Ex-Judge Romance Probe Reaches Contentious Sanchez Energy Case

A former Jackson Walker LLP bankruptcy partner maintained communications with her judge boyfriend while he mediated an oil and gas company’s contentious bankruptcy that the firm worked on, according to court records.

The Texas law firm has declined to hand over the emails between attorney Elizabeth Freeman, who is no longer with the firm, and former top Houston bankruptcy judge David R. Jones, according to a filing Thursday by the Justice Department’s bankruptcy monitor in the US Bankruptcy Court for the Southern District of Texas.

The document was filed as part of efforts by the US Trustee to disgorge as much as $23 million from Jackson Walker for failing to disclose the romance as a conflict of interest while it represented clients before Jones in court.

Between March 19, 2020, and April 21, 2020, Freeman emailed Jones several times as part of mediation of the former Sanchez Energy Co. bankruptcy case, according to a filing from the US Trustee. Jackson Walker has withheld the content of the communications from the government, citing mediation privilege.

Jones mediated the case as a sitting judge while Jackson Walker represented Sanchez as co-counsel. Freeman was a partner at the firm at the time, but left at the end of 2022.

The romance scandal caught the attention of certain lenders from the Sanchez case, notably Apollo Global Management and Fidelity Management & Research Co., in August. They noted that Jones steered Sanchez’s bankruptcy settlement in a way that cost the lenders hundreds of millions of dollars—while hiding the relationship.

The romance between Jones and Freeman became public in October 2023, leading to Jones’ resignation, and an expanding web of litigation entangling him, Jackson Walker, and Freeman. A federal criminal investigation is also ongoing.

They owned and lived in a house together since 2017, shared some household expenses, and their relationship could go back as far as 2013.

The US Trustee document also shows that Freeman, Jones, and Jackson Walker were included in 2023 emails related to the mediation of bankrupt bond seller GWG Holdings Inc. The firm is also withholding those emails.

Lender Questions

Apollo and Fidelity, which also provided financing during the bankruptcy, in August questioned the mediation that led to a 2020 settlement in the bankruptcy and said they may have damages claims against Jones, Freeman, and Jackson Walker for concealing the relationship.

Jones pushed for the value of the estate’s potential claims to be decided after Sanchez’s Chapter 11 plan was confirmed, the lenders said. That advocacy benefited Freeman and Jackson Walker because they otherwise would have had to represent the estate in a contested confirmation hearing without additional pay because they had already agreed to cap their fees, the lenders said.

If the lenders had known about the relationship at the time, they wouldn’t have participated in the mediation or agreed to enter into Jones’ proposed settlement, they said.

Jackson Walker has said it only learned of allegations of the relationship in March 2021. Recently released texts showed that certain members of its bankruptcy team had some knowledge of the extent of the relationship, but the firm has said its leadership was kept in the dark about its full extent.

Jackson Walker has said it did not violate its duty of candor and bankruptcy rules don’t require disclosure of connections to judges.

Sanchez’s bankruptcy lenders said they have a right to know about any connections between Jones and the professionals in the Sanchez case and whether the ex-judge’s impartiality and fairness should be called into question.

Attorneys for Jones, Jackson Walker, and Apollo didn’t immediately respond to requests for comment Friday. Freeman’s attorney, and Fidelity declined to comment.

Counsel for several groups of senior secured noteholders and bankruptcy lenders include Willkie Farr & Gallagher LLP. Jackson Walker is represented by Rusty Hardin & Associates LLP and Norton Rose Fulbright US LLP. Jones is represented by Quinn Emanuel Urquhart & Sullivan LLP. Freeman is represented by Law Office of Tom Kirkendall.

The case is Professional Fee Matters Concerning the Jackson Walker Law Firm, Bankr. S.D. Tex., No. 23-00645, exhibit 11/7/24.