Burford obtained an arbitration ruling blocking Sysco from closing deals to resolve price-fixing lawsuits against major poultry processors and meatpackers, the company said in the suit filed Wednesday.
Burford, which invested $140 million in the price-fixing and related cases, says the settlements are too low compared to the value of the claims. Sysco accused the litigation funder of “prioritizing its greed over Sysco’s rights and interests as the plaintiff.”
The new court filing offers rare insight into the lucrative world of litigation funding, in which deals are often kept secret and disputes are handled in closed-door arbitration. It also takes aim at Boies Schiller Flexner, the powerful law firm that represented Sysco and which the company said succumbed to pressure from Burford.
Burford CEO Christopher Bogart called the situation “unprecedented” Thursday in a statement provided to Bloomberg Law. “Burford structures our arrangements—as we had with Sysco—precisely to avoid such situations,” he said.
Sysco is seeking a court order setting aside a temporary restraining order issued by the arbitration panel, which stops the settlement agreements. The order “violates several of the most fundamental public policies underlying our judicial system, including party control over litigation,” according to the company.
“For nearly three months, Sysco has been forced to litigate against its will against key suppliers who have offered fair and reasonable settlement payments,” the company said.
Antitrust Funding Deal
The dispute presents a new wrinkle on long-running antitrust litigation involving livestock, agriculture, and protein, including the chicken, beef, turkey, pork, tuna, salmon, egg, and dairy sectors. Sysco is a plaintiff in several of the cases, which generally center on claims that the companies laundered secret commercial information through farm sector databases.
The allegations also go to straight to the core premise, and promise, of the $13.5 billion litigation funding industry. By backing costly legal ventures such as antitrust class actions—on terms that can increasingly resemble complex commercial loans—companies like London-based Burford can make it possible for law firms to shoulder the financial burdens of important cases they might not otherwise be able to take on.
But Burford and other litigation finance firms have pledged not to meddle directly in the cases they pay for, and there are ethical rules restricting their ability to do so. Burford—which has repeatedly said publicly that it doesn’t interfere with clients or their attorneys—has crossed that red line, Sysco claims.
Burford says the company gave the funder the power to veto settlements only after violating the terms of the original investment deal.
The case “highlights the tension between ethical rules and contractual agreements” that give funders and other outside parties a possible say in how litigation is handled, said Jan Jacobowitz, who teaches legal ethics at the University of Miami.
“There’s potential for conflict all over the place,” she said.
According to the petition, the dispute began when Sysco assigned some of its antitrust claims to customers asserting a contractual right to pursue them. Burford agreed with that much, telling Bloomberg Law the assignment was barred by its contracts with Sysco and weakened the company’s incentives to maximize the potential outcomes in the cases.
Sysco’s “admitted breaches of our agreements led to a fundamental economic misalignment between Sysco and Burford of no fault of Burford’s that in turn led to a unique set of contractual provisions and ultimately to this dispute,” Bogart said in the statement.
Sysco in a statement said the action takes aim at Burford’s misplaced contention that it was permitted to “veto any settlement it does not like.”
‘Secret’ Call
Sysco claims it had no choice.
The company handed over certain price-fixing claims in response to lawsuits by customers against another food distributor, US Foods Inc., which balked at similar assignment requests, according to the petition.
When Burford objected, Sysco agreed to rewrite the funding deals to give the financial firm more control over the cases, including a limited right to consent to settlements, the petition says.
The restructured deal allegedly included provisions barring Burford from unreasonably withholding its consent, seeking to impose commercially unreasonable terms, or interfering with Sysco’s attorneys at Boies Schiller. The law firm in 2019 allegedly approached Sysco about a Burford funding arrangement.
After Sysco notified Burford it had reached several settlements, the finance firm objected, saying other plaintiffs had secured better terms, according to Sysco.
The settlement amounts were “too low,” Bogart, Burford’s CEO, said in an interview.
The two sides set a meeting, but a few days before it was scheduled to take place, Burford had a “secret” call with Sysco’s lead attorney, Scott Gant of Boies Schiller, that it kept hidden for months, the petition says.
Details of the conversation are redacted.
Burford later ambushed Sysco on a Sept. 6 call, with Gant appearing to side against his own client, according to the court filing. He allegedly said for the first time that he thought the value of the chicken-related settlement was too low.
Burford’s Bogart said Sysco agreed to allow the funder to talk directly with the company’s lawyers, which he called common practice.
Boies Schiller said in a statement that the firm “strongly disputes” Sysco’s accusations.
“We look forward to the full facts coming out as these issues are adjudicated in court,” the firm said.
Burford later initiated arbitration, obtaining the temporary restraining order in December. The panel is expected to rule soon on whether to make the injunction blocking the settlements permanent.
Sysco is represented by Reed Smith LLP and Cleary Gottlieb Steen & Hamilton LLP.
The case is Sysco Corp. v. Glaz LLC, N.D. Ill., No. 23-cv-1451, petition filed 3/8/23.
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