CHICAGO - A Chicago federal judge has deleted, perhaps for the final time, a long-running lawsuit brought by a Chicago law firm, claiming a company providing software services in bankruptcy proceedings was involved in a fee-fixing conspiracy.
Earlier this month, U.S. District Judge Joan Lefkow dismissed the sole remainin claim from the antitrust action brought by Chicago legal firm McGarry & McGarry LLP against Bankrupt Management Solutions Inc. (BMS).
In her ruling, Lefkow said the McGarry firm once again failed, as in past decisions, to establish exactly how an alleged conspiracy harmed the legal practice, and how the law firm, as an unsecured creditor of an estate, had standing to sue over the alleged conspiracy.
U.S. District Judge Joan Lefkow
| fedbarchicago.org
"As in the first action, McGarry fails to explain how its injury was inextricably intertwined with the conspiracy to fix the manner of charging fees for bankruptcy software," Lefkow wrote. "... McGarry has participated in no market. Rather, it is simply a creditor of an estate that allegedly was injured by an antitrust violation."
McGarry & McGarry first filed its claims against BMS in the Northern District of Illinois. That lawsuit was dismissed because the firm was an individual creditor, not the bankruptcy trustee or debtor.
Instead of appealing, McGarry filed a similar suit in state court, claiming violations of the Illinois Anti-Trust Act. However, that case was moved back to the federal court, which again ruled that McGarry was not an "appropriate party" to make the claim.
Judge Lefkow said the dispute between McGarry and BMS centered on BMS's alleged practice of telling estate trustees to deposit funds in a partner bank, in this case Rabobank, which could earn money from the deposit, pay interest to the estate and pay a fee to BMS.
As interest rates dropped, McGarry said the bank had a harder time paying BMS's fee.
As a result, the firm alleged that the company decided to change the way it was paid for its services, charging a set percentage based on the funds in an estate's account, but also allegedly securing the agreement of two other parties to structure fees in the same way.
In the case in which it was a creditor, McGarry said it was able to get back just over $12,000 of its $78,000 claim, and it later found out that, of that amount, more than $500 was paid to Rabobank, most of which was passed on to BMS. McGarry claimed this amount was greater than what would have been paid under the previous fee structure.
In her ruling, Judge Lefkow said a trustee is charged with pursuing the debtor’s claims "on behalf of all the debtor’s creditors equally, without preference for any particular creditor."
The judge dismissed the case with prejudice.
BMS is defended in the action by attorneys with the firms of Dorsey & Whitney, of New York and Minneapolis, and LeonardMeyer LLP, of Chicago.
McGarry is also represented by attorney William Dunnegan, of the firm of Dunnegan & Scileppi LLC, of New York.