Sex, Secrets Trigger Downfall of Star Texas Bankruptcy Judge (2)
At “Meatfest,” the judge and the lawyers were all smiles.
Judge David R. Jones, who had worked for years to make Houston a destination for high-dollar bankruptcy litigation, can be seen in an October 2022 photo huddled at the barbecue with local attorneys who brought cases before him and also formed a cooking crew.
Among them is Elizabeth Freeman, who had known Jones for years, clerked for him—and had an intimate relationship with him.
That they had been together at least since 2017 was not yet public knowledge, but an anonymous letter alleging favoritism would eventually reveal the relationship.
The revelations it contained cast a shadow upon the court Jones built to prominence, sparked scrutiny of the loose rules allowing lawyers to judge-shop their cases, and prompted a Justice Department unit to try to recover millions from Jackson Walker, Freeman’s former firm. The issues are so severe federal officials are pushing to reopen scores of Jones’ cases.
This is Part 1 of Bloomberg Law’s investigation into the relationships in the Houston bankruptcy court. Read Part 2: How Four Judges Kept Romance Allegations Quiet for Two Years
Still, at the annual cookout all appeared to be well.
Jones, Freeman, and other attorneys can be seen wearing matching aprons embroidered with their team’s name “CFN,” or Chili F’n Nelson, in the photo posted on Instagram by Albert Alonzo, then Jones’ case manager. The lawyers included some who attended evidence classes Jones taught and some, like Freeman, who were partners with Jackson Walker. The Texas law firm earned millions of dollars in fees in cases overseen by Jones while the two lived together.
Their relationship would eventually have consequences for a court and a firm that have handled high-profile bankruptcies, including
By December 2022, Freeman had left Jackson Walker and started her own firm. Jones’ and Freeman’s years-long romantic involvement—and ownership of a house together—remained hidden until the anonymous letter was finally made public on October 6, 2023.
Jones announced his resignation nine days later as the scandal rocked the bankruptcy world, particularly in Houston, where a clubby, find-a-work-around culture helped put the US Bankruptcy Court for the Southern District of Texas among the top venues for large Chapter 11 bankruptcies.
Jones, ethics experts say, broke cardinal rules of the judiciary. He failed to disclose the relationship or remove himself from cases in which Freeman’s firm was involved.
“When it’s a hidden relationship, the perception is the judge is playing fast and loose with the rules,” said Charles Geyh, an Indiana University law professor who teaches judicial ethics. “If the judge doesn’t disqualify, then he damn well better disclose.”
Jones didn’t respond to interview requests or written questions from Bloomberg Law. Freeman, through her attorney, declined to comment. Jackson Walker did not answer written questions, but a spokesman said the firm responded appropriately when notified of the allegations.
The judge presided over at least 26 bankruptcies in which he awarded Jackson Walker fees while Freeman was a partner and living with him, the Department of Justice’s bankruptcy monitoring unit, the US Trustee, said in court filings. He mediated another seven cases involving the firm and Freeman.
In all, Jones approved or oversaw cases in which Jackson Walker was paid at least $13 million. That includes at least $1.1 million in fees Freeman billed herself, the US Trustee has said.
“To me the real issue about Houston is not so much about David Jones, although I think it’s horrific,” said former Nevada bankruptcy judge Bruce Markell, a professor of bankruptcy law at Northwestern Pritzker School of Law. “It shows to me the environment down there is basically a swamp.”
Bloomberg Law is investigating US bankruptcy courts. If you have information about questionable practices in the courtroom or relationships among judges and lawyers, please send tips to James Nani or Ronnie Greene.
Close Ties
Large bankruptcy cases are sprawling affairs that can take years and involve billions of dollars and scores of creditors. But the bankruptcy bar itself is a tight community. “It tends to be that everyone knows each other,” one judge recently remarked.
In Houston, that closeness was exemplified by the tag-team relationship between Jones and fellow US Bankruptcy Judge Marvin Isgur. A former executive for his uncle’s Houston-based real estate empire, Isgur pivoted careers to become a bankruptcy attorney after the city’s 1980s housing bust.
The two went back. Isgur and his former law partner hired Jones as an associate at their downtown law firm after he graduated from the University of Houston in 1992. Jones has called Isgur his mentor.
“Everything I am and everything I know I owe, at least in part, to him,” Jones said of Isgur in a podcast hosted by law firm Sheppard Mullin and the American Bankruptcy Institute.
