Sysco Corporation v. Cargill Inc. et al

Filing 20

MEMORANDUM OPINION AND ORDER Denying Sysco's Appeal/Objection to Magistrate Judge Decision 565 ; Denying Carina's Appeal/Objection to Magistrate Judge Decision 566 ; and Affirming the Magistrate Judge's Order 545 . (Written Opinion) Signed by Judge John R Tunheim on 6/3/2024. Associated Cases: 0:22-md-03031-JRT-JFD, 0:22-cv-01750-JRT-JFD (KKM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

IN RE: PORK ANTITRUST LITIGATION

Civil No. 18-1776 (JRT/JFD)

IN RE: CATTLE AND BEEF ANTITRUST
LITIGATION

MDL No. 22-3031 (JRT/JFD)

This Document Relates To:
Sysco Corp. v. Agri Stats, Inc. et al, Civil
No. 21-1374 (D. Minn.), and Sysco Corp. v.
Cargill Inc. et al, Civil No. 22-1750 (D.
Minn.)

MEMORANDUM OPINION AND ORDER
DENYING APPEAL AND AFFIRMING
MAGISTRATE JUDGE’S ORDER

Christopher P. Wilson, Michael Calhoon, Julie B. Rubenstein, Brian C. Kerr,
and Wyatt M. Carlock, BAKER BOTTS L.L.P., 700 K Street Northwest,
Washington, D.C. 20001, for Plaintiff Sysco Corporation.
Derek T. Ho, Travis G. Edwards, Dustin G. Graber, and Christopher C.
Goodnow, KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C., 1615 M
Street Northwest, Suite 400, Washington, D.C. 20036; Scott E. Gant, BOIES
SCHILLER FLEXNER LLP, 1401 New York Avenue Northwest, Washington,
D.C. 20005; Colleen A. Harrison, BOIES SCHILLER FLEXNER LLP, 333 Main
Street, Armonk, NY 10504; Christopher A. Seeger and Jennifer Scullion,
SEEGER WEISS LLP, 55 Challenger Road, Ridgefield Park, NJ 07660, for
Movant Carina Ventures LLC.
Craig S. Coleman, Richard A. Duncan, Aaron D. Van Oort, and Emily E. Chow,
FAEGRE DRINKER BIDDLE & REATH LLP, 90 South Seventh Street,
Minneapolis, MN 55402; Jacob D. Bylund and Robert C. Gallup, FAEGRE
DRINKER BIDDLE & REATH LLP, 801 Grand Avenue, 33rd Floor, Des Moines,
IA 50309; John S. Yi, FAEGRE DRINKER BIDDLE & REATH LLP, One Logan
Square, Suite 2200, Philadelphia, PA 19103; Jonathan H. Todt, FAEGRE
DRINKER BIDDLE & REATH LLP, 1500 K Street Northwest, Suite 1100,

