Weeks after food distribution giant Sysco apparently ended its contentious battle with lawsuit funder Burford over control of Sysco's antitrust class action against poultry producers over alleged chicken price-fixing, those chicken producers have stepped forward to block the handover, assering it amounts to "invalid champerty."
In early June, Sysco and Burford requested full dismissal of all their litigation regarding a dispute over the amount of control Burford should have over Sysco’s potential settlement with poultry producers accused of a years-long price-fixing conspiracy. Burford had won an international arbitration ruling holding the financier — through subsidiaries Glaz, Posen Investments and Kenosha Investments — had the contractual right to stop Sysco from settling, but Sysco argued the “multibillion dollar litigation funding firm” exceeded its limited settlement consent rights.
According to court records, Burford had invested at least $140 million into Sysco's lawsuit, and was hoping for a much bigger return on that investment than they would have received from Sysco's potential settlement.
On June 18. Sysco sought to leave the class action altogether, substituting in its place Carina Ventures. According to a motion filed July 12 in federal court in Chicago, the defendant poultry producers called Carina “a newly-created Burford affiliate” — formed June 12 — and said the one-page motion for substitution “raises more questions than it answers, injecting unnecessary complexity into this already complicated case and forcing the resolution of difficult legal and factual questions on an incomplete record.”
The filing puts the defendants in a similar position to that Sysco maintained since March 8, hoping to keep Sysco involved in settlement negotiations absent outside influence. But the motion to reject substitution strikes a stronger chord, saying allowing Carina to become an actual plaintiff could be construed as “invalid champerty” because Carina, especially as a new corporate entity, has no legal interest in the collusion litigation or any of the plaintiff or defendant parties.
Champerty is a legal concept, long frowned upon, if not outlawed, in much of America's legal system, by which people who otherwise have no interest in a lawsuit, provide money to take control of a lawsuit, with no goal other than claiming a financial cut of any judgment or settlement.
The chicken producers have asked the judge to deny the substitution outright, or at least to put consideration of that requeston hold pending discussion about discovery and a supplemental briefing.
As part of the motion to oppose, the poultry producers referenced 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 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.”
The defendants alleged “Sysco has sold its claims in five different antitrust cases — broilers, pork, beef, turkey and Keurig — to Carina” and said they “do not know the financial arrangements between Sysco, Burford, Carina and the other parties to the original agreements” or “what consideration was exchanged for Sysco to agree to hand over its role as a plaintiff in multiple class action cases to Carina.”
Substitution motion hearings regarding pork and beef lawsuits are set for Aug. 21 in Minnesota federal court, the poultry defendants said, adding their belief those producers have had a chance to start learning a bit more about the Sysco-Carina relationship and how it will affect litigation.
“Sysco and Carina have identified no reason why this substitution would facilitate the conduct of this litigation or otherwise assist the Court in managing it — and in fact, there are good reasons to think that the substitution will make this case even harder to manage,” the defendants said. “Granting this motion risks a situation where Sysco has been removed as a plaintiff, only for Carina to later be held incapable of pressing Sysco’s claims because of an invalid assignment. As such, the Motion should be denied.”
Mountaire Farms is represented by ArentFox Schiff, of Chicago and Ann Arbor, Mich., and Rose Law Firm, of Chicago and Little Rock, Ark.
Perdue Farms is represented by Venable, of Washington, D.C., and Falkenberg Ives, of Chicago.
Koch Foods and JCH Foods are represented by Armstrong Teasdale, of Chicago.
Foster Farms is represented by Mayer Brown, of Washington, D.C.
Simmons Foods is represented by Shook Hardy & Bacon, of Chicago and Kansas City, Mo., and Conner & Winters, of Fayetteville, Ark.
House of Raeford is represented by Vedder Price, of Chicago, and Jordan Price Wall Gray Jones & Carlton, of Raleigh, N.C.
Claxton Poultry Farms is represented by Vaughan & Murphy, of Atlanta, and Wintston & Strawn, of Chicgao.
Wayne Farms is represented by Proskauer Rose, of Washington, D.C., New York and Los Angeles.
O.K. Foods is represented by Kutak Rock, of Fayetteville and Omaha, Neb., and MoloLamken, of Chicago.
Harrison Poultry is represented by Eversheds Sutherland, of Atlanta, and Amundsen Davis, of Chicago.
Case Foods is represented by Joseph D. Carney & Associates, of Avon, Ohio; Miller Shakman Levine & Feldman, of Chicago; D. Klaw Law, of Bel Air, Calif.; and Paul Bunder, of Fairview Park, Ohio.
Tyson Foods is represented by Axinn, Veltrop & Harkrider, of Washington, D.C., Hartford, Conn., and New York; and Lipe Lyons Murphy Nahrstadt Pontikis, of Chicago.
Pilgrim’s Pride is represented by Quinn Emanuel Urquhart & Sullivan, of Washington, D.C., Atlanta and Chicago.
Mar-Jack Poultry is represented by Edward C. Konieczny, of Atlanta; and Smith, Gambrell & Russell, of Atlanta and Chicago.
Sanderson Farms is represented by Proskauer Rose, of Chicago, Washington, New York and Los Angeles.
Agri Stats, the industry publication whose internal data is sentry to the price-fixing allegations, is represented by Hogan Lovells, of Washington, D.C., and Miller, Canfield, Paddock and Stone, of Chicago.