Third-Party Litigation Funding Dangers Highlighted in Sysco Lawsuit Against Burford Capital
For the past several years, our reports have highlighted the many issues surrounding lawsuit funding and third-party litigation financing.
But last week, food distributor Sysco Corp, filed a federal lawsuit (Sysco Corporation v. Glaz LLC et al) in the U.S. District Court for the Northern District of Illinois against one of the most well-known litigation financiers, Burford Capital Limited.
The lawsuit alleges that Burford engaged in illegal and unethical conduct by encouraging plaintiffs to file frivolous lawsuits against Sysco to generate profits for itself.
According to reporting from Reuters’:
“Burford advanced millions to Sysco in 2019 to fund the company’s antitrust litigation against chicken, beef and pork suppliers. (Buford says the total was $140 million. Sysco declined to confirm the amount.) Late last summer, Sysco reached proposed settlements with several of the defendants.
Then things went badly awry, according to Wednesday’s filings in federal court in Chicago. Sysco asserts that Burford nixed the settlements and brought an arbitration proceeding to enjoin Sysco from finalizing the proposed deals. The arbitration panel issued a temporary restraining order in December. Sysco’s new lawsuit seeks to vacate that order.
In essence, Sysco is arguing in the new case that it is a litigation hostage, forced by a greedy funder to keep litigating cases that it wants to resolve.”
This is just the latest example of the dangers of bringing third parties and outside investors into the legal process.
It’s easy to see how third-party litigation financing incentivizes bringing more and more lawsuits. This, in turn, adds to already overburdened court dockets. Lawsuit funding also can create conflicts of interest when investors pressure plaintiffs to settle to maximize their own profits.
In the Sysco lawsuit, Burford is accused of engaging in precisely this type of unethical behavior. The lawsuit alleges that Burford worked with a law firm to encourage plaintiffs to file meritless lawsuits against Sysco, then pressured those plaintiffs to settle in order to generate profits for Burford.
This behavior is simply unacceptable. The legal system is intended to achieve fair and just resolution – not to generate profits for outside investors. Incentivizing meritless lawsuits and creating conflicts of interest undermines the integrity of our legal system and serves only the interests of funders and lawyers.