Washington, DC 20005, for Defendants Hormel Foods Corporation and
Hormel Foods, LLC.
Daniel E. Laytin, Christa Cottrell, and Jenna M. Stupar, KIRKLAND & ELLIS
LLP, 300 North LaSalle, Chicago, IL 60654; Mark L. Johnson and Davida S.
McGhee, GREENE ESPEL PLLP, 222 South Ninth Street, Suite 2200,
Minneapolis, MN 55402, for Defendants Clemens Food Group, LLC and The
Clemens Family Corporation.
John A. Cotter and John A. Kvinge, LARKIN HOFFMAN DALY & LINDGREN
LTD., 8300 Norman Center Drive, Suite 1000, Minneapolis, MN 55427;
Richard Parker and Josh Lipton, GIBSON, DUNN & CRUTCHER, LLP, 1050
Connecticut Avenue Northwest, Washington, D.C. 20036; Brian Robison,
BROWN FOX PLLC, 6303 Cowboys Way, Suite 450, Frisco, TX 75034, for
Defendant Smithfield Foods, Inc.
Sami H. Rashid, Michael B. Carlinsky, and David B. Adler, QUINN EMANUEL
URQUHART & SULLIVAN, LLP, 51 Madison Avenue, 22nd Floor, New York,
NY 10010; Donald G. Heeman, Jessica J. Nelson, and Randi J. Winter,
SPENCER FANE LLP, 100 South Fifth Street, Suite 1900, Minneapolis, MN
55402; Lewis A. Remele, Jr. and Christopher R. Morris, BASSFORD REMELE,
P.A., 100 South Fifth Street, Suite 1500, Minneapolis, MN 55402; William F.
Hargens and Patrick E. Brookhouser, Jr., MCGRATH NORTH MULLIN &
KRATZ, PC LLO, 1601 Dodge Street, Suite 3700, Omaha, NE 68102, for
Defendants JBS USA Food Company, JBS Packerland, Inc., Swift Beef
Company, and JBS S.A.
Peter J. Schwingler and Tess L. Erickson, JONES DAY, 90 South Seventh
Street, Suite 4950, Minneapolis, MN 55402; William L. Greene and William
D. Thomson, STINSON LLP, 50 South Sixth Street, Suite 2600, Minneapolis,
MN 55402; J. Nicci Warr, STINSON LLP, 7700 Forsyth Boulevard, Suite 1100,
St. Louis, MO 63105, for Defendant Seaboard Foods LLC.
Christopher A. Smith, Aaron Chapin, Tessa K. Jacob, A. James Spung, and
Jason Husgen, HUSCH BLACKWELL LLP, 8001 Forsyth Boulevard, Suite 1500,
St. Louis, MO 63105, for Defendant Triumph Foods, LLC.
Tiffany Rider Rohrbaugh, Rachel J. Adcox, and Lindsey Strang Aberg, AXINN,
VELTROP & HARKRIDER LLP, 1901 L Street Northwest, Washington, DC
20036; Jarod Taylor, AXINN, VELTROP & HARKRIDER LLP, 90 State House
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Square, Hartford, CT 06103; David P. Graham, DYKEMA GOSSETT PLLC, 90
South Seventh Street, Minneapolis, MN 55402; Susan E. Foster, Ulrike B.
Connelly, Tiffany Lee, and Hannah Parman, PERKINS COIE LLP, 1201 Third
Avenue, Suite 4900, Seattle, WA 98101; Jon B. Jacobs, PERKINS COIE LLP,
700 Thirteenth Street Northwest, Suite 800, Washington, DC 20005; Barry
G. Stratford, PERKINS COIE LLP, 2901 North Central Avenue, Suite 2000,
Phoenix, AZ 85012; Caroline Gizem Tunca, PERKINS COIE LLP, 110 North
Wacker Drive, Suite 3400, Chicago, Illinois 60606; David P. Graham,
DYKEMA GOSSETT, PLLC, 90 South Seventh Street, Minneapolis, MN 55402,
for Defendants Tyson Foods, Inc., Tyson Prepared Foods, Inc. and Tyson
Fresh Meats, Inc.
William L. Monts III and Justin W. Bernick, HOGAN LOVELLS US LLP, 555
Thirteenth Street Northwest, Washington, D.C. 20004; Peter H. Walsh,
HOGAN LOVELLS US LLP, 80 South Eighth Street, Suite 1225, Minneapolis,
MN 55402, for Defendant Agri Stats, Inc.
Kosta S. Stojilkovic, Beth A. Wilkinson, and Sarah Neuman, WILKINSON
STEKLOFF LLP, 2001 M Street Northwest, 10th Floor, Washington, DC
20036; Moira Penza, WILKINSON STEKLOFF LLP, 130 West 42nd Street, 24th
Floor, New York, NY 10036; X. Kevin Zhao, Holley C. M. Horrell, Davida S.
McGhee Williams, and Emily M. McAdam, GREENE ESPEL PLLP, 222 South
Ninth Street, Suite 2200, Minneapolis, MN 55402; Jacob D. Bylund and
Robert C. Gallup, FAEGRE DRINKER BIDDLE & REATH LLP, 801 Grand
Avenue, 33rd Floor, Des Moines, IA 50309; Bennett Rawicki, HILGERS
GRABEN PLLC, 7859 Walnut Hill Lane, Suite 335, Dallas, TX 75230; Britt M.
Miller and Matthew Provance, MAYER BROWN LLP, 71 South Wacker Drive,
Chicago, IL 60606; William H. Stallings, MAYER BROWN LLP, 1999 K Street
Northwest, Washington, DC 20006; for Defendants Cargill, Incorporated
and Cargill Meat Solutions Corporation.
Benjamin L. Ellison and Chelsea A. Bollman, JONES DAY, 90 South Seventh
Street, Suite 4950, Minneapolis, MN 55402; Julia E. McEvoy, JONES DAY, 51
Louisiana Avenue Northwest, Washington, D.C. 20001; Michelle Fischer,
JONES DAY, 901 Lakeside Avenue, North Point, Cleveland, OH 44114;
Tiffany Lipscomb-Jackson, JONES DAY, 325 John H. McConnell Boulevard,
Suite 600, Columbus, OH 43215; Eddie Hasdoo, JONES DAY, 110 North
Wacker Drive, Suite 4800, Chicago, IL 60606, for Defendant National Beef
Packing Company, LLC.

