Cases
Sotera Health Company
Corporate Governance / Derivative
Overview
Overview
- Date:
- 11/13/2023
- Company Name:
- Sotera Health Company
- Stock Symbol:
- SHC
- Class Period:
- FROM 11/20/2020 TO 9/19/2022
- Status:
- Filed
- Filing Date:
- 1/24/2023
- Court:
- U.S. District Court: Northern Ohio
Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against Sotera Health Co. (NASDAQ: SHC) on behalf of long-term stockholders following a class action complaint that was filed against Sotera on January 24, 2023 with a Class Period pursuant to the November 20, 2020 IPO; pursuant to the March 18, 2021 SPO; and/or between November 20, 2020 and September 19, 2022. Our investigation concerns whether the board of directors of Sotera have breached their fiduciary duties to the company.
Sotera provides sterilization and lab testing and advisory services to the medical device and pharmaceutical industries. The Company operates through three businesses: Sterigenics, Nordion, and Nelson Labs. Through its Sterigenics brand, which accounts for the majority of Sotera’s annual revenues, Sotera provides outsourced terminal sterilization services for the medical device and pharmaceutical markets. Terminal sterilization is the process of sterilizing a product in its final packaging.
The Company’s sterilization services rely on three primary technologies, one of which is Ethylene Oxide (“EtO”) processing. EtO processing is a gas sterilization process in which pallets of packaged goods are loaded into a chamber that is then injected with EtO gas to penetrate the packaging. That process emits toxic fumes which must be filtered before being released into the air. Sotera, through its Sterigenics business, conducts or has conducted EtO processing at facilities located in Illinois, California, Georgia, and New Mexico.
In August 2006, the U.S. Environmental Protection Agency (the “EPA”) published an assessment concluding that EtO was significantly more likely to cause cancer than previously known.
In December 2016, the EPA reclassified EtO as a chemical known to be carcinogenic to humans and increased its estimate of EtO’s cancer potency by a multiple of thirty. The EPA has concluded that EtO exposure affects the most vulnerable members of the population, including children, stating that “for a single year of exposure to EtO, the cancer risk is greater for children than for adults . . . because EtO can damage DNA.”
In August 2018, the EPA released the National Air Toxics Assessment (“NATA”)—a screening tool that estimates cancer risks based on emissions data in tens of thousands of census tracts across the United States. The NATA report revealed that people living in communities near Sterigenics’ facilities in Illinois, Georgia, and New Mexico had among the highest cancer rates in the country.
That same month, the Agency for Toxic Substances and Disease Registry of the U.S. Department of Health and Human Services released a report titled “Evaluation of Potential Health Impacts from Ethylene Oxide Emissions.” That report documented the public health impacts of Sterigenics’ emissions on the area surrounding its Illinois facility and revealed the staggering and disproportionate risks of cancer in that area, which included several schools and a daycare.
Beginning in September 2018, shortly after the publication of the EPA’s NATA report, cancer-stricken plaintiffs filed a surge of lawsuits in Illinois against Sotera, alleging that EtO emissions from the Company’s sterilization facility had caused their cancer.
On September 30, 2019, after significant pressure from the public and action taken against the Company by Illinois regulators, Sotera announced the closure of its Illinois facility. Beginning in August 2020, just months before the IPO, cancer-stricken plaintiffs living in proximity to a Sterigenics facility in Georgia filed lawsuits similar to those filed in Illinois.
On November 20, 2020, Sotera conducted its IPO, ultimately selling 53.59 million shares of common stock at $23 per share for gross proceeds of more than $1.2 billion. Months later, on March 18, 2021, the Company conducted the SPO, through which selling shareholders, including affiliates of Sotera’s private equity shareholders, Warburg Pincus LLC (“Warburg Pincus”) and GTCR, LLC (“GTCR”), as well as Sotera’s CEO, sold 25 million shares of Sotera common stock at $27 per share for $675 million in gross proceeds.
