Jackson Walker Says Judge Tried to Mislead Court on Romance (2)

A Jackson Walker partner was asked by a former Texas bankruptcy judge to file a potentially false court disclosure about his relationship with his secret live-in girlfriend, the firm said in court papers.

The Texas law firm’s filing Wednesday in several bankruptcy cases adds a blockbuster new allegation to the still-unfolding scandal surrounding the resignation of David R. Jones, once the busiest corporate bankruptcy judge in the country, after he admitted to the romance with attorney Elizabeth Freeman last year.

Jones, Freeman, and Jackson Walker are all facing litigation accusing them of improperly keeping the relationship out of the public eye.

Jackson Walker said Jones indicated in late 2022 that he wanted the matter kept under wraps, just as the firm was negotiating with Freeman over whether it should disclose the romance — or if she should leave the firm.

The filings provide new details in the timeline of the scandal, which has rocked the tight-knit bankruptcy community.

Freeman had insisted in 2021 that her relationship with Jones was over. But Jackson Walker found out on Feb. 1, 2022, that Jones and Freeman were still in a romantic relationship: a non-bankruptcy law firm partner heard about it from an acquaintance of Freeman’s ex-husband.

Jackson Walker’s management confronted Freeman on March 29 that year. The next day, she admitted that the two had “rekindled their relationship,” the firm said.

Jackson Walker spokesman Jim Wilkinson and Freeman attorney Tom Kirkendall declined to comment. Jones didn’t immediately respond to a request for comment.

‘Unprecedented Circumstances’

To be retained as counsel, law firms must disclose any connections to with interested parties in a case as part of standard filings in a suit.

Jackson Walker’s latest filings lay out its defense of how it tried to address the Jones-Freeman situation, why it shouldn’t be held responsible for what it says it Jones’ misconduct, and why the US Trustee’s push to claw back its fees should be rejected.

The “unprecedented circumstances required a thoughtful approach” that led to months of talks between the firm and Freeman’s attorney, Tom Kirkendall, about how to disclose the relationship. The situation was especially sensitive because Jones “was convinced” that the rules didn’t require disclosure of the relationship, Jackson Walker said.

By Oct. 28, 2022, Freeman was given a draft agreement to withdraw from Jackson Walker. The draft included language that Freeman would “confer and cooperate” with the firm when it came to existing clients, and allowed Freeman and the firm to continue to work together after she left.

As negotiations continued, Jones sometime in October or November 2022 invited Freeman’s colleague and Jackson Walker bankruptcy partner Matthew Cavenaugh into his chambers after a hearing, the firm said.

Jones told Cavenaugh that as the judge, he “alone” was required to disclose the relationship with Freeman—not the firm—and “insinuated that he was displeased with JW’s desire for a full disclosure of his romantic relationship with Ms. Freeman,” according to the filing.

Jones at the end of the conversation gave Cavenaugh a proposed disclosure that described Freeman as Jones’ former law clerk, noted they were former law partners, and said they maintained a “close personal relationship.” Jones’ proposal didn’t fully address the romantic element of their relationship, according to the firm.

Jones instructed Jackson Walker to use the proposed disclosure in future cases the firm brought before him in court, saying the firm “needs to make this happen,” according to the filing. The proposed disclosure didn’t mention Jones’ and Freeman’s shared home, either, according to Jackson Walker.

“JW determined that the disclosure was potentially misleading or untruthful because it did not fully disclose the nature of Judge Jones’s relationship with Ms. Freeman,” the firm said. “As a result, JW declined to use Judge Jones’s proposed disclosure, and proceeded with its separation from Ms. Freeman.”

Says ‘Acted Reasonably’

Jackson Walker made the statements about Jones and the timeline of the situation in several bankruptcy cases on Wednesday, including in the Chapter 11 of JCPenney.

The Justice Department’s bankruptcy monitor, the US Trustee’s office, is seeking to claw back at least $13 million in fees Jackson Walker earned in cases in which the firm failed to disclose the romantic relationship, including in JCPenney’s.

In the JCPenney filing, Jackson Walker said it didn’t violate any ethical rules, disclosure obligations, or other duties as alleged by the US Trustee. Jackson Walker “could not disclose information it did not know” and “acted reasonably,” the firm said.

Jackson Walker complained that the US Trustee has been targeting the firm, but so far had failed to impose any consequences on Jones or Freeman.

“It is ironic that the U.S. Trustee alleges JW should have disclosed the nature of the relationship to the same judge who knew of the relationship, allegedly had a duty to disclose or recuse himself, and who knowingly declined to do so,” Jackson Walker said.

A Justice Department spokesman declined to comment on Thursday.

The case is J. C. Penney Direct Marketing Services LLC, Bankr. S.D. Tex., No. 20-20184, response 5/22/24.