Alix v. McKinsey & Co., Inc.

Background

The opinion resolves defendants’ request to stay discovery in a case brought by Jay Alix against four McKinsey entities and nine current or former McKinsey employees. Alix’s 289-page second amended complaint asserted claims under the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO, based on alleged conduct connected to fourteen bankruptcy proceedings over nearly two decades.

Defendants had filed a motion to dismiss the second amended complaint. They argued that the motion could dispose of the entire case or substantially narrow it. Among other arguments, defendants contended that Alix had not adequately pleaded fraud, knowledge or intent, a legally sufficient RICO enterprise, racketeering acts by the individual defendants, a qualifying injury, or a conspiracy. They also argued that some claims were untimely, some claims were barred by an earlier ruling, and that AlixPartners LLP was the real party in interest under Federal Rule of Civil Procedure 17.

Defendants’ Request

Defendants argued that good cause supported pausing discovery because the motion to dismiss presented substantial issues, the anticipated discovery would be extensive and expensive, and a stay would conserve the parties’ and court’s resources. They also argued that Alix would not suffer unfair prejudice because he principally sought monetary damages and had not identified ongoing harm or an imminent loss of evidence.

In the alternative, defendants asked the court to prioritize limited discovery and briefing concerning whether Alix was authorized to pursue claims allegedly assigned by AlixPartners. They proposed eight weeks of document discovery followed by four weeks of fact depositions on that issue before broader discovery. The court had previously deferred deciding an expedited schedule because it depended on whether discovery would proceed generally.

Ruling

The court stated that it was expressing no view on the merits of defendants’ motion to dismiss. After considering the relevant factors, it concluded that discovery should be stayed pending a decision on that motion, and possibly pending a decision on the pending petition for a writ of certiorari. Judge Jesse M. Furman reasoned that, despite the age of the case, a delay of a few more months would not prejudice Alix and that the scope and nature of the claims made it useful to determine which claims, if any, would proceed before discovery began.

The court therefore ordered that discovery be stayed pending a decision on the motion to dismiss. It rejected defendants’ alternative proposal to stage discovery by prioritizing the Rule 17 real-party-in-interest issue if discovery later proceeds. The court also directed the Clerk of Court to terminate ECF No. 201.