Kirkland, Jackson Walker, Ex-Judge Beat Bankruptcy Romance Suit

Kirkland & Ellis LLP, Jackson Walker LLP, and a former bankruptcy judge won their bid to dismiss a suit alleging they all conspired to keep the ex-judge’s relationship with an attorney under wraps.

Finding that courts must “resist the temptation to bend existing frameworks to bring a vexing case to a palatable resolution,” Chief Judge Alia Moses of the US District Court for the Western District of Texas on Friday dismissed the case. But she emphasized that she did so with “consternation” and that she wasn’t pleased with that result.

The ruling is a major win for the firms, ex-judge David R. Jones, and his girlfriend and former Jackson Walker partner, Elizabeth Freeman. The pair have all been center stage in a scandal that’s rocked the bankruptcy world since October 2023.

Moses emphasized that the dismissal doesn’t redeem Jones’s misconduct, saying he violated the code that requires judge to disqualify themselves in any proceeding where their impartiality might reasonably be questioned. The “relationship presented a glaring appearance of impropriety,” she wrote.

“Whether through hubris, greed, or profound dereliction of duty, Jones flouted these statutory and ethical requirements by presiding over dozens of cases from which he was obviously disqualified,” Moses wrote. “The legal deficiency of the Plaintiff’s claims does not erase these failures.”

The suit was brought by Michael Van Deelen, a former shareholder from a contentious Chapter 11 case Jones presided over when he sat on the US Bankruptcy Court for the Southern District of Texas. Van Deelen’s lawsuit ultimately led to the unearthing of the closely guarded romantic relationship between Jones and Freeman, the former judge’s one-time clerk.

The suit was dismissed against all the parties in the case, including Freeman and others. Moses held that Van Deelen doesn’t have standing to bring the claims but gave him 30 days to refile the case.

Failure to Disclose

Van Deelen’s suit stemmed from the 2020 bankruptcy of McDermott International Inc., during which his stock in the company was wiped out. The company was represented in its bankruptcy by Kirkland and Jackson Walker, while Jones oversaw the case.

Moses at a June hearing held in Del Rio, Texas said Jones was required to disqualify himself on any case Freeman was involved in. Jones said he has judicial immunity from the suit.

Van Deelen’s civil suit, brought first in October against Jones, accused him of concealing his relationship, and owning a home, with Freeman for years, all while making rulings and approving fees in cases involving her firm. Jones eventually admitted to the relationship and resigned.

Jones, who sat in Houston, once handled more large Chapter 11s than any other bankruptcy judge in the country.

Van Deelen expanded his suit in January to target Freeman, Kirkland, and Jackson Walker. He accused them of failing to disclose the relationship as part of a plan to secure favorable bankruptcy court rulings. The lack of disclosure amounted to bankruptcy fraud, honest services fraud, mail and wire fraud, and obstruction of justice under the Racketeer Influenced and Corrupt Organizations Act, or RICO, he alleged.

Van Deelen accused Jackson Walker and Kirkland, the world’s largest law firm by revenue, of filing “misleading and dishonest” court records without disclosing the relationship. Kirkland often partnered with Texas-based Jackson Walker to represent large bankrupt companies in Jones’ courtroom.

Freeman told the court her “close personal relationship” with Jones had nothing to do with the damages that Van Deelen incurred. Kirkland said it had no role in the conduct of Jones, Freeman, and Jackson Walker and that it was “at worst, a bystander” in the whole debacle.

Jackson Walker said it didn’t know about the full extent of the romance until after McDermott’s bankruptcy plan was confirmed.

Moses rejected calls by Kirkland to sanction Van Deelen and his counsel at Bandas Law Firm PC, finding that the firm brought the case in good faith. Kirkland said they lacked a factual basis to make the allegations against the firm, and should be punished.

The question of who at Jackson Walker knew about the relationship, and when, is still being litigated in another court. Freeman left Jackson Walker in December 2022.

Moses’ decision comes as the Justice Department’s bankruptcy monitor, the US Trustee’s office, continues efforts to claw back at least $13 million in fees Jackson Walker earned in cases in which the firm failed to disclose the relationship.

Kirkland is represented by Beck Redden LLP and Hueston Hennigan LLP. Jackson Walker is represented by Rusty Hardin & Associates LLP.

Jones is represented by McKool Smith PC. Freeman is represented by Law Office of Tom Kirkendall.

The case is Van Deelen v. Jones, Bankr. S.D. Tex., No. 23-03729, opinion 8/16/24.