DOJ Unit Renews Venue Dispute for Jackson Walker Fee Challenges

A Justice Department unit asked to move out of bankruptcy court 16 disputes involving ethical questions over fees a Texas law firm earned while failing to disclose that one of its attorneys was in a relationship with a prominent judge.

The US Bankruptcy Court for the Southern District of Texas needs to decide quickly whether to move actions against Jackson Walker LLP in a slew of corporate bankruptcies to a federal district court, the government’s bankruptcy monitor, the US Trustee, said in several Monday court filings. Discovery related to the ethics scandal is coming to a close and trials are less than two months away, the US Trustee said.

The US Trustee is trying to claw back as much as $23 million in fees earned by Jackson Walker across 33 bankruptcy cases for allegedly concealing that former partner Elizabeth Freeman was secretly dating and living with ex-bankruptcy judge David R. Jones.

The US Trustee has already asked for 17 of the fee disputes to be moved out of the Southern District of Texas bankruptcy court. The request was denied by a Houston bankruptcy judge last year, and has yet to be ruled on by a district court judge.

“The United States Trustee can no longer defer seeking relief in all the proceedings against Jackson Walker,” the US Trustee said.

Chief Judge Alia Moses of the US District Court for the Western District of Texas should handle all of the fee challenges, the US Trustee said, to help restore “sooner rather than later public confidence in the integrity of the bankruptcy court.” Moving the fee battles would also help address “the perception, if not the reality, that Jackson Walker profited off of its former partner’s intimate and financial relationship with former Judge Jones,” the US Trustee said.

Jones, who sat on the Houston-based bankruptcy court for 12 years, announced last year he would resign after admitting to a long-term relationship with Freeman, who left Jackson Walker in December 2022.

If approved, disputes in bankruptcy cases that include Sanchez Energy Corp. and McDermott International Inc. would be transferred away from bankruptcy judges.

Chief Judge Eduardo V. Rodriguez of the Southern District of Texas bankruptcy court recommended last December that a district court reject the US Trustee’s motion, but the request to district court itself has been stalled for months.

The fee disputes are spread out among three different bankruptcy judges, with some cases open, others closed, and in some in which Jones only mediated but didn’t preside. Judge Marvin Isgur recently recused himself from a several cases after issuing a disciplinary recommendation against Jackson Walker.

A Jackson Walker spokesman decline to comment.

The case is Sanchez Energy Co., Bankr. S.D. Tex., No. 19-34508, docket 10/7/24.