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Innovative Thinking, Positive Results

Case Review

2/15/2022

1 Comment

 

Alix v. McKinsey & Co. Inc., 20-2548 
​
(2d Cir. Jan. 19, 2022)

The district judge believed that the injury to Alix had been caused by the debtors’ decisions not to hire AlixPartners and not by McKinsey’s alleged misconduct. The district judge also believed that the U.S. Trustee would have been the better plaintiff to remedy the alleged misconduct.
Disagreeing, Judge Parker said that the district court had “conflated proof of causation and proof of damages and that it did not draw all reasonable inferences in Alix’s favor.”
Here’s the important bankruptcy angle:
“More importantly,” Judge Parker said, “the district court gave insufficient consideration to the fact that McKinsey’s alleged misconduct targeted the federal judiciary.”
Judge Parker expanded on the idea, suggesting that litigants who can’t show direct harm to afford standing may nonetheless pursue litigation when the integrity of the process is at stake. He said:
[T]his case requires us to focus on the responsibilities that Article III courts must shoulder to ensure the integrity of the Bankruptcy Court and its processes. Litigants in all of our courts are entitled to expect that the rules will be followed, the required disclosures will be made and that the court’s decisions will be based on a record that contains all the information applicable law and regulations require. If McKinsey’s conduct has corrupted the process of engaging bankruptcy advisors, as Alix plausibly alleges, then the unsuccessful participants in that process are directly harmed.
Later, Judge Parker said that “fraud on the Bankruptcy Court committed in the manner alleged by Alix causes direct harm to litigants who are entitled to a level playing field and calls into play our unique supervisory responsibilities.”
​
Judge Parker also reversed dismissal of Alix’s pay-to-play claim under 18 U.S.C 152(6), which proscribes fraudulently offering money to act or forbear from acting in a bankruptcy case. He said it was “implausible — indeed inconceivable — that any Bankruptcy Court would have approved McKinsey’s retention if Alix’s allegations were substantiated.”
Because Judge Parker was reversing a motion to dismiss, he said that “McKinsey might well prevail on summary judgment or at trial and to be sure, uncertainties at those stages might exist.”

Although not in lawsuits with Alix, the U.S. Trustee Program issued a press release in February 2019 about a settlement where McKinsey agreed to pay $15 million for inadequate disclosure in three chapter 11 cases. In December 2020, the U.S. Trustee Program issued a press release about a separate settlement made in connection with a case in Texas where McKinsey agreed to withdraw its application for retention and waive the recovery of fees for work it had performed. The press release said that the fees and expenses “likely” would have been “millions of dollars.”
1 Comment
IT Zone link
5/25/2022 12:39:01 pm

very nice… i really like your blog…

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  • Home
  • Our Team
    • Matthew R. Braucher
    • Martha L. Davidson
    • Christopher Jantzen
    • Fahelle Bonheur
    • Anna D’Avolio - Esquire
  • Areas of Practice
    • Real Estate Law
    • Bankruptcy
    • Business Law
    • Default Services
    • Civil Litigation
  • About Us
    • Contact Us
    • Legal News
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    • Articles