Law360 (September 16, 2020, 5:47 PM EDT) -- A Texas bankruptcy judge on Wednesday said the half-done trial over consulting giant McKinsey & Co.'s disclosures in Westmoreland Coal Co.'s Chapter 11 will stay on hold until January to wait out COVID-19 restrictions on in-person court appearances.
At a remote status conference, U.S. Bankruptcy Judge David Jones said his "conservative" expectations were that coronavirus restrictions on the court would stay in place through the end of the year, but that live testimony and argument were important enough to wait before longtime McKinsey foe Jay Alix puts on his case against the firm.
"I have a very strong preference to finish this in person," he said.
Acting through the purpose-built entity Mar-Bow Value Partners LLC, Alix — the retired founder of turnaround consultancy and McKinsey competitor AlixPartners LLP — is contesting McKinsey's request for court approval of Westmoreland's November 2018 application to hire McKinsey to assist in its now-completed $1.4 billion restructuring.
Alix has filed actions in multiple bankruptcy cases accusing McKinsey of failing to disclose business and financial connections to interested parties in the cases.
In the trial, which opened Feb. 5, McKinsey claimed it disclosed every relevant connection the firm has to parties with an interest in the Westmoreland case, while Alix and the U.S. Trustee's Office repeated their allegations that McKinsey was still holding back information from the court.
On March 18, following eight days of testimony from and cross-examination of witnesses called by McKinsey, both sides asked Judge Jones to adjourn the trial until April, citing COVID-19 travel restrictions. In April McKinsey asked that the trial be resumed electronically, but Judge Jones ruled that that would be unfair to Alix, as McKinsey had made the bulk of its case conventionally.
A combination in-person and remote hearing was held June 5 on Mar-Bow's motion for judgment on partial findings, which Judge Jones denied.
Last week Alix — who had argued against conducting the trial remotely in April — filed a status report telling the court he planned to ask to resume the trial remotely in the beginning of October, noting the case has been delayed six months with "no end in sight."
In McKinsey's response it agreed the trial should be restarted but disagreed with Alix's proposed procedures.
Judge Jones, however, said that given the importance of the case he had a "very strong preference to finish the way we started," and would go forward when in-person testimony and argument became possible.
He said he expects the current COVID-19 orders will be extended through Dec. 31, but not after that. He said he had set aside the first week of January and the first week of February to finish the trial.
Mar-Bow counsel Sean O'Shea said Mar-Bow's own "strong preference" had been to proceed in person, and that it expects it will need nine days to put on its case.
McKinsey is represented by Faith E. Gay, Jennifer M. Selendy, Maria Ginzburg and David S. Flugman of Selendy & Gay PLLC, Zack A. Clement of Zack A. Clement PLLC and M. Natasha Labovitz, Winston M. Paes and Erica Weisgerber of Debevoise & Plimpton LLP.
Mar-Bow is represented by Sean O'Shea, Michael E. Petrella and Amanda Devereux of Cadwalader Wickersham & Taft LLP, Steven Rhodes of Steven Rhodes Consulting LLC, Daniel L. Lemisch of Lakeview Capital Inc. and Christopher R. Murray and Erin E. Jones of Jones Murray & Beatty LLP.
The U.S. Trustee's Office is represented in-house by Hugh M. Bernstein.
The case is In re: Westmoreland Coal Co. et al., case number 4:18-bk-35672, in the U.S. Bankruptcy Court for the Southern District of Texas.
--Additional reporting by Ryan Boysen. Editing by Bruce Goldman.
Correction: A previous version of the story incorrectly listed counsel for the U.S. Trustee's Office. The error has been corrected.
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