IN RE PORK ANTITRUST LITIGATION

Background

Sysco Corporation brought antitrust claims alleging conspiracies to fix or raise prices for pork and beef. The cases were transferred to and coordinated in multidistrict litigation proceedings in the District of Minnesota. Sysco financed its litigation expenses through Burford Capital. The financing agreement required Sysco to obtain Burford’s prior written consent before accepting a settlement.

Sysco negotiated settlements with some defendants, but Burford withheld approval because it considered the settlement amounts too low. Sysco then discharged Boies Schiller Flexner LLP, its litigation counsel in these cases, after alleging that the firm had conflicting loyalties because it also represented Burford on other matters. The court allowed the firm to withdraw and partially stayed the cases while Sysco obtained new counsel.

On June 28, 2023, Sysco assigned its interests in the pork, cattle, and related chicken antitrust cases to Carina Ventures LLC. The order states that Carina was created by Burford in June 2023 and apparently had no assets other than Sysco’s assigned claims in those lawsuits. Sysco and Carina jointly moved under Federal Rule of Civil Procedure 25(c) to substitute Carina for Sysco in the pork and cattle cases.

Rule 25(c) and Standing

Rule 25(c) governs what may happen when a party transfers an interest during a lawsuit. The court may allow the case to continue with the original party, join the new owner to the case, or substitute the new owner for the original party. The choice is discretionary rather than automatic.

The court rejected Sysco and Carina’s suggestion that the assignment eliminated Sysco’s constitutional standing. The court held that Sysco had Article III standing when it filed the lawsuits and still had standing after the transfer. The court also held that Carina had Article III standing through the assignment, but not merely because it was affiliated with a litigation financier or had a financial interest in the outcome.

The court decided that federal law, specifically Rule 25(c), governed the substitution motions. It did not decide whether the assignment itself was valid under state contract law, and it did not need to decide whether the assignment violated the legal doctrine of champerty.

Reasons for Denying Substitution

The court exercised its Rule 25(c) discretion to deny substitution because it found that replacing Sysco with Carina would conflict with important public policies. In particular, the court emphasized that parties who suffered the alleged injury should generally control their litigation, especially settlement decisions.

The court found that Burford’s control over settlement approval had created serious practical problems. It concluded that substituting Carina would allow a litigation financier with no interest beyond maximizing its investment return to take control of the litigation and prevent settlements that Sysco had sought to make. The court also found that the settlement between Sysco and Burford was intended to prevent other settlements, so the general policy favoring settlements did not support substitution in these circumstances.

The court considered the policy behind antitrust standing, which limits antitrust lawsuits to plaintiffs with the type of injury the antitrust laws are intended to address. It reasoned that Carina’s interest, without the assignment, would be only an investment interest and not an antitrust injury. Although the assignment gave Carina standing, the court concluded that the rationale behind antitrust standing weighed against allowing a newly formed special-purpose company created by a litigation funder to replace Sysco mid-case.

The court also noted that neither side had identified a prior case involving a litigation funder’s substitution for its client under Rule 25(c) after litigation was well underway and settlements had been negotiated. The court treated the unusual nature of the requested substitution as an additional reason for caution.

Disposition

The court denied Sysco Corporation and Carina Ventures LLC’s joint motions for substitution in both the pork antitrust litigation, Docket No. 1940 in Case No. 18-cv-1776, and the cattle and beef antitrust litigation, Docket No. 277 in Case No. 22-md-3031. The cases may continue with Sysco as the original party. The court also ordered the Clerk’s Office to correct the pork-case docket by designating Carina as a “Movant” rather than a “Plaintiff.”

The order was signed by John F. Docherty, United States Magistrate Judge.