Burford's $35 million bet on antitrust claims hits snag in US bankruptcy court

By Mike Scarcella WASHINGTON, Nov 19 (Reuters) - A judge in Texas has dealt litigation funder Burford Capital (BURF.L) a setback in its bid to collect on a $35 million investment in antitrust lawsuits brought by bankrupt food distributor Harvest Sherwood Burford affiliates had sued Harvest Sherwood in July, asserting that their 2022 agreement with the company to fund antitrust claims worth as much as $1.1 billion functioned as a secured loan and gave Burford a first-priority right to proceeds from the cases. Chief Judge Stacey Jernigan of the U.S. Bankruptcy Court in Dallas rejected those arguments in a ruling last week, holding that Burford affiliates Blakemore Investments and Milwaukee Investments had not shown that their so-called capital provision agreement entitled them to payment ahead of secured creditors such as JPMorgan Chase. Burford and its lawyers did not immediately respond to requests for comment on Tuesday. Attorneys for Harvest Sherwood had no immediate comment. Detroit-based Harvest Sherwood was once the country’s largest independent wholesale food distributor. Harvest Sherwood declared bankruptcy in May, and its antitrust lawsuits accusing pork, chicken and beef producers of illegally fixing prices are among the company’s key remaining assets. Publicly-traded Burford is the world’s largest litigation finance provider. Litigation funders provide financial support to clients in exchange for a part of any settlement or judgment. Burford in its lawsuit accused Harvest Sherwood of “blatantly mischaracterizing” its funding agreement as an unsecured loan. The agreement said the funders were entitled to at least $70 million. In seeking to dismiss Burford’s lawsuit, which was filed as part of the bankruptcy, Harvest Sherwood’s lawyers said the funders sought improperly to “elevate Burford’s unsecured claim to some amorphous senior and first priority interest.” Jernigan said Burford’s funding contract with Harvest Sherwood was “not a subordination agreement” and created no trust or lien. Instead, the judge ruled, it amounted to an unsecured claim for repayment, leaving Burford to wait in line with other general creditors. The judge said granting a victory for Burford would “contradict bankruptcy policy” and harm other stakeholders. The case is Blakemore Investments LLC et al v. Hamilton Meat et al, U.S. Bankruptcy Court for the Northern District of Texas, No. 25-08008-sgj. For Blakemore: Kevin Lippman and Julian Vasek of Munsch Hardt Kopf & Harr For Harvest Sherwood: Rakhee Patel, Jason Hufendick and Stephen Hessler of Sidley Austin Read more: Burford drills down on law firm strategy with UK advisory deal Can investors buy in to Big Law? Burford Capital bets on it Litigation funders get a boost in budget bill drama, court wins Ruling keeps litigation funder Burford in control of turkey price-fixing case