Jones, a North Carolina native, worked as a corporate financial analyst and a self-employed computer consultant before going back to school to become a lawyer.
Isgur, in turn, called Jones his “stubborn adopted son” during a banquet last year in Jones’ honor. Isgur, who remains on the bench, declined to comment.
When Isgur became a judge in 2004, Jones moved to Porter Hedges LLP in Houston, where he worked with Freeman.
Jones joined Isgur as a bankruptcy judge in 2011 after practicing for 19 years. At the end of 2012, his assets ranged from $2.8 million to $9.3 million, according to disclosure forms.
Freeman left Porter Hedges to become Jones’ permanent law clerk when he joined the bench. It’s not clear when their intimate relationship began. By 2012, both Freeman and Jones filed for divorce from their respective spouses.
‘The Judge Who Saved Texas’
Isgur and Jones presided over a bankruptcy court previously known for the case that got away.
In 2001, Houston-based Enron Corp. filed what was then the largest corporate bankruptcy in US history—in New York’s southern district. The loss stung the pride and wallets of the Houston bar.
John Ray, who oversaw Enron’s liquidation, said it was typical that New York lawyers chose New York or Delaware for complex Chapter 11s back then.
Jones became chief bankruptcy judge for Houston in 2015 and set about putting in place a slew of rules that turned the district into a national powerhouse. Vitally, those who filed complex Chapter 11s knew they would get one of two judges—Jones or Isgur—despite others being available. That provided what Jones called “predictability.”
“Texas became a favored forum in the last several years because of the perceived ability to handle the Chapter 11 cases with speed,” Ray said.
Yet predictability “is only something lawyers like if it means that they win,” said Georgetown University law professor Adam Levitin. “The whole ‘predictability’ trope is hogwash.”
The judges scheduled emergency hearings quickly, even on weekends or evenings, and often ruled from the bench the same day. Jones convinced the clerk’s office to get his case manager, Alonzo, a government-issued cell phone, and then published that number on the court website to ensure lawyers easy access to the court.
For companies seeking a quick resolution, the judges provided a “really tight, choreographed playbook,” said Nick Montgomery, head of research at BankruptcyData.com.
Houston’s docket grew—and then exploded—in what Isgur has called the “David revolution.”
From 2017 to his resignation in 2023, Jones took on 81 large corporate cases with assets ranging from $50 million to billions of dollars, the most among bankruptcy judges nationwide, according to data compiled by BankruptcyData.com and New Generation Research Inc. Isgur ranked second in handling such cases, with 58.
Jones was the “judge who saved the Texas bankruptcy practice,” said an article in The Texas Lawbook. He approved hourly fees of $1,400 or more that were in line with New York or Delaware rates. “Bankruptcy lawyers today are so specialized, they are so talented,” he told the Lawbook. “It doesn’t bother me one bit.”
Backwater to Boomtown
The changes made Houston a “judge shopping district” that could “attract a megacase clientele,” Levitin wrote. “Houston went from being a bankruptcy backwater to becoming the single most popular destination for large, public company bankruptcy filings.”
Jackson Walker moved strategically to file cases in its hometown.
At least five companies Jackson Walker represented used a Houston-area PO Box address as their hook to file in the Southern District of Texas, records show. A shareholder in one of those cases, involving California-based drug developer Sorrento Therapeutics, as well as the US Trustee, accused the law firm of manufacturing a connection so it could bring the case locally.
The US Trustee argued it was “a case of forum shopping and venue manipulation taken to a new and unprecedented extreme.” In court, Jackson Walker said its actions were proper.
With Houston taking off, bankruptcy behemoth Kirkland & Ellis, the world’s largest law firm by revenue, began teaming up with local firms such as Jackson Walker.
The firm’s appeal was “straightforward,” Kirkland said in court papers. It had “substantial on-the-ground resources,” and its partners included former clerks for both Isgur and Jones. By early 2016, Kirkland had brought at least three cases to Houston.
Since the relationship became public, Kirkland has defended its appointment as debtors’ counsel. It argued in a recent court document that it was approved as counsel “because it is a ‘dominant US debtor law firm’ that is routinely approved for high-profile matters throughout the country.”
The court created a committee stacked with local and national bankruptcy attorneys to help improve procedures. It eventually grew to 21 members, including then-Kirkland partner James H.M. Sprayregen—and Freeman.
