DOJ Bankruptcy Unit Opposes Invitae’s Bid to Hire Kirkland

Kirkland & Ellis LLP can’t represent genetic testing company Invitae Corp. in its Chapter 11 case because the law firm has a significant conflict of interest, the Justice Department’s bankruptcy watchdog said.

Kirkland represents Invitae’s largest secured creditor, Deerfield Management Company, which holds nearly 80% of Invitae’s 2028 senior secured notes, outside of Invitae’s bankruptcy. Even though Kirkland represents Deerfield in matters unrelated to Invitae’s case, it’s still a conflict of interest, the US Trustee said in a Monday filing in the US Bankruptcy Court for the District of New Jersey.

“It appears that K&E is not disinterested and holds an adverse interest against the estate,” the US Trustee said.

Softbank-backed Invitae filed for bankruptcy earlier this year as the DNA testing industry struggles to regain investor interest following a pandemic-era boom. Invitae’s market capitalization rose to more than $10 billion during the Covid-19 pandemic, but it kept losing money.

The US Trustee’s objection to Kirkland’s employment follows similar opposition from Invitae’s unsecured creditors, who earlier this month objected to Invitae’s proposed employment of Kirkland, the world’s largest law firm by revenue.

The creditors’ opposition, as well as the US Trustee’s, both highlight a 2023 transaction that creditors say allowed Deerfield to vault ahead of others in the bankruptcy repayment order.

“Deerfield appears to be the main beneficiary” of that transaction, the US Trustee said.

The case is Invitae Corporation, Bankr. D.N.J., No. 24-11362-MBK, 4/15/24.