Suppressed v. Suppressed

Filing 101

Opinion and Order Signed by the Honorable William T. Hart on 2/1/2016:Mailed notice(clw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

UNITED STATES OF AMERICA, and
)
THE STATES OF CALIFORNIA,
)
DELAWARE, FLORIDA, ILLINOIS,
)
INDIANA, MASSACHUSETTS, NEVADA,)
NEW HAMPSHIRE, NEW JERSEY,
)
NEW YORK, NORTH CAROLINA,
)
RHODE ISLAND, TENNESSEE,
)
VIRGINIA, and THE DISTRICT OF
)
COLUMBIA, ex rel.
)
JENNIFER D. PEREZ,
)
)
Plaintiffs,
)
)
v.
)
)
STERICYCLE, INC.,
)
)
Defendant.
)

No. 08 C 2390

OPINION AND ORDER
Plaintiff-relator Jennifer Perez initiated this action under the qui tam
provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3730(b)(1), against
defendant Stericycle, Inc. ("Stericycle") on behalf of the United States of America.
Included in the action are the States of California, Delaware, Florida, Illinois,
Indiana, Massachusetts, Nevada, New Hampshire, New Jersey, New York, North

Carolina, Rhode Island, Tennessee, and Virginia, and the District of Columbia1
under analogous state false claims statutes. Neither the United States nor any of
the other named entities have intervened.
The court has jurisdiction of the federal claim pursuant to 28 U.S.C.
§ 1331 and over the state claims pursuant to 31 U.S.C. § 3732(b).
The case is now before the court on the motion of the relator to obtain
the consent of the court for a voluntary stipulation of dismissal pursuant to
31 U.S.C. § 3730(b)(1). This section provides that the action "may be dismissed
only if the court and the Attorney General give written consent to the dismissal
and their reasons for consenting." A similar provision is contained in the
analogous state false claims statutes which are patterned after the FCA. The
power of the Attorney General to veto a relator's settlement in a non-intervened
case is intended to protect the Government's interests when the interests of the
relator and the defendant are served at a government's expense. U.S. ex rel.
Doyle v. Health Possibilities, P.S.C., 207 F.3d 335, 340-41 (6th Cir. 2000).
The Attorney General of the United States and the Attorneys General of
the States and the District of Columbia initially filed consents for dismissal
1

The District of Columbia also has a False Claims Act. D.C. Code

§ 2-381.

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without providing the court with enough information to find and conclude that
reasons exist to consent to the voluntary dismissal of the action. Thereafter, the
parties were ordered to provide all the terms of the settlement together with factual
data concerning the nature of the claims, the results of discovery, the potential
recovery, the history of settlement negotiations including whether a consent decree
was considered, the fees and expenses, intended division of the recovery, and the
amount of the award to the relator. Pending receipt of the information ordered, the
relator and the governments were ordered to refrain from distribution of the
proceeds of the settlement. All of the information ordered has been provided.
It has been observed that Congress borrowed key language of the FCA,
31 U.S.C. § 3730(c)(2)(B), from the rules governing class action settlements.
Accordingly, courts evaluating proposed FCA settlements must consider some of
the same factors used in evaluating the propriety of class action settlements. U.S.
ex rel. Schweizer v. Oce N. Am., 956 F. Supp. 2d 1, 10-11 (D.D.C. 2013); U.S. ex
rel. Resnick v. Weill Med. Coll. of Cornell Univ., 2009 WL 637137 *2 (S.D.N.Y.
March 5, 2009). However, the court's role in a qui tam action is more limited than
its role in approving the resolution of a private class action because it is

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appropriately deferential to the views of the government which are required to be
considered.
The Claims and Discovery
This case was filed by a relator who was a government customerrelations specialist for Stericycle from 2004 until March 2008. Stericycle is in the
important business of collecting and disposing of medical waste products
throughout the United States. It has many government and private customers. It is
alleged that Stericycle was illegally imposing 18% price increases, annually and
even more frequently, on federal and state government customers with long-term
fixed price contracts that either did not permit price increases or permitted price
increases only to address increases in the company's cost of servicing its
customers. It was alleged that price increases were in violation of contract
provisions and bore no relation to the company's cost.
Initially, the Attorney General of New York investigated the claims as to
New York. The investigation, assisted by relator's attorneys, included obtaining
documents consisting of contracts, invoices, payments, and correspondence that
demonstrated that government customers were being charged price increases on a
regular basis. Relator's counsel arranged for electronic document searches and

