A federal judge has sealed off one avenue for Sysco Corporation to prevent third-party litigation financier Burford Capital from blocking the commercial food distributor from settling antitrust lawsuits with poultry producers accused of fixing prices and depressing supply.
In late March, Sysco asked U.S. District Judge Martha Pacold to invalidate an international arbitration ruling in favor of Burford that held the financier has the contractual right to top 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 said the “multibillion dollar litigation funding firm” has exceeded its limited settlement consent rights and is violating the law by denying Sysco the ability to control its own lawsuits. That dispute goes back to August, when Sysco alleged Burford first said proposed settlements were too low compared to the outcome of other antitrust litigation.
The case is in federal court in Chicago in part because that’s where the poultry price fixing litigation is based. Sysco also asked to have its motion to vacate the injunction reassigned to U.S. District Judge Thomas Durkin and consolidated with the some of the antitrust proceedings. Durkin also presides over that litigation, which since 2016 has seen chicken producers defending against several lawsuits incorporating similar allegations: producers boosted profits by sharing internal data from a publication called Agri Stats, suppressing supply in order to elevate prices, even as the price of raising birds, such as feed costs, dropped.
The U.S. Department of Justice conducted its own proceedings in the matter and various plaintiff classes — such as consumers and “end users” of chicken, which is distinct from “direct purchasers,” a group that includes wholesalers, supermarkets and other retailers — have reached settlements totaling hundreds of millions of dollars, generally apportioned by the producers’ market share.
Burford has opposed Sysco's motion to reassign and consolidate their dispute over Sysco's possible settlements. For its part, Burford argues any claims Sysco may have belong in court in New York, where Burford is attempting to win court orders requiring Sysco to abide by Burford's interpretation of its rights under the contract that accompanied its loans to fund Sysco's lawsuits.
Judge Durkin issued an order April 13 denying Sysco’s reassignment motion. He said Sysco argued the potential resolution of its dispute with Burford would affect its ability to settle a chicken price lawsuit, but said rather than seeing them “related as ‘night-following-day,’ ” per Sysco’s framing, “the two cases are as different as night and day.”
“Whether parties settle impacts whether a case proceeds, but it does not impact the proceedings of the case itself,” Durkin wrote. “That is especially true for the (chicken) Broilers Case, which involves many parties. Whether Sysco is one of them going forward will have little impact on the contours of the case.”
The dispute with Burford focused solely on financing, Durkin continued, with no factual questions to resolve. The pending chicken litigation, by contrast, “has many unresolved questions of law and fact, and none of them concern the Sysco-Burford contract. The two cases are simply not related.”
Beyond those distinctions, Durkin continued, granting the reassignment would be inappropriate. Sysco tried to argue that if it prevailed over Burford, that would pave the way for settling the chicken lawsuit. Durkin disagreed, saying “Sysco’s claims are only a small part” of that litigation, and even if Burford prevails over Sysco, the chicken lawsuit would be immediately unaffected.
Further, he said, reassignment would offer no efficiencies. Durkin noted his experience with the chicken litigation “is not relevant to addressing claims about the terms of the finance agreement” adding he was not “even aware of the finance agreement” before Sysco asked he be assigned to the matter. Urging the case be reassigned would not lead to efficiency through a reduction of claims in the chicken lawsuit, Durkin said, it would only allow “avoidance of the claims altogether.”
“Sysco’s argument here amounts to the contention that this Judge should grant the motion to reassign in order to ensure that Case 1451 is decided in Sysco’s favor so that Sysco can settle its claims in the Broilers case,” Durkin wrote. “While district judges sometimes mediate settlement, it is never appropriate to presume settlement. And it is certainly inappropriate to decide whether Case 1451 should be reassigned on the assumption that Sysco’s claim in that case is meritorious. Leave that to another judge, who has no stake, perceived or otherwise, as to whether Sysco settles its claims.”