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U.S. Supreme Court spurns McKinsey appeal

Posted On: Oct. 11, 2022 11:37 AM CST


(Reuters) — The U.S. Supreme Court on Tuesday declined to hear McKinsey & Co’s bid to escape a lawsuit by retired turnaround specialist Jay Alix accusing the management consulting firm of concealing potential conflicts when seeking permission from bankruptcy courts to perform lucrative work on corporate restructurings.

The justices turned away McKinsey’s request that they overturn a lower court's decision that the lawsuit by Mr. Alix, who has accused the firm of running a “criminal enterprise” by hiding its ties to lenders and its clients’ competitors.

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

Mr. Alix, who has battled McKinsey in multiple courtrooms since 2016, sought triple damages under RICO, which lets people sue if they believe criminal enterprises caused them harm.

U.S. District Judge Jesse Furman in Manhattan in 2019 dismissed the lawsuit, saying Mr. Alix did not assert a “proximate” link between McKinsey's alleged wrongdoing and harm to AlixPartners. Mr. Alix reported owning a 35% equity stake in AlixPartners.

The New York-based 2nd U.S. Circuit Court of Appeals in January revived the case, saying Judge Furman gave “insufficient consideration” to whether McKinsey undermined the integrity of federal judicial proceedings.

McKinsey in its petition to the Supreme Court argued that the 2nd Circuit's decision ran contrary to past rulings by the high court holding that RICO lawsuits may be brought only by plaintiffs injured “directly” by wrongdoing.