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Burford Capital-Sysco Dispute Highlights Unique Litigation Funder/Client Issue

On March 8, 2023, Sysco Corp. sued affiliates of Burford Capital Ltd., one of the world’s largest litigation finance firms, in the Northern District of Illinois. The corporation seeks to vacate an injunction issued by an arbitration panel that blocked Sysco’s efforts to settle price-fixing claims against major poultry processors and meatpackers. See Sysco Corp. v. Glaz LLC et al. (N.D. Ill. Case No. 23-C-1451).

The lawsuit and underlying dispute between Sysco and Burford are being touted as a rare glimpse into the world of litigation finance. The United States Chamber of Commerce has filed an amicus brief in support of Sysco’s petition that raises what it contends are serious issues with the $13.5 billion litigation funding industry.

Current Litigation Funding Discovery Limits

For years, litigation finance has been somewhat of a lightning rod:

  • Supporters tout litigation funding as offering litigants and law firms access to capital to pursue meritorious claims that might otherwise not be feasible to prosecute.
  • Critics, including large companies that may face increased litigation, complain about perceived conflicts-of-interest and divergent incentives between parties and funders that they claim multiply litigation and make settlement more difficult.

All of this makes for interesting discourse. But one issue relating to litigation funding has been open and shut for years: namely, whether a party may obtain discovery regarding the particulars of its opponent’s funding arrangement. On that point, the courts have answered with a resounding “no.”

In the seminal decision, Miller UK Ltd. v. Caterpillar, Inc., 17 F. Supp. 3d 711 (N.D. Ill. 2014), the court engaged in a thorough and well-reasoned analysis and concluded that a party “is not entitled to discover the amount of money sought or received by [the opposing party], the details of the agreement it has with its funder, or how much the funder will receive if [the adversary] wins the case. In the setting of this case, that information is simply irrelevant.” Id. at 742. This has not stopped parties from seeking discovery from opponents and their funders about the funding arrangement. But time and time again, courts have rejected those efforts, either denying the discovery outright or permitting extremely narrow discovery to assess peculiar issues like standing or witness bias when the party can make a sufficient factual showing of relevance, which is rare.

How Sysco and Burford’s Case Differs

The dispute between Sysco and Burford is likely a one-off situation and not a change in direction from the overwhelming trend against discovery into litigation funding. In a nutshell, Sysco accuses Burford of:

  • improperly blocking reasonable settlements Sysco had reached with the defendants in the price-fixing cases.
  • having secret discussions with Sysco’s counsel of which Sysco was not aware of and which, it contends, violated counsel’s ethical obligations.

Its petition cites portions of the litigation funding agreement that it contends requires Burford to consent to any settlement of the claims.

While Burford disputes the extent to which it may “control” settlement, the provision, based on the dozens of published cases discussing other funding arrangements, appears to be an outlier and was only included in an amendment to the initial funding agreement between Sysco and Burford.

Both the specific provisions of the amendment between Sysco and Burford as well as Burford’s alleged conduct separate this case from the norm. In the typical case, the funder has no contractual ability to and does not involve itself in settlement decisions. The logic of Miller UK and the dozens of cases following it should still hold.

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