In the Offering Materials (defined below) issued in connection with the Offerings, and throughout the Class Period, Sotera made numerous materially false and misleading representations concerning its emissions control systems and exposure to liability from lawsuits for the Company’s failure to limit harmful EtO emissions. The Company represented that it had “a proactive [environmental, health and safety] program and a culture of safety and quality.” In addition, Sotera stated that it employed adequate and effective safeguards to control EtO emissions. Moreover, Sotera and its executives vehemently denied allegations that the Company’s EtO emissions from its sterilization facilities caused cancer and other severe health issues in people living in the communities near those facilities.
These and similar statements made throughout the Class Period were false. In truth, Sotera and its senior executives and controlling shareholders knew, or at a minimum, recklessly disregarded, that for years the Company failed to employ effective emissions control systems to prevent the release of excessive amounts of toxic EtO gas from its sterilization facilities. Those deficiencies exposed people living in the surrounding communities to a significantly increased risk of cancer and subjected Sotera to an increased risk of liability from hundreds of EtO-related lawsuits. As a result of these misrepresentations, shares of Sotera stock traded at artificially inflated prices throughout the Class Period.
Investors began to learn the truth on September 19, 2022, when an Illinois state court jury in the first lawsuit arising from Sotera’s EtO emissions to go to trial, captioned Kamuda v. Sterigenics U.S., LLC, No. 18 L 10475 (Ill. Cir. Ct.) (“Kamuda”), found Sotera liable for the plaintiff’s cancer. Specifically, the jury awarded the plaintiff $363 million in damages, including $38 million in compensatory damages and $325 million in punitive damages. Of great significance for Sotera investors, the jury cited Sotera’s and Sterigenics’ “willful and wanton” misconduct in not preventing toxic EtO emissions, and failing to warn about the severe health hazard posed by the Company’s Illinois facility. As a result of these disclosures, Sotera’s stock price declined by $4.90 per share, or 33.3%, from $14.73 per share on September 16, 2022, to $9.83 per share on September 19, 2022.
On September 19, 2022, after the market closed, news reports revealed that the jury verdict in the Kamuda case was supported by “[e]mails and corporate documents” that showed “the companies knew long ago” about the toxic effects of EtO. Despite that knowledge, Sotera “delayed installing pollution-control equipment and attempted to undermine federal regulations that would require costly improvements at sterilization facilities.”
The next day, on September 20, 2022, analysts at Goldman Sachs downgraded Sotera stock, noting a significantly greater risk to Sotera in future EtO-related litigation due to facts that emerged in the Kamuda case and “possible bands of outcome being so open ended that it creates a material overhang on the stock for the foreseeable future.” As a result of these disclosures, Sotera’s stock price declined by an additional $1.63 per share, or 16.6%, from $9.83 per share on September 19, 2022, to $8.20 per share on September 20, 2022.
Then, on September 21, 2022, analysts at JP Morgan downgraded Sotera stock after finding that “investors are likely to price in this unprecedented ruling as a higher probability of a larger settlement or subsequent payouts of the 700+ remaining individual lawsuits, which [Sotera] could potentially not afford.” As a result of these disclosures, Sotera’s stock price declined by an additional $0.88 per share, or 10.7%, from $8.20 per share on September 20, 2022, to $7.32 per share on September 21, 2022—more than 68% below the IPO price of $23 per share, and nearly 73% below the SPO price of $27 per share.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s shares, Plaintiffs and other Class members have suffered significant losses and damages.
If you are a long-term stockholder of Sotera, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
Sotera provides sterilization and lab testing and advisory services to the medical device and pharmaceutical industries. The Company operates through three businesses: Sterigenics, Nordion, and Nelson Labs. Through its Sterigenics brand, which accounts for the majority of Sotera’s annual revenues, Sotera provides outsourced terminal sterilization services for the medical device and pharmaceutical markets. Terminal sterilization is the process of sterilizing a product in its final packaging.
The Company’s sterilization services rely on three primary technologies, one of which is Ethylene Oxide (“EtO”) processing. EtO processing is a gas sterilization process in which pallets of packaged goods are loaded into a chamber that is then injected with EtO gas to penetrate the packaging. That process emits toxic fumes which must be filtered before being released into the air. Sotera, through its Sterigenics business, conducts or has conducted EtO processing at facilities located in Illinois, California, Georgia, and New Mexico.
