Food distribution giant Sysco has ended a contentious battle with lawsuit funder Burford as the companies have jointly asked for a full dismissal of all their litigation regarding a dispute over the control Burford should have over Sysco’s legal strategies.
At the heart of the dispute is whether Burford, as a third-party funder to the tune of $140 million, can force Sysco to keep pressing litigation when the food wholesaler would rather settle. The fight formally started with Houston-based Sysco’s March 8 filings in Chicago federal court asking U.S. District Judge Martha Pacold to invalidate an international arbitration ruling in favor of Burford. In that decision, an arbitrator held the financier has the contractual right to to stop Sysco from settling antitrust claims against a host of companies like Tyson Foods that supply chicken, pork, beef and other foods.
Because of its capital infusion, Burford — through subsidiaries Glaz, Posen Invetments and Kenosha Investments — stood in line to share in any proceeds, but Sysco argued the “multibillion dollar litigation funding firm” exceeded its limited settlement consent rights.
In later filings, Sysco acknowledged its contract with Burford affords the right to seek damages if Sysco were to commit a breach by settling a lawsuit without consent, but insisted Burford was attempting to wield veto power. Sysco maintained being forced to abandon the settlement would put it at risk of “chilling key commercial relationships” with certain customers, while Burford 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 September 2022 email regarding potential settlement of the antitrust lawsuit with meat producers, 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.”
In arguing the arbitration award contravenes public policy, Sysco said 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.”
In April, Sysco failed to get U.S. District Judge Thomas Durkin, who is presiding over antitrust litigation with poultry producers in Chicago, to consolidate with those actions Sysco’s motion to invalidate the arbitration award. The dispute with Burford focused solely on financing, Durkin wrote, with no factual questions to resolve. The pending chicken price 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.”
The stipulation of dismissal motion, filed June 28, gives no indication for the sudden shift but does request “this action be dismissed with prejudice as to all claims, causes of action, and parties, with each party to bear its own attorney’s fees and costs.” The filing lists U.S. District Judge LaShonda Hunt and Magistrate Judge Gabriel Fuentes.
Judge Hunt, a nominee of President Joe Biden, is one of Chicago's newest federal district judges, as she was seated on the federal district court bench in Chicago in late May. The Sysco-Burford case was one of many cases reassigned to her when she took office.
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 Steen & Hamilton, of New York and London; and Jared Kosoglad, of Chicago.
Burford’s legal team includes Richard Prendergast and Michael Layden, of the Chicago office of Croke Fairchild Duarte & Beres; Derek Ho, of Kellogg, Hansen, Todd, Figel & Frederick, of Washington, D.C., and Elizabeth Snodgrass, of Threw Crowns, also of Washington, D.C.