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Plaintiff Sysco Corporation (“Sysco”) and Movant Carina Ventures LLC (“Carina”)
filed joint motions to substitute Carina for Sysco in In re Pork Antitrust Litigation (“Pork”)
and In re Cattle and Beef Antitrust Litigation (“Beef”). Because the Court finds that the
Magistrate Judge’s decision to deny the Joint Motions for Substitution of Plaintiff was not
clearly erroneous, the Court will deny Sysco and Carina’s appeal and affirm the Magistrate
Judge’s Order.
BACKGROUND
I.

SYSCO’S ASSIGNMENT TO CARINA IN THE PORK AND BEEF LITIGATION
The factual and procedural history of the Pork and Beef litigation have been

comprehensively addressed in the Court’s prior orders, which the Court incorporates by
reference. See, e.g., In re Pork Antitrust Litig., 495 F. Supp. 3d 753, 764–67 (D. Minn.
2020); In re Cattle Antitrust Litig., No. 19-1222, 2021 WL 7757881, at *1–2 (D. Minn. Sept.
14, 2021). As such, the Court will only address the facts and procedural history relevant
to the current appeal.
Sysco filed actions alleging price-fixing conspiracies in the pork and beef industries,
which were transferred to this Court and consolidated into the Pork and Beef multidistrict litigation (“MDL”) cases.1 Sysco financed its litigation in the MDLs with over $140

1

(See Compl., Mar. 8, 2021, Docket No. 1 in ECF No. 21-1374; Mem. Op. & Order
Consolidating Actions, Nov. 14, 2021, Docket No. 34 in ECF No. 21-1374; Compl., June 24, 2022,
Docket No. 1 in ECF No. 22-1750; Order for Consolidation, Oct. 12, 2022, Docket No. 17 in ECF
No. 22-1750.)

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million provided by Burford Capital (“Burford”). (Magistrate Judge’s Order at 6, Feb. 9,
2024, Docket No. 2104 in ECF No. 18-1776.) Under Sysco and Burford’s financing
agreement, Sysco was not permitted to “accept a settlement offer without [Burford’s]
prior written consent, which shall not be unreasonably withheld.” (Id. at 7 (internal
quotation omitted).)
Burford and Sysco entered arbitration to determine the meaning and validity of
the provision that required Burford’s written consent to accept a settlement after Burford
vetoed settlements that Sysco negotiated with some of the defendants. (Id. at 7–8;
Carina’s Mem. Supp. Joint Mot. Substitution at 2, July 7, 2023, Docket No. 1952 in ECF No.
18-1776.)
Meanwhile, an arbitration panel in New York granted Burford a temporary
restraining order to prevent Sysco from finalizing the negotiated settlements. (Magistrate
Judge’s Order at 8.) Rather than litigate subsequently filed motions to vacate and confirm
the arbitration award, Sysco assigned its interest in the Pork and Beef MDLs to Carina, a
“special purpose vehicle” created by Burford for the sole purpose of accepting and
litigating Sysco’s assigned claims in the MDLs. (Id. at 2–3, 9.)
II.

