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A top US bankruptcy court judge approved an indirect fee arrangement for his live-in girlfriend that could have paid her $750 per hour in at least two recent high-profile cases, according to publicly filed court documents.
Neither disclosed their personal relationship to parties in the cases, despite US bankruptcy code requirements that advisers seeking to be paid by bankruptcy estates disclose connections to other participants in the proceedings.
David R Jones, the chief judge of the US bankruptcy court for the Southern District of Texas, resigned in the past week after he admitted to concealing a romantic relationship with a Houston bankruptcy attorney, Liz Freeman.
Freeman was a longtime partner at Jackson Walker, a law firm which frequently appeared in Jones’s court and whose case billings he often signed off upon. Freeman left Jackson Walker in late 2022 to start her own law firm.
In the bankruptcy cases of Diebold Nixdorf and Venator Materials this year, the Office of Liz Freeman was designated as a “special conflicts counsel”. In this role, she would be called upon as a third law firm if conflicts of interest prevented the companies’ main counsel and local counsel from handling a case matter.
Both companies selected Jackson Walker as their local counsel. Client engagement letters in both cases, submitted to Judge Jones and filed on the bankruptcy docket, described Jackson Walker’s arrangement with Freeman’s firm — “subject to clearance of requisite conflict checks and disclosures in accordance with the requirements of the bankruptcy code” — in identical language.
Freeman ultimately never performed nor was paid for any work as a special conflicts counsel, according to her lawyer, Tom Kirkendall.
Jones did not respond to a request for comment on his decision to approve the retention application. Lawyers at Kirkland & Ellis, the lead bankruptcy counsel to Venator, and Jones Day, the lead bankruptcy counsel to Diebold, did not respond when asked for comment.
The Fifth Circuit Court of Appeals which oversees the bankruptcy court in South Texas, released its complaint against Jones on Friday. Its chief judge, Priscilla Richman, stated that she had “probable cause to believe that misconduct by Judge Jones has occurred” when he had failed to publicly disclose his relationship with Freeman or recuse himself in matters where Jackson Walker was involved.
The complaint noted that “in another matter over which Judge Jones presided, it appears that Judge Jones approved a fee application submitted by The Law Offices of Liz Freeman. It does not appear that any party or any other counsel in that proceeding was apprised of Judge Jones’ relationship with Ms Freeman”. A representative for the Fifth Circuit declined to specify the case referred to in the complaint.
Freeman spent roughly four years at Jackson Walker after six years as a clerk to Jones. The firm told the Financial Times that it had begun investigating a potential intimate relationship between Freeman and Jones in early 2021 and that immediately after launching the investigation, she was kept out of cases in front of him as a matter of policy. It declined to comment on the conclusion of the investigation.
“Our firm acted in a timely fashion once we learned of this issue, including conducting a full inquiry and consulting independent outside ethics counsel for their guidance. From the time we first learned of this allegation Ms Freeman was instructed not to work or bill on any cases before Judge Jones. We are confident that we acted responsibly,” Jackson Walker said.
A representative for Jackson Walker confirmed that it had never subsequently retained Freeman in the Diebold and Venator cases, even after Jones approved the application permitting her retention, in adherence to its 2021 policy. It added that the engagement letter had been drafted before Jones was assigned to the respective cases.
Jones, who has overseen other high-profile bankruptcies including Cineworld Group, Serta Simmons Bedding and Neiman Marcus, was only one of two judges in the Southern District of Texas venue who could have heard either of the two cases.
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