“Bankruptcy Racketeering Lawsuit Against Law Firms, Ex-Judge Dismissed” —

• “A federal judge dismissed a civil racketeering complaint accusing law firms Kirkland & Ellis and Jackson Walker of conspiring with the nation’s former top bankruptcy judge to rig his Houston court.”
• “U.S. District Judge Alia Moses on Friday ruled that an unhappy litigant, Michael Van Deelen, had failed to show he was harmed by the alleged scheme. Moses said she dismissed the case ‘ with some consternation’ after finding that Van Deelen lacked standing to sue the two law firms, then-judge Jones and his longtime romantic partner, who worked as a bankruptcy lawyer on major chapter 11 cases they brought to his court.”
• “Jones became the nation’s busiest bankruptcy judge in recent years after Kirkland, the top U.S. firm for advising financially-troubled companies, began filing many of its largest chapter 11 cases to Houston, usually with Texas-based Jackson Walker as its co-counsel. Jones resigned in October after he confirmed to The Wall Street Journal that he had shared a home for years with Elizabeth Freeman, a Jackson Walker partner from 2018 to 2022.”
• “Van Deelen, who filed the lawsuit, is a former high school math teacher who had owned shares in McDermott International, an oil-and-gas drilling company that filed bankruptcy in Jones’s court with Kirkland and Jackson Walker as its lawyers.”
• “Moses, who sits in Del Rio, Texas, ruled that Van Deelen didn’t adequately show in his complaint that the alleged scheme to conceal Jones’s conflict of interest caused Van Deelen to take a greater loss on his investment in McDermott than he would have otherwise.”
• “Van Deelen’s shares in the company were wiped out when Jones in 2020 confirmed a chapter 11 plan drawn up by McDermott’s lawyers. As a result, he had no financial interest in the company by the time its lawyers received court approval to collect their fees, Moses said.”

“McKinsey Foe Alix Ends Bankruptcy Conflict-of-Interest Battle” —

• “Jay Alix, the founder of turnaround consulting firm AlixPartners, isn’t appealing a recent ruling dismissing his long-running racketeering lawsuit against McKinsey & Co., ending his six-year battle against the major consulting firm.”
• “In early July, a federal judge dismissed for a second time Alix’s lawsuit against McKinsey, which alleged the consulting firm concealed conflicts of interest from bankruptcy courts to help land lucrative contracts advising on corporate restructurings and causing AlixPartners to lose out on work and revenue. “
• “At the time of the ruling, Alix’s spokesperson said he intended to appeal the decision. But the deadline to appeal has now passed, and the case has been closed. “
• “A McKinsey spokesperson said Thursday that the consulting firm has maintained from the beginning that Alix’s accusations were legally meritless and his motives anticompetitive.”
• “Without admitting any wrongdoing, McKinsey in 2021 paid $18 million to resolve a government probe into its policies meant to prevent insider trading, and in 2019 $15 million to settle a separate investigation into the firm’s conflict-of-interest disclosures in bankruptcy court. “
• “Last year, The Wall Street Journal, citing people familiar with the matter, reported that the consulting firm was winding down its bankruptcy practice after numerous lawsuits and government probes into its recovery and transformation services division’s work.”
• “A McKinsey representative told the Journal the division wasn’t shutting down, while confirming the company didn’t have any chapter 11 engagements at that time. The firm’s spokesman said Thursday it will ‘continue to support our clients’ transformations with integrity, professionalism, and excellence.'”

Brian Faughnan asks: “Can you name all the ABA Model Rules that can never be violated?” —

• “No one can actually violate an ABA Model Rule as they don’t govern anyone on their own. They can only have sway if they are adopted into a specific jurisdiction as a relevant ethics rule. However, since I do not possess encyclopedic awareness of every single variation of the rules that have been adopted in all 51 U.S. jurisdictions, I’m keeping this post focused on the substantive concepts enshrined in the ABA Model Rule version of the ethics rules.”
• “The first is the one that likely springs to mind first for everyone: Model Rule 6.5 regarding pro bono public service. It is an entirely aspirational rule and so no one could ever get disciplined for a ‘violation” of it.'”
• “The second is another easy one. Model Rule 8.5 which simply addresses conflict of law issues and determines which jurisdiction’s ethics rules would apply in a particular circumstance. Thus, since it imposes no requirement on a lawyer, it cannot itself be violated.”
• “The third is also easy (I think). Model Rule 5.2. That rule only does two things: (1) it gives a limited defense to lawyers for what might otherwise be disciplinable conduct; and (2) makes clear that, absent that defense, a lawyer is responsible for their own conduct even if ordered by their boss to do it. You cannot violate Rule 5.2.”
• “The fourth is not as easy to remember as the first three but only because it simply isn’t an easy rule to remember even exists. If you remember it exists, then recognizing its lack of teeth is pretty well understood. Model Rule 6.5 on working with nonprofit and court annexed limited legal services programs. All it does is identify the limitations on the application of other rules when the circumstances are met. A lawyer participating with such a group could still violate those other rules within their limited application but cannot actually violate Rule 6.5.”
• “And that brings us to the fifth which essentially has the same structural set up as the fourth even though it isn’t quite written in the same straightforward fashion. That’s right, it’s Model Rule 5.7: Responsibilities Regarding Law Related Services.”
• “That rule only serves to provide a structure for when a lawyer can avoid the application of nearly all of the ethics rules to the provision of law-related services. Now it is written in a somewhat backwards sort of fashion — describing when all of the rules will apply to the provision of law-related services but, in the end, it still serves to just provide guidance (even if only indirectly) for how a lawyer can avoid that result.”
• “An attorney whose conduct doesn’t meet the standards set out by RPC 5.7, doesn’t violate the rule and no one can ever be non-frivolously charged with a violation of RPC 5.7.