MAGISTRATE JUDGE’S DENIAL OF SUBSTITUTION
Sysco and Carina subsequently filed joint motions to substitute Carina for Sysco in

Pork and Beef pursuant to Federal Rule of Civil Procedure 25(c), which permits
substitutions of parties when an interest is transferred during a lawsuit. (Joint Mot.
Substitute Party, June 29, 2023, Docket No. 1940 in ECF No. 18-1776; Joint Mot. Substitute
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Party, June 29, 2023, Docket No. 277 in ECF No. 22-3031); Fed. R. Civ. P. 25(c). The
defendants objected to the substitution. (Pork Defs.’ Mem. Opp’n Joint Mot. Substitute
Party, July 21, 2023, Docket No. 1972 in ECF No. 18-1776; Beef Defs.’ Mem. Opp’n Joint
Mot. Substitute Party, July 21, 2023, Docket No. 293 in ECF No. 22-3031.)
The Magistrate Judge exercised his discretion to deny the motions. He did not
invalidate Sysco’s assignment of its claims to Carina, but denied the motions for
substitution after reasoning that substitution would be contrary to the Federal Rules and
public policy. (Magistrate Judge’s Order at 3, 14–15.)

The Magistrate Judge was

particularly concerned with the possibility that on the facts of this case, substitution
would allow a litigation financer “with no interest in the litigation beyond maximizing
profit on its investment to override decisions made by the party that actually brought
suit.” (Id. at 3.) The Magistrate Judge concluded that Sysco and Burford’s assignment
agreement and substitution request would allow Carina to stymie settlements for
Burford’s gain, contravening public policy favoring party control over litigation and
settlements. (Id. at 18–21.) Specifically, he wrote that “[t]he largest harm that condoning
Burford’s efforts to maximize its return on investment would cause is the harm of forcing
litigation to continue that should have settled.” (Id. at 17.)
The Magistrate Judge also imported principles underlying antitrust standing to
support his conclusion. He noted that even though antitrust standing can be obtained via
assignment, the rationale behind antitrust standing—that is, that antitrust cases should

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be brought by plaintiffs who have suffered antitrust injury—counsels against substitution
in these actions. (Id. at 21–25.) The Magistrate Judge made it clear he was reluctant to
allow a special purpose vehicle, which was established by a litigation financer and only
has Article III and antitrust standing from assignment, to be substituted for a party who
had both types of standing in the Pork and Beef MDLs. (Id. at 24–25.)
Further, the Magistrate Judge explained that Sysco and Carina’s request for
substitution is unique. Indeed,
[N]o court has ever before been asked to ratify a substitution
under Rule 25(c) of a party with undoubted Article III and
antitrust standing with a newly formed shell company created
mid-suit for the sole purpose of litigating assigned claims on
behalf of a litigation funder, which has no stake in the
litigation other than maximizing its return on an investment it
made in the outcome of the litigation. If such a case exists,
neither the parties favoring substitution nor the parties
opposed to substitution have directed the Court’s attention
to it.
(Id. at 25–26.)
Weighing all the above factors, the Magistrate Judge declined to exercise
discretion to grant the motions for substitution. (Id. at 28–29.) Concluding otherwise
would have undermined public policy and the purpose of antitrust laws. (Id.) Sysco and
Carina appealed the Magistrate Judge’s Order.2

2

(Sysco’s Appeal/Obj. of Magistrate Judge’s Decision, Feb. 23, 2024, Docket No. 2126 in
ECF No. 18-1776; Carina’s Appeal/Obj. of Magistrate Judge’s Decision, Feb. 23, 2024, Docket No.
2127 in ECF No. 18-1776; Sysco’s Appeal/Obj. of Magistrate Judge’s Decision, Feb. 23, 2024,

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DISCUSSION
I.

STANDARD OF REVIEW
The standard of review applicable to an appeal of a magistrate judge’s order on

nondispositive pretrial matters is extremely deferential. Roble v. Celestica Corp., 627 F.
Supp. 2d 1008, 1014 (D. Minn. 2007). The Court will reverse such an order only if it is
clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a); D.
Minn. LR 72.2(a). “A finding is clearly erroneous when ‘although there is evidence to
support it, the reviewing court on the entire evidence is left with the definite and firm
conviction that a mistake has been committed.’” Lisdahl v. Mayo Found., 633 F.3d 712,
717 (8th Cir. 2011) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)).
“A decision is contrary to law when it fails to apply or misapplies relevant statutes, case
law or rules of procedure.” Knutson v. Blue Cross & Blue Shield of Minn., 254 F.R.D. 554,
556 (D. Minn. 2008) (internal quotation marks omitted).
II.

