By: Christopher L. Farmer
Over the past several years funeral service businesses have faced several challenges that have affected performance and profitability, including an increasing cremation rate, decreasing revenue per call, and increasing operating costs. We have worked hard to face those challenges, and some of those challenges can be managed. Expenses like employee-related costs, insurance, liability costs, etc., can be controlled with careful and diligent management. However, some costs imposed on our industry have been fraudulently levied by corporate predators looking to line their own pockets with the hard-earned money of those in funeral service who are dedicated to serving others.
A series of lawsuits have been filed across the country against Stericycle, Inc., (NASDAQ: SRCL) alleging that the biomedical waste company breached contracts and defrauded its customers out of hundreds of millions of dollars through a series of impermissible and fraudulent practices. Stericycle collects and processes biohazard waste for disposal and offers a range of training, consulting, and compliance services. The lawsuits claim, among other things, that Stericycle systematically and regularly raised prices, despite agreeing to supposedly fixed-price contracts, and failed to inform its customers about the price increases. The suits claim that:
- plaintiffs were invoiced for an automatic price increases that was neither calculated using dollar amounts of costs incurred nor authorized by contract;
- Stericycle engaged in a common scheme and practice of offering false and misleading information to induce customers to enter into contracts;
- Stericycle then engaged in further fraudulent conduct to conceal price increases with false and misleading information as well as illusory price reductions; and,
- Stericycle charged plaintiffs for several “undisclosed fees” that were hidden increases buried in invoices.
Stericycle admits that it has employed automatic price increases and has charged other extra fees without notice or justification, and it has acknowledged that at least some of its contracts with plaintiffs forbid automatic price increases without notice and justification.i One plaintiffs’ expert claims that damages for the class members was $608 million, comprising $481 million for automatic price increases and $127 million for surcharges.ii The most recent lawsuit has now been certified by the court to proceed as a class-action.
Most in funeral service are probably familiar with Stericycle as they have a large presence in our industry. However, what you might not know is that Stericycle is a publicly traded company with a market capitalization of almost $7 billion and revenues of approximately $3.56 billion in 2016, according to its Securities and Exchange Commission filings. That is larger than any company in funeral service.
Stericycle operates regulated waste management networks in the United States and more than 20 other countries. It has approximately 250 processing facilities, over 360 transfer sites, and over 140 other service facilities. Stericycle’s customers include hospitals, physician and dental practices, outpatient clinics, and, of course, funeral service businesses.
The lawsuits against Stericycle allege that the medical waste disposal company misled its customers regarding pricing. The lawsuits detail Stericycle’s electronic billing and accounting software system, which was allegedly set to default to an 18 percent “automated price increase” for “small-quantity” customers. According to the suits, those accounts made up 97 percent of Stericycle’s customers worldwide.
Following the imposition of the Automatic Price Increase, the suits claim, Stericycle’s customer service department received a large volume of complaint calls, and customer service representatives were told to give false reasons for the price increases to get customers to pay.
The suits also claim that Stericycle improperly increased prices by charging several fees and surcharges, labeled as fuel costs or environmental fees. However, these charges were not connected to actual costs, which is why Stericycle often hid them from customers on invoices by bundling them with its flat fees, the suits claim.
The suits charge Stericycle with breach of contract and violations of consumer protection laws across several states. It asks the court to award damages to a class of Stericycle’s customers impacted by the fraudulent behavior alleged in the complaint.
I have multiple clients who claim to be victimized by obscene price increases in price over the many years they were Stericycle clients. I have clients who reported being charged $5,000 for one month’s pick-ups when they volume had not changed from the original $160 contract price. Some of my clients reported being billed for pick-ups that didn’t occur and services for which they did not contract. Many reported Stericycle demanding excessive fees, in excess of $50,000, to simply get out of a Stericycle contract.
In a previous case against Stericycle, United States ex rel. Perez v. Stericycle, Inc., Stericycle supervisors admitted that they were aware that Stericycle’s practices were improper, yet Stericycle continued these practices with its other clients, the recently certified lawsuit claims. The whistleblower lawsuit stated that the company had illegally raised its prices to garner millions from the federal government, several states, and Washington, D.C. The data revealed that the federal government and the states were overcharged by approximately $12 million. Stericycle agreed to pay $26.8 million to settle that lawsuit.
Stericycle also paid $2.4 million to settle a former employee’s whistleblower claim that the medical waste disposal company overcharged more than 1,000 New York government entities by hiding automated price increases for its services. The lawsuits that have been filed so far largely ignore the fact that the funeral service industry has been hit hard by Stericycle’s alleged overcharging.
The lawsuits filed recently identify the specific industries that assert to have been victimized by Stericycle’s pricing. However, they have not mentioned our industry by name and I have heard from clients that the lead firm in the class action is not accepting funeral service businesses as clients. Plaintiffs’ attorneys are lining up to sign up medical offices, labs, and veterinary clinics, but are not standing up to represent our industry. Until now.
I have been representing funeral service for over 15 years. My entire business is dedicated to funeral service. For years, I have had my clients call me asking for help in dealing with the corporate behemoth that is Stericycle. The costs and contract terms were so onerous that it significantly impacted small- and medium-sized businesses alike.
However, the lawsuits that had been brought against Stericycle on a one-off basis in the past were largely unsuccessful, and the costs of bringing an individual suit were prohibitive. However, now that some of these actions have been successful and are being allowed to proceed on a collective basis, the opportunity exists to stand together to prosecute these claims. I have had several opportunities to initiate lawsuits for plaintiffs in our industry, most against the bad actors in our profession who could end up giving the entire industry a bad name, but I have always declined – not wanting to cross the line from defender of our industry to prosecutor. This case, however, is a different story. Right now, we have the opportunity for our industry to stand together and have a chance to get back a little bit of that money that those who serve our communities worked so hard to earn over so many years.
Funeral service businesses have been struggling for years from Stericycle’s business practices and automatic price increases, and I am eager to bring them restitution for what I believe to be outright fraud. You have worked hard to serve your families and build your business. Don’t let someone get away with taking that away from you.
This article is meant to educate you on the damage that might have been done to your business if you have been a Stericycle customer over the past 15 years. However, it is also to educate you on what you can do to make it right. You have the opportunity to possibly recover some of the hard- earned money that might have been taken from you by fraudulent business practices. Since 2003, Stericycle’s electronic billing software has instituted an automatic 18 percent price increase every six to 12 months. If your business used Stericycle in the past 15 years, you may have been defrauded.
If you would like to learn more about Stericycle litigation, or to discuss having your contracts and billing reviewed free of charge to see if you were defrauded, please contact me at chris@thefarmerfirm.com or call me at 713-367-1013 to discuss this matter.