A federal judge has approved a new agreement allocating $7.7 million in legal fees to attorneys who led a class action against Stericycle, which represents more than a 30% cut from their initial fees of $11 million, which an appeals court deemed excessive.
The lawsuit in question originated in October 2015, when two Florida pension funds sued Stericycle alleging company executives inflated its stock price through misleading statements about fraudulent billing practices. That lawsuit followed Stericycle’s decisions earlier in the decade to agree to pay more than $325 million to settle a number of legal actions from public and private sector customers, based on a whistleblower’s allegations the company imposed illegal price increases.
In the stock price lawsuit, U.S. District Judge Andrea Wood appointed two pension funds as lead plaintiffs — the Arkansas Teacher Retirement System and the Public Employees’ Retirement System of Mississippi — and named attorneys from the firm of Bernstein Litowitz Berger & Grossman as lead counsel. After two years, with motions to dismiss pending, the parties agreed to settle for $45 million and the firm sought a 25 percent fee award, or about $11.25 million.
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| HLLI.org
Class member Mark Petri objected to that award, asking Judge Wood to allow discovery on so-called “pay to play” arrangements between the law firm and the Mississippi fund. Wood denied both requests, prompting Petri to appeal to the U.S. Seventh Circuit Court of Appeals. In a May 2022 opinion, that panel said Wood’s analysis of appropriate legal fees was incomplete and sent the matter back to her court for recalculation.
On Jan. 30, Wood issued a new order granting the plaintiffs’ revised motion for fees. Now, the fee award represents only 17.5% of the settlement fund, almost $7.7 million, plus interest. Wood also said Petri will get a $1,000 incentive award as an objector, while $575,000 will go to his lawyer, Ted Frank, who has won renown throughout the country for representing objectors to class action settlements.
Wood explained Petri did not object to the reduced fee request, which she said weighs in favor of granting the award. She also said she followed the Seventh Circuit panel’s lead and assessed a September 2016 agreement in which the Mississippi Attorney General’s Office retained Bernstein Litowitz Berger & Grossman regarding the Stericycle lawsuit, which included a sliding schedule for potential recovery with percentages decreasing based on the size of the settlement fund.
“As interpreted by the Seventh Circuit, application of the ex ante fee agreement between MissPERS and lead counsel to a recovery of $45 million calls for an award of attorneys’ fees equal to approximately 12.78% of the settlement,” Wood wrote. “However, the MissPERS agreement was not the only applicable ex ante fee agreement in this matter. Rather, under its fee agreement with the Arkansas Teacher Retirement System, lead counsel was permitted to seek attorneys’ fees of up to 25% of the net recovery.”
Wood said she also took direction to consider the factors the Seventh Circuit said reduced the risk plaintiffs would get nothing absent a settlement. Among those factors were settlements in other Stericycle suits, including one from state and federal attorneys. But the other private litigation hadn’t reach settlement at the time the Arkansas and Mississippi funds sued, Wood noted, and dealt with customers, not investors. She also said Bernstein Litowitz Berger & Grossman argued the other lawsuits actually jeopardized the funds’ action by possibly allowing Stericycle to plead them out of court through invoking statutory limitations.
The Seventh Circuit also told Wood to more closely scrutinize the lawyers’ workload relative to the fee request, notably because the settlement preceded a ruling on a motion to dismiss. Wood said the case was pending for two years prior to the settlement, including two rounds of briefing on the dismissal motions, and also said the firm “persuasively explains why an early settlement was in the best interests of the class, as Stericycle’s precarious financial position meant that the risk of nonpayment actually increased the longer the case remained pending.”
Wood said Petri’s objection ultimately saved class members $3.3 million and noted the $575,000 for his lawyer represents 17.4% of that benefit.