Sysco Corp. says a litigation funder that gave the food distributor $140 million to pursue price-fixing lawsuits is blocking it from hiring new lawyers in the cases.
Burford Capital Ltd. is seeking to scuttle settlements in at least two of the lawsuits, in which Sysco accuses poultry processors and meatpackers of antitrust violations. The funder has also prevented Sysco from getting new lawyers, according to the company.
“Sysco has not been able to secure the replacement counsel of its choice,” the company said in a court filing, because of Burford’s meddling in the settlement discussions. Burford has also refused to sign off on a new fee arrangement for replacement lawyers, according to the company.
Jonathan Molot, Burford’s chief investment officer, in an interview called Sysco’s characterization of the situation “disingenuous” and “inaccurate.”
Burford and other litigation funding firms in what’s now a $13.5 billion industry have consistently pledged not to directly control the lawsuits that they finance. The Sysco dispute—Burford says the settlements are “too low"—offers a rare glimpse into funding deals and the interplay between funders, lawyers and clients.
“The reason this whole thing works in cases where funding is law firm directed is because lawyers maintain their independence,” John Hanley, an attorney at Rimon Law Firm who frequently negotiates litigation finance agreements, said in an interview. “This might be a case there where we’re setting a precedent that’s not good for the market.”
Sysco filed a lawsuit in a federal court in Illinois earlier this month, alleging that Burford meddled in the food distributor’s efforts to settle the antitrust cases with suppliers. It also accused Burford of conspiring with Sysco’s lawyer to block the settlements.
The company says after it discharged its original counsel, Scott Gant of Boies Schiller, Burford refused to sign off on Sysco’s proposed fee arrangement for replacement lawyers.
Sysco reached out to at least one other law firm, which already represents other claimants in the antitrust suits. The firm told Sysco they couldn’t represent it out of fear that Burford’s involvement would impact settlement for their existing clients, according to the company, which declined to identify the firm.
Burford says it won’t stand in the way of Sysco hiring new lawyers, as long as the company agrees to cover any additional costs for substitute counsel.
“It was purely a strategic move that had no legal merit whatsoever,” Molot said of Sysco’s court filing. “The statements suggesting that Burford improperly interfered with the independent judgment of our counsel were also false.”
The contract between Sysco and Burford has not been made public, although some of its terms are described in court filings. The agreement was updated after Sysco assigned to its customers some of the company’s legal claims against the poultry processors and meatpackers.
Burford’s standard funding contract doesn’t limit companies to a particular list of replacement counsel, according to Molot. The funder will not interfere with the decision, he said, so long as the new lawyers are of a similar caliber to original counsel and hiring them doesn’t increase Burford’s costs.
The general terms of the funding deal appear standard, Hanley said, but Burford seems to have taken an aggressive stance on of its ability to withhold consent for the settlements and new lawyers.
Molot, the Burford spokesman, said its phones have been “ringing off the hook” with firms calling to offer representation to Sysco.
The case is Sysco Corp. v. Glaz LLC, N.D. Ill., No. 23-cv-1451, petition filed 3/8/23.
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