In August 2006, the U.S. Environmental Protection Agency (the “EPA”) published an assessment concluding that EtO was significantly more likely to cause cancer than previously known.
In December 2016, the EPA reclassified EtO as a chemical known to be carcinogenic to humans and increased its estimate of EtO’s cancer potency by a multiple of thirty. The EPA has concluded that EtO exposure affects the most vulnerable members of the population, including children, stating that “for a single year of exposure to EtO, the cancer risk is greater for children than for adults . . . because EtO can damage DNA.”
In August 2018, the EPA released the National Air Toxics Assessment (“NATA”)—a screening tool that estimates cancer risks based on emissions data in tens of thousands of census tracts across the United States. The NATA report revealed that people living in communities near Sterigenics’ facilities in Illinois, Georgia, and New Mexico had among the highest cancer rates in the country.
That same month, the Agency for Toxic Substances and Disease Registry of the U.S. Department of Health and Human Services released a report titled “Evaluation of Potential Health Impacts from Ethylene Oxide Emissions.” That report documented the public health impacts of Sterigenics’ emissions on the area surrounding its Illinois facility and revealed the staggering and disproportionate risks of cancer in that area, which included several schools and a daycare.
Beginning in September 2018, shortly after the publication of the EPA’s NATA report, cancer-stricken plaintiffs filed a surge of lawsuits in Illinois against Sotera, alleging that EtO emissions from the Company’s sterilization facility had caused their cancer.
On September 30, 2019, after significant pressure from the public and action taken against the Company by Illinois regulators, Sotera announced the closure of its Illinois facility. Beginning in August 2020, just months before the IPO, cancer-stricken plaintiffs living in proximity to a Sterigenics facility in Georgia filed lawsuits similar to those filed in Illinois.
On November 20, 2020, Sotera conducted its IPO, ultimately selling 53.59 million shares of common stock at $23 per share for gross proceeds of more than $1.2 billion. Months later, on March 18, 2021, the Company conducted the SPO, through which selling shareholders, including affiliates of Sotera’s private equity shareholders, Warburg Pincus LLC (“Warburg Pincus”) and GTCR, LLC (“GTCR”), as well as Sotera’s CEO, sold 25 million shares of Sotera common stock at $27 per share for $675 million in gross proceeds.
In the Offering Materials (defined below) issued in connection with the Offerings, and throughout the Class Period, Sotera made numerous materially false and misleading representations concerning its emissions control systems and exposure to liability from lawsuits for the Company’s failure to limit harmful EtO emissions. The Company represented that it had “a proactive [environmental, health and safety] program and a culture of safety and quality.” In addition, Sotera stated that it employed adequate and effective safeguards to control EtO emissions. Moreover, Sotera and its executives vehemently denied allegations that the Company’s EtO emissions from its sterilization facilities caused cancer and other severe health issues in people living in the communities near those facilities.
These and similar statements made throughout the Class Period were false. In truth, Sotera and its senior executives and controlling shareholders knew, or at a minimum, recklessly disregarded, that for years the Company failed to employ effective emissions control systems to prevent the release of excessive amounts of toxic EtO gas from its sterilization facilities. Those deficiencies exposed people living in the surrounding communities to a significantly increased risk of cancer and subjected Sotera to an increased risk of liability from hundreds of EtO-related lawsuits. As a result of these misrepresentations, shares of Sotera stock traded at artificially inflated prices throughout the Class Period.
Investors began to learn the truth on September 19, 2022, when an Illinois state court jury in the first lawsuit arising from Sotera’s EtO emissions to go to trial, captioned Kamuda v. Sterigenics U.S., LLC, No. 18 L 10475 (Ill. Cir. Ct.) (“Kamuda”), found Sotera liable for the plaintiff’s cancer. Specifically, the jury awarded the plaintiff $363 million in damages, including $38 million in compensatory damages and $325 million in punitive damages. Of great significance for Sotera investors, the jury cited Sotera’s and Sterigenics’ “willful and wanton” misconduct in not preventing toxic EtO emissions, and failing to warn about the severe health hazard posed by the Company’s Illinois facility. As a result of these disclosures, Sotera’s stock price declined by $4.90 per share, or 33.3%, from $14.73 per share on September 16, 2022, to $9.83 per share on September 19, 2022.