SUBSTITUTION
Sysco and Carina argue that the Magistrate Judge’s denial of their motions for

substitution was clearly erroneous on two grounds. First, because requiring Sysco to
continue to litigate claims it voluntarily assigned to Carina is contrary to precedent and
the purpose of Federal Rule of Civil Procedure 25(c). Second, because the public policies

Docket No. 565 in ECF No. 22-3031; Carina’s Appeal/Obj. of Magistrate Judge’s Decision, Feb. 23,
2024, Docket No. 566 in ECF No. 22-3031.)

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that the Magistrate Judge relied upon in reaching his conclusion favor substitution. The
Court disagrees on both grounds.
A.

Federal Rule of Civil Procedure 25(c)

Federal Rule of Civil Procedure 25(c) permits substitutions of parties when an
interest is transferred during a lawsuit. Fed. R. Civ. P. 25(c). “The rule is designed to allow
an action to continue unabated when an interest in a lawsuit changes hands, rather than
requiring the initiation of an entirely new lawsuit.” ELCA Enters., Inc. v. Sisco Equip. Rental
& Sales, Inc., 53 F.3d 186, 191 (8th Cir. 1995) (internal quotation marks omitted). The
decision whether to substitute parties lies within the district court’s discretion. Froning’s,
Inc. v. Johnston Feed Serv., Inc., 568 F.2d 108, 110 n.4 (8th Cir. 1978). Importantly, Rule
25(c) “does not require that anything be done after an interest has been transferred. The
action may be continued by or against the original party, and the judgment will be binding
on the successor in interest even though the successor is not named.” 7C Charles A.
Wright & Arthur R. Miller, Federal Practice and Procedure § 1958 (3d ed). Indeed, “[s]ince
the matter is discretionary, the court . . . may refuse substitution if this seems the wisest
course.” Id.
While federal antitrust claims can be freely assigned, see, e.g., Gulfstream III
Assoc., Inc. v. Gulfstream Aerospace Corp., 995 F.2d 425, 437 (3d Cir. 1993), and courts
have found substitution appropriate where a claim is assigned, see, e.g., ELCA Enters.,
Inc., 53 F.3d at 191; Columbian Bank & Trust Co. v. Miller, 384 Fed. App’x 524, 525 (8th Cir.
2010), Sysco and Carina underestimate the discretionary power afforded to the district
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court. Rule 25(c) does not require substitution when an interest is transferred during a
lawsuit. Rather, the Court is free to exercise its discretion to deny substitution, especially
in light of valid policy concerns. See Froning’s, 568 F.2d at 110 n.4 (“The decision whether
to substitute parties lies within the discretion of the trial judge and he may refuse to
substitute parties in an action even if one of the parties so moves.”).
Further, the Eighth Circuit cases that Sysco and Carina insist warrant substitution
here did not concern the unique set of facts that this case presents. See ELCA Enters.,
Inc., 53 F.3d at 188; Columbian Bank & Trust Co., 384 Fed. App’x at 524. Neither case
involved “an attempt by a litigation funder to step into the shoes of the party it was
funding, once litigation was well underway and settlements purportedly negotiated, and
conduct the litigation for itself, in search of a larger payoff.” (Magistrate Judge’s Order at
27.) Given the extraordinary facts of this case, wherein a litigation financer is essentially
requesting to substitute itself in the place of its client mid-litigation, the Court finds the
Magistrate Judge’s decision to deny substitution was not contrary to precedent or the
purposes of Rule 25(c).
B.

