McKinsey Beats Jay Alix’s RICO Case Over Bankruptcy Conflicts

McKinsey & Co. Inc. and its executives defeated a racketeering lawsuit after the judge ruled its competitor’s founder lacked standing to sue.

Jay Alix, founder of global consulting firm AlixPartners LLP, wasn’t injured by the claims in his complaint against McKinsey, and AlixPartners didn’t transfer its claims to Alix for him to sue on its behalf, Judge Jesse Furman of the US District Court for the Southern District of New York ruled Wednesday. Those issues couldn’t be resolved by AlixPartners assigning him to sue McKinsey because it would require the original complaint to be amended beyond what federal rules allow, Furman said in the opinion.

The ruling is the latest in longstanding litigation in which Alix accused McKinsey of concealing conflicts of interest to secure lucrative corporate bankruptcy work.

“Alix has no one to blame but himself — or perhaps AlixPartners,” Furman said in the opinion. “They did not take the steps that were necessary for Alix to press the claims he brings here.”

Alix intends to appeal in the next 30 days or so, his attorney Sean O’Shea of Cadwalader, Wickersham & Taft LLP said.

“We respectfully disagree with the decision on a technical ground only raised recently after six years of litigation,” O’Shea said. “We believe we have the better argument. We intend to appeal again, and we expect to be successful again.”

Furman originally dismissed the case in 2019, but the US Court of Appeals for the Second Circuit revived Alix’s claims. The circuit court ruled the lack of standing might be resolved by federal rule 17, which allows for the injured party to ratify an agent to sue on their behalf post-filing and allows the suit to proceed as if the injured party had filed the original complaint.

“The Second Circuit believes this case should continue,” O’Shea said. He expects the circuit court to remain consistent in that view and send it back to the district court after an appeal.

Alix first sued McKinsey in 2018. The allegations included three violations of the Racketeer Influenced and Corrupt Organizations Act.

McKinsey asked the Supreme Court to examine Alix’s standing in the case after the Second Circuit revived his claims. But the Supreme Court denied McKinsey’s request and the lawsuit returned to the district court in 2022. McKinsey moved to dismiss it based on Alix’s lack of standing due to rule 17 in March of this year.

McKinsey didn’t immediately respond to a request for comment.

Alix is represented by Cadwalader, Wickersham & Taft LLP.

McKinsey is represented by Kobre & Kim LLP and Debevoise & Plimpton LLP. Executives are represented variously by Kramer Levin Naftalis & Frankel LLP, Driscoll & Redlich, McDonald Hopkins LLC, Spears & Imes LLP, Glenn Agre Bergman & Fuentes LLP, and Blank Rome LLP.

The case is Alix v. McKinsey & Co., Inc. et al, S.D.N.Y., Docket No. 1:18-cv-04141-JMF, 7/3/24.