On September 19, 2022, after the market closed, news reports revealed that the jury verdict in the Kamuda case was supported by “[e]mails and corporate documents” that showed “the companies knew long ago” about the toxic effects of EtO. Despite that knowledge, Sotera “delayed installing pollution-control equipment and attempted to undermine federal regulations that would require costly improvements at sterilization facilities.”
The next day, on September 20, 2022, analysts at Goldman Sachs downgraded Sotera stock, noting a significantly greater risk to Sotera in future EtO-related litigation due to facts that emerged in the Kamuda case and “possible bands of outcome being so open ended that it creates a material overhang on the stock for the foreseeable future.” As a result of these disclosures, Sotera’s stock price declined by an additional $1.63 per share, or 16.6%, from $9.83 per share on September 19, 2022, to $8.20 per share on September 20, 2022.
Then, on September 21, 2022, analysts at JP Morgan downgraded Sotera stock after finding that “investors are likely to price in this unprecedented ruling as a higher probability of a larger settlement or subsequent payouts of the 700+ remaining individual lawsuits, which [Sotera] could potentially not afford.” As a result of these disclosures, Sotera’s stock price declined by an additional $0.88 per share, or 10.7%, from $8.20 per share on September 20, 2022, to $7.32 per share on September 21, 2022—more than 68% below the IPO price of $23 per share, and nearly 73% below the SPO price of $27 per share.
As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s shares, Plaintiffs and other Class members have suffered significant losses and damages.
If you are a long-term stockholder of Sotera, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Marion Passmore by email at investigations@bespc.com, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.
The individual or institution below (“Plaintiff”) has reviewed and agrees to the Bragar Eagel & Squire, P.C. (“BESPC”) retainer agreement and authorizes BESPC to prosecute an action on Plaintiff’s behalf under the federal securities laws or applicable state laws to recover damages on behalf of investors in Sotera Health Company. BESPC will prosecute the action on a full contingency basis and will forward all costs and expenses.
Case Updates
Retainer Agreement
This will confirm that you have retained Bragar Eagel & Squire, P.C. (“BESPC”) to represent you in connection with potential litigation against Sotera Health Company (the “Company”) and its directors and officers. BESPC has conducted an investigation and believes that there is a valid basis to assert claims against the Company and its directors and/or officers for breach of fiduciary duties and other applicable laws.
In making this agreement, BESPC is relying upon your representation that you held the Company’s shares during the period from 11/20/2020 to 9/19/2022 (the “Relevant Period”) and that you continue to hold Company shares. Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other shareholders or the Company concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
BESPC will prosecute this litigation on a contingency basis. You will not be responsible for paying any legal fees, costs, or out-of-pocket expenses arising out of or related to the prosecution of this litigation, regardless of the outcome of the matter. If there is a monetary recovery in this action, BESPC will, at the conclusion of the litigation or any segment thereof, apply to the court for approval of an award of attorneys’ fees and reimbursement of expenses. BESPC may also seek a fee if we obtain substantial non-monetary relief for the Class or the Company. The court will then award fees and disbursements (if any) from the proceeds of any judgment or settlement obtained in this litigation, based on factors considered relevant by the court. Such fees, costs, and disbursements will be paid from the entire settlement amount and not only from your share of the settlement amount.
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
It is possible that you will not be appointed as a lead plaintiff in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time.
Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.
In making this agreement, BESPC is relying upon your representation that you held the Company’s shares during the period from 11/20/2020 to 9/19/2022 (the “Relevant Period”) and that you continue to hold Company shares. Please provide us with documentation of your trading history in the Company’s stock by emailing a relevant copies of your brokerage statements to investigations@bespc.com. If you have any questions or need assistance, please call us at (212) 308-5858.
The terms under which we will represent you and your responsibilities as a potential representative plaintiff are set forth below.