Public Policy

Sysco and Carina also contend that public policy favors substitution. In their view,
the policy favoring settlements supports substitution because Sysco would otherwise be
deprived of the benefit of its settlement bargain with Burford. In addition, they argue
that antitrust policy supports substitution because the antitrust standing doctrine does
not categorically prohibit a party that suffered an antitrust injury from assigning its claims
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to a third party, even for the purpose of turning a profit. See, e.g., Cordes & Co. Fin. Servs.,
Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91, 103 (2d Cir. 2007). Finally, Sysco and Carina
challenge the Magistrate Judge’s emphasis on the doctrine of champerty 3 and the policy
interests that protect a party’s right to control its own litigation. They argue that any
concern regarding Sysco’s right to control its own litigation and settlements relates to the
previous dispute between Sysco and Burford, which is no longer live now that Sysco
assigned its rights to Carina.
The Court finds nothing in the record suggesting that the Magistrate Judge
erroneously denied substitution based on his cited public policy concerns. The fact that
public policy could support substitution in this instance does not mean that the
Magistrate Judge clearly erred. Rather, the Magistrate Judge appropriately explained that
granting substitution here could have a detrimental impact on antitrust cases across the
country.
Indeed, Sysco and Burford’s conduct that resulted in the assignment agreement
threatens the public policy favoring the settlement of lawsuits. See Associated Elec. Coop, Inc. v. Mid-Am. Transp. Co., 931 F.2d 1266, 1272 (8th Cir. 1991). The Magistrate Judge
was rightly concerned that allowing substitution here could encourage litigation financers

3

Champerty is a common law doctrine, now abolished in Minnesota, that prohibits
parties unrelated to a lawsuit from supporting or helping enforce the claim for financial purposes.
See Maslowski v. Prospect Funding Partners LLC, 944 N.W.2d 235, 237–41 (Minn. 2020).

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everywhere to use mid-litigation assignments and substitutions to undermine
agreements between parties otherwise willing to settle.
Moreover, substitution in this instance would threaten antitrust standing policy.
While federal antitrust claims can be freely assigned, see Gulfstream III Assoc., Inc., 995
F.2d at 437, the unique facts of this case counsel against substitution. Permitting a
litigation funder to step into the shoes of its client via assignment and substitution would
contravene the purpose of antitrust laws and standing requirements by condoning third
parties with only investment interests to take over and litigate antitrust cases. Midwest
Commc’ns v. Minn. Twins, Inc., 779 F.2d 444, 450–51 (8th Cir. 1985) (describing antitrust
standing requirements and their rationale).
Finally, whether the assignment agreement is valid—notwithstanding the fact that
the Magistrate Judge declined to rule on its validity—is of no matter. Though the State
of Minnesota has abolished its common-law prohibition against champerty, courts must
still “be careful to ensure that litigation financiers do not attempt to control the course of
the underlying litigation.” Maslowski v. Prospect Funding Partners LLC, 944 N.W.2d 235,
241 (Minn. 2020). Sysco and Burford’s conduct is precisely the kind of conduct of which
courts are wary. The substitution motion directly resulted from their attempt to resolve
the dispute over whether Sysco or Burford should control this litigation. The Court will
not approve such conduct.

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The Court finds that the Magistrate Judge’s decision to deny substitution was
based on valid policy concerns and therefore not clearly erroneous.
CONCLUSION
The Court finds nothing in the record indicating that the Magistrate Judge’s
decision to deny the Joint Motions for Substitution of Plaintiff was clearly erroneous,
especially considering the unique facts of this case. Accordingly, the Court will deny Sysco
and Carina’s appeal and affirm the Magistrate Judge’s Order. If there are changes in
circumstances which later warrant a different outcome, Sysco and Carina may refile a
motion for substitution.

ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Sysco’s Appeal/Objection of Magistrate Judge Decision [Docket No. 2126 in ECF
No. 18-1776 and Docket No. 565 in ECF No. 22-3031] is DENIED;
2. Carina’s Appeal/Objection of Magistrate Judge Decision [Docket No. 2127 in
ECF No. 18-1776 and Docket No. 566 in ECF No. 22-3031] is DENIED; and

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3. The Magistrate Judge’s Order [Docket No. 2104 in ECF No. 18-1776 and Docket
No. 545 in ECF No. 22-3031] is AFFIRMED.

DATED: June 3, 2024
at Minneapolis, Minnesota.

JOHN R. TUNHEIM
United States District Judge

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