A federal judge has cleared the way for a nationwide class
action to proceed against Stericycle over allegations the Lake Forest-based
regulated waste disposal giant for years used an automatic price-increasing
scheme to defraud customers out of hundreds of millions of dollars.
U.S. District Judge Milton I. Shadur certified the
plaintiffs class in a memorandum opinion and order issued Feb. 16 in Chicago,
more than a year after consumer-rights law firm Hagens Berman, of Chicago, lead counsel in the
action, filed a motion to certify the class of customers alleging Stericycle
violated contracts and committed fraud. The actions, which were filed in
federal courtrooms in different federal judicial districts, landed in Shadur’s court
in Chicago after a federal judicial panel consolidated the cases into a
so-called multidistrict litigation.
Stericycle collects and disposes of medical waste from jails,
clinics, laboratories and other businesses. Seven customers joined to accuse
Stericycle of violating “contracts by using an automated price increase to
increase charges arbitrarily to ‘small-quantity’ customers without any notice
or explanation,” as well as assessing “‘undisclosed fees’ that were hidden
increases buried in invoices.” They assert Stericycle focused on smaller
customers because larger businesses and government customers provided more
While Stericycle did admit using APIs - some without notice
or justification - and charging other fees, it said the wide variance in
contract language and client treatment should negate class action.
In granting class certification, Shadur also decided which
expert witnesses to allow to weigh in on the question of just how potentially
valuable the class action lawsuit may be.
The request for certification, Shadur wrote, relied heavily
on the opinions of expert witness, damages analyst Patrick Kilbourne.
Stericycle asked the court to strike Kilbourne’s testimony, preferring that of their
witness, Stericycle’s vice president of information technology application and delivery
maintenance Jeremy Boiles. The plaintiffs then sought to have Boiles’ testimony
Shadur reviewed Kilbourne’s professional and academic
credentials, but placed primary importance on his methods to arrive at placing damages
for class members at $608 million — $481 million for the price hikes at
$146 million for the fees, less $19 million related to credits. He “identified
256,405 customers as class members subjected to a total of 1,945,530 price
changes,” Shadur said. Of those, Stericycle identified 87.6 percent as APIs.
Kilbourne asserted Stericycle’s price increases didn’t
correlate to the company’s cost increases.
However, Stericycle asserted he didn’t review all the
original contracts and made assumptions about APIs undermining his math.
The judge, however, sided with the plaintiffs, affording “little
weight” to Boiles’ assertions, which plaintiffs had argued was improper opinion.
“According to Stericycle, its database does not adequately
keep track of contracts over time for customers, so that manual review of each
customer file would be necessary,” Shadur wrote. “But no precedent suggests
that poor bookkeeping should shield a company from potential liability … this court
rejects any argument that depends on Stericycle not adequately tracking its
customer contracts. … There was a time when computers did not exist, yet class
actions did, and if Stericycle has chosen to keep poor records of its contracts
digitally that is not enough to bar class certification.”
In addition to certifying the class, Shadur agreed to the
plaintiffs’ requested definition: any of Stericycle’s small quantity customers that
were charged and paid more than the contracted price dating back to March 8,
2003. Exceptions include customers in Washington and Alaska as well as
governmental entities whose claims were asserted in a federal action against
Stericycle settled with 12 states in November 2015 for
Shadur set a status hearing for Feb. 27.
Stericycle is represented in the action by attorneys with
the firms of Duane Morris LLP, of Chicago, and Parsons Behle & Latimer, of
Salt Lake City.