Kirkland, Jackson Walker Hit With Suit Over Judge Romance (1)

Kirkland & Ellis and Jackson Walker are facing new allegations that they helped keep secret a former Texas bankruptcy judge’s relationship with a local attorney.

The former CEO of petroleum barge company Bouchard Transportation Co. Inc. accused the two firms of filing multiple “misleading and dishonest” court papers in the company’s Chapter 11 case without disclosing the relationship between former Southern District of Texas bankruptcy court Judge David R. Jones and attorney Elizabeth Freeman. The civil suit, filed Monday by former CEO Morton S. Bouchard III, is the latest in the fallout related to Jones’ relationship with Freeman, a former Jackson Walker partner.

“Freeman, Jackson Walker and Kirkland Ellis used this secret relationship to bolster prestige and collect tens of millions of dollars or more in fees at the expense of those affected by the bankruptcies,” Bouchard told the US District Court for the Southern District of Texas.

Jackson Walker, a Texas firm, regularly represented clients in Jones’ courtroom before he resigned last fall after the relationship was revealed.

Kirkland, a behemoth of the corporate restructuring community, and Jackson Walker represented Bouchard Transportation in its bankruptcy, which was filed in September 2020. The business was one of the country’s largest independently-owned petroleum barge companies, with about 50 vessels that serviced the East Coast and US Gulf Coast, according to court papers.

The former CEO, who was removed as head of the company during the bankruptcy, said the failure to disclose the relationship amounts to bankruptcy fraud, honest services fraud, mail and wire fraud, and obstruction of justice under the Racketeer Influenced and Corrupt Organizations Act, or RICO.

Jones, Freeman, and the law firms also breached their fiduciary duties to creditors and others, committed fraud, and were “unjustly enriched,” the suit said.

Bouchard’s suit also named the company’s restructuring adviser, Portage Point Partners LLC, and Portage’s founder and managing partner, Matthew Ray, as defendants. Bouchard didn’t allege Ray or Portage knew about the relationship or accuse them of RICO violations, but blamed them for “wrongfully orchestrating” his ouster.

Jones removed Bouchard in February 2021, citing concerns about the company’s management and a lack of progress in the bankruptcy cases. Ray was appointed in his place, according to court papers.

The oil barge and tug company was eventually wound down in bankruptcy and its fleet sold off.

Bouchard said he’s suffered significant damages as a result of the firms’ conduct. He’s been unable to pay back loans he took out from life insurance policies that he had lent to his former company resulting in $40 million in losses and the policies being terminated, he said. He’s also been hit with adverse tax consequences, suffered reputational damage, has been denied recovery on claims against his former company, and lost “hundreds of millions of dollars in value” through his equity in the company being destroyed, he said.

Mounting Problems

Jones, Freeman, Jackson Walker, and Kirkland are already facing a similar suit from a former shareholder involved in the bankruptcy of McDermott International Inc., which Jones also presided over. That suit, filed by shareholder Michael Van Deelen, accused Jones of living with Freeman for years and hiding the relationship. His complaint led to a series of revelations that made the relationship public.

Kirkland told Van Deelen last week that his lawsuit is frivolous, according to a statement by a Kirkland spokesperson.

“This lawsuit is too. Kirkland has abided by its ethical responsibilities, and has made accurate representations to the court, including all required disclosures,” the spokesperson said.

Jackson Walker, which employed Freeman until December 2022, has regularly served as local counsel to Kirkland in large Chapter 11 cases. Jackson Walker has accused Freeman of lying to the firm about the full extent of the relationship.

The US Trustee, the Justice Department’s bankruptcy monitoring unit, in recent months embarked on an expansive and complex campaign to deal with the fallout of the Jones scandal. It’s trying to claw back at least $13 million in attorney fees in at least 26 different bankruptcy cases involving Jones, Jackson Walker, and Freeman.

Jim Wilkinson, a spokesman for Jackson Walker, declined to comment on the Bouchard suit Tuesday.

Representatives for Jones, Freeman, Portage, and Ray didn’t immediately respond to a request for comment.

Morton S. Bouchard III is represented by the Bandas Law Firm PC.

The case is Bouchard v. Jones, S.D. Tex., No. 24-cv-00693, complaint 2/26/24.