The legal entanglements between food distribution giant Sysco, litigation financier Burford Capitol and the poultry producers defending themselves in antitrust lawsuits continued as Carina Ventures, a new Burford-backed entity, has filed a motion supporting its right to be substituted for Sysco as plaintiff in the antritrust action.
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 invested at least $140 million into Sysco's lawsuit, and was hoping for a much bigger return 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.”
On July 21, Carina filed its own motion, saying the issue is “a straightforward application” of a court rule allowing Sysco to transfer interest in its claims.
“Federal antitrust claims are freely assignable, and when an assignment is made during the course of litigation, assignees routinely seek substitution,” Carina argued through its attorneys, Scott Gant, of the Washington, D.C., office of Boies Schiller Flexner, and Colleen Harrison, from the firm’s New York office.
As part of the motion to oppose, the poultry producers referenced Gant, whose firm was Sysco’s outside counsel but also represents Burford in its own antitrust lawsuits. They 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.”
But Carina said the opposition ignores the U.S. Supreme Court’s long-term acceptance of substitutions and said “there is no general federal common law proscribing champerty,” a legal term under which parties who otherwise have no interest in a lawsuit provide money to take control of the action with no goal other than claiming a financial cut of any judgment or settlement.
Although acknowledging “champerty is a disfavored doctrine,” Carina noted there “is no federal common law doctrine prohibiting assignments of antitrust claims” and argued Congress has worked to encourage private antritrust litigation and that rights assignment agreements are in that context viewed as tools of efficiency, especially when dealing with multiple jurisdictions.
Sysco also filed a new motion supporting the substitution, saying “There is simply no basis to allow certain defendants to turn this straightforward procedural motion into a distracting sideshow. Assignments of antitrust claims are routine (including in this litigation), and substitution is the ordinary procedure when assignments are made.”
Carina also argued that even if the issues fell under state law — the antitrust litigation is assigned to federal court in Chicago — Illinois allows assignments of legal claims outside of “officious intermeddling.” It maintained Sysco got into the antritrust action on its own before making its first deal with Burford and said this isn’t an instance of a financier providing the initial motivation.
“Indeed, there have been dozens of assignments in this case already — including some by Sysco,” Carina argued. “Defendants conveniently make no mention of this fact. But if defendants have their way, it would usher in a wave of additional discovery requests from defendants to other assignees, justified by the same rationale defendants advance here: the need to know details about the circumstances of the assignment to assess its validity. Whatever legitimate informational needs defendants have should and can be addressed through the normal discovery process in this case.”
Representing Sysco are the Paul Hastings firm, of Washington, D.C., and Salvatore Prescott Porter & Porter, of Evanston.
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.