U.S. Bankruptcy Judge David Jones, who oversees more major Chapter 11 cases than any other U.S. judge, is seen in a screenshot from video shot during a virtual interview with Reuters done from Houston, Texas, U.S. December 11, 2020. REUTERS/Staff/File Photo Acquire Licensing Rights
Nov 13 (Reuters) – Texas law firm Jackson Walker was deceived by a former partner who never disclosed she was living with a U.S. bankruptcy judge in Houston who was handling its cases, the firm said in a court filing on Monday.
Jackson Walker was told by former partner Elizabeth Freeman in 2021 that she had ended her relationship with then-U.S. Bankruptcy Judge David Jones “well in the past” and it was unlikely to rekindle, according to a filing that appeared in multiple bankruptcy cases the firm had worked on, including that of J.C. Penney.
The 500-lawyer firm was responding to an effort by the U.S. Trustee, the U.S. Justice Department’s bankruptcy watchdog, to force the firm to return millions of dollars earned in cases presided over by Jones, who resigned in October after his relationship with Freeman became public.
Tom Kirkendall, an attorney for Freeman, declined to comment, as did spokespeople for Jackson Walker and the U.S. Trustee.
Jackson Walker said it first learned of the allegations in March 2021 from an email to the firm sent by a disgruntled litigant.
Jackson Walker confronted Freeman with the allegations and she said the relationship ended by March 2020, according to the court filing by the law firm‘s attorney, William Greendyke, an attorney with Norton Rose Fulbright and a former Houston bankruptcy judge.
In addition, Jackson Walker sent the allegations to the Houston bankruptcy court under seal, according to the filing. Chief Judge Eduardo Rodriguez did not immediately respond to a message left with his staff.
Freeman also told Jackson Walker in 2021 that she and Jones owned their own homes and did not live together, according to the filing.
But when confronted again last year, Freeman told Jackson Walker her relationship with Jones had resumed and in December she left the firm to start her own practice, according to the filing.
Jones resigned last month, days after acknowledging to the Wall Street Journal that he and Freeman had lived together for years.
Jones, who was handling more major Chapter 11 corporate bankruptcy cases than any other U.S. bankruptcy judge, presided over at least 26 Jackson Walker cases while in a relationship with Freeman and he awarded about $13 million in fees to the firm, the U.S. Trustee has said in filings.
Jackson Walker never disclosed there was a relationship between one of its partners and the judge after the firm learned of the allegations in March 2021, according to the U.S. Trustee.
Bankruptcy rules require law firms representing debtors to file lengthy disclosures that can run more than 50 pages listing connections to debtors, creditors and “parties in interest.”
Jackson Walker was the only major law firm that did not follow the standard practice of checking for connections between its staff and judges during Freeman’s time at the firm, according to a Reuters analysis of court filings.
The U.S. Trustee has argued that the bankruptcy system was “significantly compromised” by the undisclosed relationship, which “created an unlevel ‘playing field’ for every party in interest in every case Jackson Walker had before Judge Jones.”
The filing by Jackson Walker did not address why the firm continued to work with Freeman after she left to start her own practice and why her relationship with Jones was never disclosed to other parties.
In the bankruptcy of GWG, an insurance services firm, Jackson Walker filed a motion on Nov. 30, 2022, to request that Jones be appointed by the court as a mediator. The next day, court records show that Jackson Walker hired Freeman as a contract attorney and she participated in the mediation overseen by Jones. Her relationship with Jones was not disclosed to other parties.
The mediation led to her being selected to wind down the estate of GWG at a starting pay of $100,000 a month. The appointment was signed by Jones.
Jumpstart your morning with top legal news delivered straight to your inbox from The Daily Docket.
Reporting by Tom Hals in Wilmington, Delaware
Our Standards: The Thomson Reuters Trust Principles.