Your Responsibilities as a Representative Plaintiff
As a representative plaintiff, you will have a duty to represent the interests of similarly situated shareholders and to participate in the prosecution of this litigation. You may also be asked to provide documents concerning your trading in Company stock and may be asked to sit for a deposition. Accordingly, you should preserve all documents that relate to this case until it has concluded or we inform you otherwise. Relevant documents include any information you have about the Company or your trading in Company stock, no matter how it is recorded or who is keeping it for you. If you have any questions about whether information should be retained, please contact us.You will have an obligation to remain knowledgeable about the litigation and participate in decisions concerning the progress of the litigation. If BESPC is appointed as lead counsel or in a similar capacity in the action, we will provide you with copies of all pleadings in the litigation for your review and approval, circumstances permitting, before they are filed with the court. BESPC will also promptly advise you of any significant developments in the litigation.
As a representative plaintiff, you cannot have any interest antagonistic to or in conflict with other shareholders or the Company concerning the claims we are pursuing or any relationships with any of the named defendants that would in any way impair your ability or incentive to obtain the best possible result. You agree that neither you nor any of your affiliates or agents will trade stocks while in the possession of any material non-public information you may receive in connection with the litigation. In addition, as a representative plaintiff, you may be required to continue holding Company shares. Please contact us before buying or selling Company shares.
Contingency Fee and Advancement of Expenses
BESPC will prosecute this litigation on a contingency basis. You will not be responsible for paying any legal fees, costs, or out-of-pocket expenses arising out of or related to the prosecution of this litigation, regardless of the outcome of the matter. If there is a monetary recovery in this action, BESPC will, at the conclusion of the litigation or any segment thereof, apply to the court for approval of an award of attorneys’ fees and reimbursement of expenses. BESPC may also seek a fee if we obtain substantial non-monetary relief for the Class or the Company. The court will then award fees and disbursements (if any) from the proceeds of any judgment or settlement obtained in this litigation, based on factors considered relevant by the court. Such fees, costs, and disbursements will be paid from the entire settlement amount and not only from your share of the settlement amount.
Association with Counsel
BESPC may associate with other counsel to assist in the prosecution of this litigation. Any recovery of fees and costs will be shared with such counsel, determined on a percentage basis or based upon the time spent on the matter, as approved by the court if applicable. The division of work and or fees among co-counsel will not affect the amount of fees received upon a successful completion of the litigation. From time to time, BESPC may utilize contract attorneys to supplement the work of its own employed attorneys. BESPC will supervise the work of all contract attorneys and adopt their work product as its own. You authorize BESPC, as we deem appropriate, to associate with other counsel and to hire experts and consultants to assist in the handling of your claims.
Other Actions
It is possible that you will not be appointed as a lead plaintiff in the action. However, we may wish to represent you in other litigation related to the wrongful acts giving rise to this case. In such event, we will contact you to discuss the scope of such representation and obtain your approval before moving forward. You also agree that we may contact you with respect to other potential matters on your behalf.No Special Treatment
You understand that in the event we secure a recovery, you will not receive any special treatment or receive a greater share of any recovery based on your service as a named plaintiff. However, we may ask the Court to approve an additional award to you to compensate you for the time and effort you expend on this matter. Any such award is solely within the discretion of the Court.
Settlement
BESPC will consult with you regarding any settlement negotiations and seek to obtain your approval for any proposed resolution of this litigation before entering into a final settlement agreement with defendants.
No Guarantee of Success
You expressly acknowledge that we have not made any representation to you, express or implied, concerning the outcome of any litigation or other matter in which we represent you.
Termination of This Agreement
If you are not chosen as a representative plaintiff and we do not choose to pursue other related litigation on your behalf, we will provide you with notification and this Agreement shall terminate. Otherwise, this Agreement shall remain in effect until the conclusion of the relevant litigation. However, you may terminate this Agreement at any time. Upon termination, BESPC’s files and papers compiled in connection with its investigation and prosecution of this matter constitute the work product and property of BESPC over which it has complete control with respect to its use and/or disclosure.
This agreement sets forth the entire agreement between the parties and supersedes all other oral or written communications.
Please feel free to contact us at any time should you have any questions or comments in this regard.