U.S. Supreme Court denies McKinsey & Co appeal in bankruptcy dispute case

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Oct 11 (Reuters) – The U.S. Supreme Court on Tuesday refused to hear McKinsey & Co’s attempt to evade a lawsuit by retired turnaround specialist Jay Alix, accusing the management consultancy to conceal potential conflicts when he sought permission from the bankruptcy courts to perform lucrative work on the company. restructurings.

Judges rejected McKinsey’s request to overturn a lower court’s ruling in Alix’s lawsuit, which accused the company of running a ‘criminal enterprise’ by hiding its ties to its lenders and competitors clients.

Alix’s lawsuit accused McKinsey and several current or former employees of violating the Racketeer Influenced and Corrupt Organizations Act (RICO), a US law used to target illegal conspiracies that was originally designed to target organized crime .

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Alix, who has fought McKinsey in multiple courtrooms since 2016, sought treble damages under RICO, which allows people to sue if they believe criminal enterprises have harmed them.

U.S. District Judge Jesse Furman in Manhattan in 2019 dismissed the lawsuit, saying Alix did not assert a “proximity” connection between McKinsey’s alleged wrongdoing and harm to AlixPartners. Alix said it has a 35% stake in AlixPartners.

The New York-based United States Court of Appeals for the 2nd Circuit revived the case in January, saying Furman had “insufficiently considered” the question of whether McKinsey had damaged the integrity of the federal court proceedings.

“If McKinsey’s conduct corrupted the process of engaging bankruptcy advisers, as Alix plausibly alleges, then unsuccessful participants in that process are directly harmed,” 2nd Circuit Judge Barrington Parker wrote.

McKinsey, in its petition to the Supreme Court, argued that the 2nd Circuit ruling ran counter to previous High Court rulings that RICO lawsuits could only be brought by plaintiffs injured “directly” by wrongdoing.

The firm urged the Supreme Court to consider whether lower courts must follow this standard “even if, according to the court’s judgment, the plaintiff’s allegations implicate the court’s ‘supervisory responsibilities’ over the legal proceedings.”

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Reporting by Nate Raymond in Boston; Editing by Will Dunham

Our standards: The Thomson Reuters Trust Principles.

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