Mark Petri v. Stericycle, Incorporated, 35 F.4th 555

Background

Stericycle faced prior qui tam and consumer/government litigation that produced settlements totaling over $325 million and generated documentary and testimonial evidence about the company’s billing practices.
Two Florida pension funds filed a securities-fraud class action; the court later appointed the Mississippi and Arkansas public pension funds as lead plaintiffs and Bernstein Litowitz as lead counsel.
No merits discovery was conducted; motions to dismiss were pending when the parties reached a $45 million settlement and lead counsel sought a 25% fee plus costs.
Class member Mark Petri objected to the 25% fee and moved to lift a discovery stay to investigate counsel’s billing, fee-allocation arrangements, and possible pay-to-play relationships between lead counsel and the Mississippi fund.
The district court approved the settlement and 25% fee and denied Petri’s discovery motion; the Seventh Circuit vacated the fee award and remanded, finding the district court underweighted (1) an ex ante tiered retention agreement, (2) reduced risk due to prior litigation, and (3) the early stage of settlement; the court affirmed the denial of discovery into pay-to-play allegations.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Reasonableness of 25% fee award	Petri: 25% is excessive given low risk, heavy prior litigation work, and early-stage settlement.	Lead counsel: Percentage is reasonable given contingent risk and class benefit.	Vacated and remanded — district court failed to give sufficient weight to ex ante fee agreement, reduced risk from prior proceedings, and early settlement; recalc to approximate ex ante market.
Significance of ex ante retention agreement (Mississippi)	Petri: The retention agreement’s sliding-scale structure should guide the market-rate fee.	Lead counsel: Agreement applies only to Mississippi fund’s share and does not mandate total-fund percentage.	Court: Ex ante sliding scale is a key market proxy; district court should have given it substantial weight and consider applying it across the total fund on remand.
Discovery re billing methods and fee allocation	Petri: Discovery into billing and prior fee-sharing would reveal padding or pay-to-play incentives.	Lead counsel: Fee is percentage-based and disclosed allocations will follow lodestar; billing details irrelevant.	Affirmed — district court did not abuse discretion; disclosures and declarations addressed allocation and work; intrusive billing discovery not warranted.
Discovery into pay-to-play / campaign contributions	Petri: Campaign contributions and alleged patterns justify discovery into influence on selection/fees.	Lead counsel: Contributions are public, legal, and not probative of influence; selection process was proper.	Affirmed — public contributions alone do not justify intrusive discovery absent stronger preliminary evidence; district court reasonably denied the request.

Key Cases Cited

In re Synthroid Mktg. Litig., 264 F.3d 712 (7th Cir. 2001) (use ex ante market-based approach and consider sliding-scale fee agreements)
Silverman v. Motorola Solutions, Inc., 739 F.3d 956 (7th Cir. 2013) (sliding-scale fee arrangements are common and logical in class settlements)
Camp Drug Store, Inc. v. Cochran Wholesale Pharmaceutical, Inc., 897 F.3d 825 (7th Cir. 2018) (early-stage settlement can justify fee reduction when less work was required)
In re Trans Union Corp. Privacy Litig., 629 F.3d 741 (7th Cir. 2011) (ex post fee estimation is inherently conjectural; must approximate ex ante market)
In re Cendant Corp. Litig., 264 F.3d 201 (3d Cir. 2001) (recognizing pay-to-play risks with public pension lead plaintiffs and suggesting disclosure/remedies)
Birchmeier v. Caribbean Cruise Line, Inc., 896 F.3d 792 (7th Cir. 2018) (appellate review of class fee awards is deferential but district court must adequately explain rationale)
Sutton v. Bernard, 504 F.3d 688 (7th Cir. 2007) (courts should award counsel the market price for services given risk and market conditions)