DOJ Unit, Jackson Walker to Mediate as Judge Loses Patience (1)

The Justice Department’s bankruptcy watchdog will mediate with Jackson Walker LLP over litigation surrounding the firm’s failure to disclose an ex-partner’s romance with a former judge.

The agreement between the US Trustee’s office and the Texas law firm came after Judge Alia Moses of the US District Court for the Western District of Texas delivered fiery remarks at a status conference Thursday related to the once-secret relationship between former Houston bankruptcy judge David R. Jones and attorney Elizabeth Freeman.

Moses also warned of potential sanctions over last-minute court filings and details of recent settlements in litigation over the firm’s fees.

“The attorneys better understand, I’m tired of games. No more games,” Moses said. “I do not have the patience for it, and I do not have the time. Sanctions are going to start coming out, and that includes striking court filings.”

The judge, who usually presides in Del Rio, Tex., but sat in Houston on Thursday, also said “there is no doubt” that collusion between Jones and Jackson Walker occurred, a position the firm has denied. Jackson Walker, which regularly represented clients in large bankruptcies before Jones, is accused of breaching its ethical duties by failing to disclose the relationship.

The US Trustee’s office has sought to vacate compensation orders, including up to $23 million in fees Jackson Walker earned in 33 bankruptcy cases connected to Jones while Freeman worked at the firm.

The mediation announced Thursday appears to be the first attempt at a resolution the bankruptcy watchdog has agreed to since it began challenging the firm’s fees in late 2023. A mediator hasn’t been named.

Jackson Walker attorney Rusty Hardin of Rusty Hardin & Associates LLP told Bloomberg Law that progress was made at the status conference.

“I feel good about today,” Hardin said.

The firm has maintained that it acted appropriately when it learned of the romance.

Jones resigned in fall 2023 after the relationship was revealed. While Freeman worked at Jackson Walker, Jones approved fees for the firm and, in some cases, for work Freeman individually performed. Jones also mediated several bankruptcies in which Jackson Walker or Freeman took part.

Freeman, who shared a home with Jones for years, left Jackson Walker in late 2022.

‘Very Serious’

Moses asked US Trustee attorneys on Thursday whether, if she vacates Jones’ orders approving Jackson Walker’s compensation, she must then also void all other orders he issued in those bankruptcy cases.

“This is very serious,” she said.

US Trustee attorney Laura Steele said the office is only interested in vacating the compensation orders.

Moses also asked questions about several settlements Jackson Walker recently struck with representatives of bankruptcy estates, asking the firm about the US Trustee’s position that the settlements are an “end run” around the government’s actions. She questioned the close relationships between Jackson Walker and some bankruptcy administrators and asked how much of the settlement money would pay for attorneys fees.

Jackson Walker attorneys said the deals bring money back to creditors and were negotiated fairly.

Moses acknowledged a federal criminal probe into the matters, noting that she may need to learn more about it for the purposes of preparing for a trial. Jones and Freeman cited their Fifth Amendment rights to self-incrimination in a civil probe.

The judge last month took the fee disputes out of the Houston bankruptcy court, leading to the postponement of a major trial. Thursday’s status conference was the first in front of Moses since she took over.

She also criticized Jones, who didn’t attend Thursday’s status conference, saying Jackson Walker shouldn’t bear all of the responsibility.

Moses said Jones should have known better, and questioned the US Trustee over whether he has immunity from his actions. She said she wouldn’t “cover for a judge” and pushed back on suggestions that the US Trustee may not have the ability to sanction Jones, who resigned.

“That doesn’t mean he doesn’t have a bank account,” Moses said.

Small Bankruptcy World

Later on Thursday, Morton S. Bouchard III, the former CEO of defunct petroleum barge company Tug Robert J. Bouchard Corp., asked Moses for permission to pursue his claims that Jones’ relationship with Freeman was improperly concealed.

He’s sued Jackson Walker, Jones, Freeman, and Kirkland & Ellis LLP, the global law firm that joined Jackson Walker in representing the barge company in bankruptcy before Jones.

Bouchard, who was removed by Jones as CEO during the bankruptcy, said he’s suffered reputational damage and the loss of $40 million in loans he made to the company.

Moses asked whether Jones’ approval of the company’s bankruptcy plan should be overturned and called Bouchard’s termination “highly suspicious.”

She questioned whether all orders Jones issued in cases involving Freeman could be “wiped out, because it’s all based on fraud,” and the lack of an impartial judge.

Attorneys for Jackson Walker, Freeman, Kirkland, and the bankruptcy plan administrator all said the bankruptcy code and precedent don’t allow for the plan to be overturned, and Bouchard is too conflicted to pursue his claims for all creditors.

But Moses pushed back, pointing to concerns about preventing inequitable outcomes when there weren’t appropriate disclosures in the case.

“So if you want to comply with the bankruptcy code, let’s start with the disclosures,” Moses said.

An attorney for plan administrator Matthew Ray of Portage Point Partners LLC asked for an independent third-party to manage claims associated with Bouchard. But Moses said she was concerned about the “small world” of the bankruptcy bar, especially in Houston, and pondered whether an outsider like Bouchard might be better pursue the claims.

“Everybody seems to have a special interest in working with everyone,” Moses said.

Moses said she would issue an opinion on the Bouchard matter.

Jackson Walker is also represented by Norton Rose Fulbright US LLP.

The case is In re: Professional Fee Matters Concerning the Jackson Walker Law Firm, S.D. Tex., No. 23-04787, hearing 5/22/25.