Food wholesaler Sysco is back in federal court with yet another motion asking a judge to invalidate an arbitration award in an antitrust lawsuit, its latest attempt to prove third party litigation financier Burford Capital is being allowed to improperly interfere with out-of-court settlements.
Sysco’s newest filing, dated March 20, comes shortly after arbitrators ruled Burford has the rights under its contract with Sysco to stop the Houston-based company from settling for less than what Burford wants to justify its $140 million investment in antitrust claims against companies like Tyson Foods that supply chicken, pork, beef and other foods.
The capital infusion puts Burford — through subsidiaries Glaz, Posen Investments and Kenosha Investments — in line to share in any proceeds, but Sysco has argued the “multibillion dollar litigation funding firm” has exceeded its limited settlement consent rights and is effectively forcing Sysco to continue litigating against its will despite multiple public claims it would not attempt to control the lawsuits.
Sysco sought to vacate the initial award in a March 8 filing, but Burford said that effort was mooted March 10 when an international tribunal in London issued a preliminary injunction against Sysco. A Burford spokesperson said the company also filed suit in New York seeking a court order enforcing the tribunal’s injunction.
On March 20, Sysco filed an amended petition for vacation, including as evidence emails from September 2022 among Burford officials disclosing the financier’s internal objections to Sysco’s settlement plans; a March 17 letter from Burford purporting to detail Sysco’s multiple contractual violations; and the March 20 response Sysco sent to Burford to assert the company’s actions reveal “the extent to which Burford has lied to Sysco, the tribunal, and the world about the lack of any control rights in its ‘standard’ contract or how easily Burford can trump up charges against its client to invoke such purported rights.”
Sysco said the March 20 filing incorporated the contents of its March 8 motion, while also asserting the tribunal “did not follow the law or afford due process” and provided to Burford a “secret dream come true: unfettered control over the settlement of its clients' federal antitrust litigation claims.”
In arguing the arbitration award contravenes public policy, Sysco further contended the tribunal’s majority opinion lacks “any consideration for the already overburdened courts that are now forced to manage complex and resource-consuming litigation between parties who want to settle, the other parties to those complex litigations, taxpayers who fund the court system, or the integrity of the judicial process, whose most fundamental purpose is to do justice rather than to function as a casino in which investors can gamble in the hopes of achieving a financial windfall.”
Sysco also filed a memorandum in support of its new petition to vacate. In that document it noted the contract with Burford gives that company the right to seek damages if Sysco were to commit a breach by settling a lawsuit without consent, but said Burford is instead attempting to wield veto power. Sysco has maintained being forced to abandon its settlement would put it at risk of “chilling key commercial relationships” with certain customers, while Burford has asserted those settlements would leave money on the table.
In the middle of that debate is Scott Gant, of Boies Schiller, the firm that was Sysco’s outside counsel but also represents Burford in its own antitrust lawsuits. In a Sept. 2 email, Burford Chief Investment Officer Jonathan Molot said Gant told him the proposed offers were too low.
“(Gant) believes Sysco is proceeding to settle these cases at this level based entirely on their business considerations and not on the merits of the suits or what could be recovered if the cases were to proceed,” Molot wrote. “He said that because they are his client, he doesn’t feel it is his place to second-guess their business judgment about the true costs to them as a business matter from leaving the disputes outstanding.”
For its part, Sysco said “Gant participated in multiple mediation sessions, consulted regularly with Sysco' s in-house counsel on settlement strategy and assisted in preparing settlement documentation.” In so doing, Sysco said, Gant advised a dollar range for the value of its antitrust lawsuit, with the proposed settlement falling within that range.
Sysco discharged Boies Schiller on Feb. 23, but said Burford’s assertion of veto rights is partially inhibiting its ability to secure new outside counsel, including ongoing refusal to consent to a prospective new firm’s fee arrangement. Sysco also said other defendants are exploring amicable resolutions to lawsuits, but Burford’s involvement inhibits those conversations.
Representing Sysco in the petitions are attorneys William Weltman, of Reed Smith, of Chicago; Jeffrey A. Rosenthal, Lina Bensman and Christopher P. Moore, of Cleary Gottlieb, of New York and London.
A spokesperson for Burford did not reply to requests for comment from The Cook County Record.