Court Seals Hearing Over Ex-Bankruptcy Judge Romance, Fee Fight

Developments in an ethics dispute surrounding a former bankruptcy judge’s secret relationship with a local attorney were largely kept under wraps Wednesday after a judge closed part of a hearing on the matter to the public.

Chief Judge Eduardo V. Rodriguez of the US Bankruptcy Court for the Southern District of Texas sealed roughly two hours of the hearing, which was part of pretrial proceedings on fee disputes related to the previously undisclosed relationship between former Houston bankruptcy judge David R. Jones and a onetime Jackson Walker LLP partner. Rodriguez cited concerns that potentially “very sensitive” information could be discussed.

Rodriguez had ordered Jones, his lawyers, and Jackson Walker attorneys to appear in court—or face an arrest warrant. Rodriguez sought an explanation as to whether Jones and Jackson Walker violated his orders when the firm questioned Jones “off the record” last month without court approval.

Jones, who resigned as one of the most prominent bankruptcy judges in the country in November, has been at the center of an ethics scandal related to his romance with former Jackson Walker partner Elizabeth Freeman. Jones and Freeman had a longstanding relationship but didn’t disclose it publicly, despite Jackson Walker’s regular appearances in major Chapter 11 cases over which Jones presided.

The Justice Department’s bankruptcy watchdog, the US Trustee, alerted Rodriguez of what it described as “off the record” talks late last week. The talks occurred even though Rodriguez hadn’t yet decided the scope of questions Jones is allowed to answer as part of a probe into who knew about the relationship. Freeman left Jackson Walker at the end of 2022.

Rodriguez has been tasked with handling pretrial disputes related to the US Trustee’s quest to claw back more than $13 million in legal fees that Jones approved for Jackson Walker in a slew of bankruptcies.

The judge called the hearing after the US Trustee informed him of a private interview between Jones and Jackson Walker. But Rodriguez kicked US Trustee attorneys out of the sealed portion of the hearing despite their protests.

US Trustee attorney Laura Steele later said the sealed hearing put her at a disadvantage, noting the case was supposed to be about disclosure.

“The watchdog can’t watch if proceedings happen behind closed doors,” Steele told Rodriguez after he reopened the courtroom to the public.

Rodriguez said he understood the US Trustee’s concerns and was “pretty confident” part of the transcript and audio could eventually be unsealed. But he noted that Jones himself was present and spoke at the hearing, which also included conversation about sealed documents.

“I hear you loud and clear,” Rodriguez said.

Rodriguez said he would decide later whether his orders were violated and whether to unseal a record of the hearing.

The disputes over whether proposed depositions of Jones tread too closely on judicial operations comes as the Houston court has been asked to retain records as part of a criminal probe.

‘Too Broad’

Rodriguez also rejected a request Wednesday by the J.C. Penney’s bankruptcy plan administrator seeking phone records for Jones to see if he secretly communicated with attorneys who handled cases he presided over.

The judge called the request “too broad,” suggesting it could allow the administrator to know about Jones’ communications with other judges, including Rodriguez himself. The administrator’s attorney, Stephen W. Lemmon of Streusand Landon Ozburn & Lemmon LLP, declined to comment.

Before the hearing began, Jones while outside the courtroom told an attorney that he’s been battling “misinformation.”

“I urge you to tell the truth,” Jones told a Bloomberg Law reporter before the hearing began. He declined further comment.

Jones is represented by Quinn Emanuel Urquhart & Sullivan LLP. Jackson Walker is represented by Rusty Hardin & Associates LLP and Norton Rose Fulbright US LLP.

The case is Professional Fee Matters Concerning the Jackson Walker Law Firm, Bankr. S.D. Tex., No. 23-00645, hearing 8/7/24.