Lawsuit investor Burford can upend Sysco’s $50M chicken price settlement

By Jonathan Bilyk | Legal Newsline
The Center Square

A Chicago federal appeals panel will allow Burford Capital, the world’s largest third-party lawsuit investor, to force poultry producer Pilgrim’s Pride back into court, after appeals judges agreed a settlement between Pilgrim’s and former Burford investee, food distributor Sysco Corp. worth $50 million — an amount Burford had found too small — had not been properly executed.

One of the appellate judges, however, blasted litigation financier Burford Capital for its conduct in the case, saying Burford was dragging out a settlement to end the litigation solely to boost its profits, in the process “having turned the courtroom into a trading floor.”

“… But for this legal maneuvering, this litigation could have been resolved long ago,” Seventh Circuit Judge Nancy Maldonado said. “This case is a cautionary tale to any party who seeks to fund its litigation through a third party.”

The case had landed before the Seventh Circuit last year, as Burford Capital, through a subsidiary company, Carina Ventures, had kept up its fight to pull the plug on the $50 million deal between Sysco and Pilgrim’s Pride.

The fight between Burford and the companies had itself come as but a flashpoint in the sprawling litigation pending in federal courts in Chicago and Minneapolis over claims meat producers violated federal antitrust laws by allegedly colluding to keep the prices of chicken, beef and pork artificially high.

The beef- and pork-related lawsuits have been consolidated in Minnesota court. But the chicken price lawsuits have remained in Chicago federal court since 2016.

At that time, Pilgrim’s Pride and other poultry producers were first pecked by a wave of collective action antitrust lawsuits, accusing the producers of suppressing the supply of chickens to make customers pay more.

Sysco Corp. was among the litany of food buyers, distributors and sellers who lodged lawsuits seeking a share of whatever the meat producers may ultimately pay out.

In 2022, however, those claims by Sysco received significant attention, as in a rare moment of transparency, Sysco and Burford tangled in federal court over an otherwise secret financing arrangement that undergirded Sysco’s lawsuits.

In that court fight, Sysco accused Burford of improperly using $140 million in lawsuit loans to improperly interfere with Sysco’s attempts to settle its lawsuits and exit the litigation.

According to public reports, Burford annually invests billions of dollars into lawsuits targeting American companies.

According to court documents, Burford was unhappy with the deals Sysco had negotiated, apparently believing it should receive far more on its investment than what Sysco was willing to accept. Burford, through three subsidiaries, instead demanded Sysco continue suing until it could extract a bigger settlement or judgment at trial.

The court fight between Sysco and Burford ended in a settlement, under which Sysco agreed to sign over its legal claims to a Burford subsidiary company, Carina Ventures.

Pilgrim’s Pride and other producers failed to snuff out that settlement, despite their claims that Burford and its affiliates should not be permitted to take control of the lawsuits, because those investors had no motive in the lawsuits other than a desire to maximize their return on investment.

In Chicago federal court, however, Pilgrim’s Pride asked U.S. District Judge Thomas Durkin to enforce a $50 million settlement deal the poultry producer claimed it had reached earlier with Sysco directly.

The settlement was never signed by Sysco executives, as they were at the time fighting with Burford over the rights to settle the claims at all.

Pilgrim’s, however, presented the court with emails between Pilgrim’s and Sysco, showing Pilgrim’s had presented settlement terms that Sysco had accepted.

Despite Burford’s objections, Durkin agreed with Pilgrim’s that the email communications were enough to show a mutually acceptable settlement had been reached between the two actual parties in interest in the case.

On appeal, however, a three-judge panel of the U.S. Seventh Circuit Court of Appeals said Durkin was wrong to enforce the settlement.

The Feb. 5 decision was written by Judge David Hamilton. Judge Frank Easterbrook and Maldonado concurred in the decision.

In the ruling, Hamilton noted that an email exists in which Sysco’s general counsel, after discussing the basic terms of the settlement, including payment, told lawyers for Pilgrim’s: “We accept.”

While that was enough for Durkin, Hamilton and the appeals panel said it was clear the deal was not struck at that time. They rejected Pilgrim’s assertion that the deal was “binding” in any way, pointing to later communications in which they continued to negotiate terms.

The judges particularly noted the communications show Pilgrim’s threatened to pull out of the settlement unless the deal was qualified under a so-called Judgment Sharing Agreement the poultry company had entered into with other defendants under antitrust law to limit liability.

“Contrary to Pilgrim’s argument and the district court’s judgment, the parties continued to negotiate terms they said were essential long after the ‘We accept’ email in September 2022,” Hamilton wrote.

“… (Pilgrim’s) reliance on later agreements on particular issues shows the holes that existed on September 9, 2022, and those holes undermine its theory that the parties had agreed by then on all material terms.”

The appeals panel, however, said it was making the judgment contingent on requiring Burford to immediately refund the $50 million Pilgrim’s already paid.

In a special concurrence to the otherwise unanimous decision, Maldonado noted she did not disagree technically with any of the main ruling.

But she said she was siding “reluctantly,” noting the prolonged proceedings in the case were “the result of gamesmanship” in the case. She noted Burford was able to use “confusion” and “procedural oddities” in the case to circumvent more stringent settlement review standards, “extracting a substantial victory” in the process.

Maldonado concluded her concurrence by suggesting Pilgrim’s and Burford should use the proceedings to come “to explore … whether Pilgrim’s is entitled to interest on the $50 million that Carina accepted for this supposed settlement in August 2024.”