$46 Million RICO Settlement for 170,000 Victims of Stream Energy's Ignite Pyramid Scheme

Stream Energy sold electricity and natural gas in deregulated markets across the southern United States, but its growth depended heavily on a multilevel marketing program called Ignite. To join as an Independent Associate, recruits paid $329 upfront and earned commissions both from energy sales and from signing up new associates beneath them. Plaintiffs alleged that the recruitment mechanics, not energy sales, were the true engine of the business, making Ignite a pyramid scheme under federal law.

The financial damage was substantial. Evidence in the record showed that more than 86 percent of people who joined as Independent Associates ultimately lost money, with collective losses exceeding $87 million. A class of roughly 170,000 current and former associates filed suit in the Southern District of Texas, asserting civil RICO claims predicated on mail and wire fraud.

The district court certified the class in January 2014, but a divided Fifth Circuit panel reversed that decision in 2015. Plaintiffs, with Kochanowski and co-counsel pressing for en banc review, persuaded the full Fifth Circuit to rehear the appeal. In September 2016, the court sitting en banc affirmed class certification, a ruling that kept the case alive and set the stage for settlement negotiations.

With the class certification locked in, the parties reached a settlement in March 2018. The district court granted final approval in October 2018. Under the terms, class members could elect a cash payment equal to 20 percent of the net amount they lost through Ignite, or choose non-cash benefits including service credits and reinstatement as associates. The total settlement fund exceeded $46 million. Attorneys' fees and costs of $10.275 million were approved alongside the settlement, though the Fifth Circuit later vacated the fee-allocation order in 2019, directing the district court to apply the Johnson factors framework when dividing the award among the multiple co-counsel firms.

For Sommers Schwartz, the result capped nearly a decade of litigation that began with the original 2009 filing and wound through two Fifth Circuit arguments before producing meaningful recovery for the class.