because they were true. As the trial begins, the judge encourages Trek and LeMond to settle out of court before things get any uglier.

My thoughts.

LeMond could have tempered his statements about Armstrong and Trek could have put more resources into the LeMond brand. Neither of those things happened because there wasn’t much incentive for either party to salvage the relationship once it soured. Much as been made of LeMond’s personal grudges, litigiousness, and questionable dealings in other business endeavors. But in my view, what doomed the Trek-LeMond partnership was a simple twist of fate.

Back in 1995, the chance of another American cyclist winning the Tour de France on a Trek would have seemed slim, if not preposterous. After all, no team had ever ridden an American bike in the Tour and the top US prospect (a certain Lance Armstrong) wasn’t thought of as a Grand Tour contender.

But once the improbable happened with an inspirational comeback story as an added bonus, there was no way that Trek could pursue the massive opportunity of its association with Armstrong – which carried potential far beyond LeMond’s high-end road niche – without putting the LeMond line on the back burner.

It’s easy to say this in hindsight but Trek should have bought LeMond out of their deal as soon as Lance won his first Tour. I worked in a Trek/LeMond dealer circa 2003 and by that time, Trek was not exerting their best efforts – although that’s an entirely subjective position that would be hard to prove in court. On the other hand, Trek has the right not to do business with people who make damaging statements about their other (more important) partners.

I’m not a lawyer but my sense is that – based solely on the merits of the lawsuit – LeMond could achieve a pyrrhic victory at best due to his own violations of the agreement. But by making Lance the focal point of the case, LeMond has put all the pressure on Trek. If the company settles, that could be interpreted as having less then total confidence in Armstrong. If they go to trial, the spectacle could be a disaster for Trek even though LeMond will most likely not prove anything about Lance.

Ultimately, I think it’s in Trek’s best interest to settle, which is unfortunate. Clearly, both Trek and LeMond could have done more to keep their partnership on the right track. But the way I see it, the most unethical act by either party was LeMond selling bikes on the sly. Furthermore, if LeMond felt so strongly that Armstrong was dirty, the principled thing to do would have been to sever the relationship with Trek. Instead, he sued to keep Trek from doing exactly that.

It goes without saying that there will be no winners in this except the lawyers. Frankly, the whole thing is a disgrace and everyone will come out looking badly.