A recent ruling by a federal magistrate judge has created ripples in the opaque litigation financing industry. The judge’s decision puts a halt on plaintiff Sysco Corp’s plan to transfer its claims in ongoing price-fixing lawsuits to litigation funder Burford Capital Ltd.
The order was issued by Magistrate Judge John F. Docherty of the US District Court for the District of Minnesota on Feb. 9. The decision prevents an affiliate of Burford Capital from assuming the plaintiff’s position in two pork and beef price-fixing lawsuits funded for food distributor Sysco Corp. Notably, Burford had supplied Sysco with $140 million to go ahead with the lawsuits. However, the companies had a disagreement over Sysco’s attempt to reach a settlement with some of the defendants on terms that Burford termed as too low. View the details of this disagreement here.
The defendants, large meat-producers, expressed strong opposition to the proposed substitution. They argued that such an assignment turns the claim into an instrument of financial speculation for a litigation funder with no connection to the underlying claim.
Judge Docherty echoed this view, stating that allowing the substitution of the Burford affiliate as the plaintiff contradicts public policy. He noted the substitution was unlike any other case he was aware of primarily because this substitution would enable a litigation funder to deter the settlement of litigation by replacing the party it was financing after the litigation was well underway.
Given the high-profile nature of this case, it is expected that this ruling will be carefully scrutinized by other courts, casting an intentionally bright light on the $13.5 billion litigation financing industry. Despite the industry’s size and influence, experts such as William Kovacic, a former Federal Trade Commission chair and current law professor with George Washington University, have noted that litigation funding is still subject to minimal state and federal regulation.
This situation may change, however, as the US Chamber of Commerce and other detractors of litigation funding push for increased transparency in the industry. In particular, these detractors advocate for laws that would require the disclosure of litigation financing to all parties within a case. They argue that litigation funders, such as Burford, exist not to resolve disputes or provide justice but to control litigation and maximize their own profit. They believe Judge Docherty’s decision in this case validates this viewpoint.
It is important to remember that despite the controversy surrounding this case, many within the litigation funding industry view it as an anomaly and a distraction from the underlying issue. Regardless of these varying perspectives, what remains clear is that this case has sparked a vigorous debate about the integrity and transparency of the litigation funding industry that will likely continue for some time.
The case citations are: In re Pork Antitrust Litig., D. Minn., No. 18-cv-1776, 2/9/24 and In re Cattle and Beef Antitrust Litig., D. Minn., No. 22-md-3031, 2/9/24.
Read the full details of this case here.