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provided analysis. The result was a negotiated settlement by New York with
Stericycle in the amount of $2.4 million which was approved by this court on
January 7, 2013. ECF 20-25.
Stericycle produced data consisting of its transactions with government
customers from 2002 through June 2014. Its last production of documents was
December 12, 2014. Relator's discovery revealed that the cumulative overcharges
of price increases to have been approximately $13.57 million.
Settlement Procedure and Terms
Settlement discussions occurred between January and April of 2015.
Relator was represented by competent and very experienced counsel. The parties
agreed to engage a mediator from the JAMS Alternative Dispute Service in
Washington, D.C. Relator's attorneys made initial demands in excess of what
losses were estimated to be in order to reflect the penalties and treble damages that
the false claims acts allow.
The parties entered into an agreement in principal to settle the case with
a total payment by Stericycle of $28.5 million, $26,750,000 to be paid to the
governments and $1,750,000 to be paid for the settlement and release of the

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relator's claim for attorneys' fees, costs, and expenses as provided under the FCA.2
A copy of the mediation agreement has been submitted to the court.
The settlement agreement did not specify how the $26,750,000 amount
would be allocated among the governments nor what award would be paid to the
relator. Instead, the agreement contemplated that the 14 non-intervening
jurisdictions and the relator would come to an agreement as to the relator's reward
and the allocation of the settlement amount. It was stipulated that Stericycle
would have no involvement in the allocation. In the course of this analysis, it was
discovered that some private Stericycle customers had been miscoded as
government customers. The effect was a $1.8 million decrease from $13.57
million to $11.76 million in the amount of government over-charges. Also,
Stericycle had categorized certain U.S. customers as State customers which
required $66,324.48 in damages to be reallocated to the federal government.
The relator share agreement is between the relator and each of the
governments represented by its respective attorney general. Relator is to be paid
$5,686,294.89 from the settlement amount totaling $26,750,000. The amount
being paid, except for Florida, Tennessee, and California affected local
2

This amount is in addition to $150,000 paid in connection with the
settlement of the New York claims.

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government customers, is 25%.3 This is the bottom of the award range for a case
where the relator pursued the case after the government does not proceed with the
action. 31 U.S.C. § 3730(d)(2). The net amount payable to the government
entities is more than $21 million on claims estimated to be $11.76 million. The
net percentage payable to the relator is approximately 21%, the bottom of the
allowed range.
The submission of the United States represents that the FCA does not
specifically require a consent decree and that the United States did not seek a
consent decree because Stericycle ceased the price increases. The relator notes
that ¶ 3 of the Settlement Agreement provides that "Stericycle shall comply with
all applicable state and/or federal laws, rules, and regulations as now constituted
or as may hereafter be amended." Accordingly, a consent decree is unnecessary.
State of Illinois
Illinois has filed a motion seeking entry of an order for disbursement of
$1,677,910.24 in settlement proceeds to 355 affected state and local government

3

Relator's award in the case of California and Florida is 15% the bottom
of the range under statutes in those states, and 27% in the case of Tennessee which
is below the 35-50% range in a case in which the State of Tennessee does not
intervene.

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entities in Illinois that were adversely affected by Stericycle's conduct. The
Attorney General is notifying each of the entities of the intended distribution.
Illinois's share of the settlement is $4,026,984.56. When Illinois does
not intervene, a relator is entitled to at least 25% and not more than 30% of the
proceeds of the action or settlement. 740 ILCS 175/4(d)(2). Illinois agreed to pay
the relator 25% ($1,006,746.14). Illinois will retain $3,020,238.42, an amount in
excess of the $1,770,935.28 in estimated damages suffered by state and local
entities. The Illinois FCA provides that 1/6 of the proceeds ($671,164.09) be paid
to the Illinois State Police and another 1/6 (another $671,164.09) be paid the
Illinois Attorney General. 740 ILCS 175/8(b).
After the deductions stated , Illinois will have $1,677,910.24. The
Illinois FCA provides that the court may award amounts from the settlement
proceeds "that it considers appropriate to any governmental entity or program that
has been adversely affected by a defendant. The Attorney General, if necessary,
shall direct the State Treasurer to make a disbursement of funds as provided in
court orders or settlement agreements." 740 ILCS 175/4(d)(2). The Settlement
Agreement provides for the payment to the state and local entities in amounts
reflecting the losses identified in discovery. The allocations disclosed are fair and

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appropriate. The motion of the Attorney General of Illinois to make the
disbursement requested will be granted.
Based on the facts presented the amount recovered exceeds the losses
incurred. Each government will recover what has been shown as overpayment
together with a part of the potential penalty. The costs are not in dispute and the
reward to the relator is on the low end of the range. The payment to the relator
will not diminish the benefit to the governmental entities. Accordingly, sufficient
reason exists for the court to consent to the dismissal of this action.
IT IS THEREFORE ORDERED that plaintiff-relator's motions for
settlement and dismissal of the case [95, 96, 97] are granted. The State of Illinois's
motion for disbursement of funds [81] is granted. The prohibition against
disbursement of the proceeds is vacated. This cause of action is dismissed with
prejudice pursuant to the parties' Settlement Agreement.
ENTER:

UNITED STATES DISTRICT JUDGE

DATED: FEBRUARY 1, 2016

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