Jones and Isgur “were the heroes of the Southern District of Texas,” said Lynn LoPucki, a law professor at the University of Florida Levin College of Law.
With those cases come enormous fees for the bankruptcy bar, some of whose members may have known about Jones’ relationship with Freeman but were hesitant to speak out.
“There’s a natural reluctance to be turning in your colleagues,” LoPucki said. “I don’t think anybody would want to be the snitch who causes the end of cases.”
In May 2017, the judge agreed to pay $985,000 cash for a four-bed home in the growing Houston neighborhood of Westview Terrace, records show. Freeman and Jones had toured the home together, said a source with knowledge of the deal. They soon filed paperwork with the Harris County clerk’s office showing they jointly owned it.
Freeman left her clerkship with Jones in 2018 and started working at Jackson Walker, which made her a partner. The firm said it didn’t formally learn of the relationship until 2021.
Jones had a rule that his former clerks couldn’t personally appear before him for the amount of years they clerked for him, which applied to Freeman when she joined the firm, a Jackson Walker spokesman previously said. That rule didn’t prevent Freeman from working or billing on cases before Jones, the spokesman has noted.
She was a success at the firm, which “grew very substantially” after she joined, Jackson Walker’s then-general counsel Patrick R. Cowlishaw said in an internal memo filed in court.
By the beginning of 2021, Freeman was promoted to an equity partner, meaning she could share in Jackson Walker’s firmwide profits.
By then, she and Jones had owned their home for more than three years and had lived together continuously “except during the COVID-19 school closures when she lived with her children at another location,” the US Trustee has said in court records.
Amid Houston’s bankruptcy bonanza, these connections remained undisclosed in court.
Clubby Culture
For years, Jones navigated potential conflicts of interest that surfaced in the insular bankruptcy world. All the while, Jones stayed close with many of the lawyers who came before him, and closer still to Freeman.
The “Meatfest” gathering in 2022 offers a glimpse into the inner circle of Houston’s bar and bankruptcy court.
Jones had other social ties to those in attendance. In 2019 he certified the marriage of Christopher Adams, a partner at local firm Okin Adams, and Susan Tran Adams, a partner at Tran Singh, another local firm. He also certified the marriage of Genevieve Graham, another lawyer at the cookout, before she went to work at Jackson Walker.
Tran had practiced in front of Jones, including in the bankruptcy of Sorrento Therapeutics, though the firm said it had no connection to any bankruptcy judge. Adams and Tran didn’t respond to interview requests, nor did Graham.
Nancy B. Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, said behind-the-scenes gatherings raise questions of fairness and access.
“The fuzziness (and thus the risk) increases as soon as a social relationship between a judge and a lawyer appearing before her slips away from the public eye,” Rapoport wrote in a paper analyzing the Jones imbroglio.
In court, Jones praised lawyers who came before him, including those from Jackson Walker and Kirkland & Ellis.
In
With Jones and Isgur on the bench, conflicts were sometimes resolved on the fly.
In April 2019, attorney Jim Prince of Baker Botts, appearing for Weatherly Operating LLC, told the court his client urgently needed cash from its bankrupt affiliate, Weatherly Oil & Gas LLC, to make payroll.
Botts’ appearance took Isgur by surprise because his son-in-law, Scott A. Keller, was then a Baker Botts partner. “It’s a concern,” said the judge, who announced he had to recuse himself from the hearing.
Isgur had a quick solution. He left to go get Jones, who walked in six minutes later.
Then came another conflict.
Among the attorneys representing debtor Weatherly Oil & Gas were Jones’ former judicial staffers, Freeman and Veronica Polnick of Jackson Walker. Jones announced that they usually would have been prohibited to appear in front of him.
But on that day, he said: “If anybody has an issue with it, please raise it and I’ll figure out what to do about it.”
When no one objected, Jones signed off on the related company’s financing request. Prince stepped away, Isgur returned to the bench, and the session continued.
The obvious conflict was resolved. But as in so many other hearings, Jones said nothing about his relationship with Freeman.
Updates to include details from a Kirkland court filing in seventh paragraph of 'Boomtown' subsection. Earlier versions of this story corrected the name of the court in the 11th paragraph and the spelling of Sheppard Mullin in the 'Close Ties' subsection.
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