The bankruptcy courts in the Southern District of Texas are still a hotbed for intense litigation, attracting some of the best lawyers in the nation — just not for the reasons the bankruptcy judges ever wanted or even contemplated.
Prominent Texas lawyers David Beck, Rusty Hardin, Anne Johnson, Tom Kirkendall, Mike Lynn, John Sparacino, Jeff Tillotson and scores of other highly paid lawyers have been hired by plaintiffs, defendants and third parties involved in the legal fallout from the forced resignation late last year of former SDTX Chief Bankruptcy Judge David Jones.
Judge Jones was caught in a secret romantic relationship with a prominent restructuring lawyer whose firm represented clients in dozens of cases the judge was handling.
Powerhouse corporate bankruptcy law firms Jackson Walker and Kirkland & Ellis have themselves lawyered up. The U.S. Department of Justice, via the U.S. trustee’s office, has a half-dozen lawyers assigned to the case.
The legal departments at several large corporations — Neiman Marcus, McDermott, Chesapeake Energy — that went through bankruptcy over the past few years are nervously wondering whether their Judge Jones-approved restructurings will be reopened.
This past week, Judge Jones hired famed New York trial lawyer David Boies to represent him in two civil lawsuits naming the judge, his live-in girlfriend Elizabeth Freeman, Jackson Walker, Kirkland & Ellis and restructuring advisor Portage Point Partners, accusing them of a conspiring to abuse the bankruptcy process to collect exorbitant fees.
Kirkland has hired prominent Newport Beach, California, lawyer John Hueston along with Houston’s David Beck to handle its defense.
From 2019 to 2023, the bankruptcy courts of the Southern District of Texas were the premier destination for large corporations facing huge financial problems to file for Chapter 11 restructuring.
Bankruptcy practitioners complained for years that the leading corporate law firms representing debtors — namely Kirkland and Weil, Gotshal & Manges — and New York-based financial advisors steered large companies such as American Airlines and Enron to file their Chapter 11s in the Southern District of New York or Delaware because the judges there were more experienced and their decision-making processes more well known.
In Houston, Judge Jones, a former business bankruptcy lawyer at Porter Hedges, implemented new procedures for large, complex business bankruptcies to make the trip through Chapter 11 more predictable and more user-friendly, especially for debtors. Specifically, the procedures allowed debtors to check a box stating that their bankruptcies were large and complex and to opt to have one of two judges — Judge Jones and Judge Marvin Isgur — handle their cases.
Turmoil in the oil and gas sectors and economic upheaval during the Covid-19 pandemic caused large bankruptcies to fill the dockets of the two judges.
Several corporate law firms — Kirkland, Jackson Walker, Weil Gotshal, Porter Hedges and Sidley Austin, to name a few — reaped the benefits, representing debtors, creditors, financial institutions, investors and lenders.
The scandal became public when McDermott investor Michael Van Deelan filed a lawsuit alleging a conspiracy by Judge Jones, Freeman, Jackson Walker and Kirkland. The lawsuit revealed specific details about the live-in relationship between Judge Jones and Freeman and sparked an investigation by the chief judge of the U.S. Court of Appeals for the Fifth Circuit last October.
The Fifth Circuit inquiry led Judge Jones to resign.
It also led U.S. Trustee Kevin Epstein, the U.S. Justice Department’s lead lawyer for bankruptcies in the Southern and Western districts of Texas, to file a petition seeking to examine the fees awarded to Freeman and Jackson Walker. The trustee is interesting in clawing back an estimated $11 million in legal fees paid to Jackson Walker in 20 bankruptcies, including Neiman Marcus, J.C. Penney, Chesapeake Energy, Whiting Petroleum Seadrill and 4E Brands.
In February, Morton Bouchard — whose company, Bouchard Transportation, went through Chapter 11 before Judge Jones in 2020 — filed a separate lawsuit that included the same parties as the Van Deelen lawsuit with one additional defendant, Portage Point Partners, which served as a restructuring advisor.
In all, more than 50 lawyers are employed by various parties in litigation — the two lawsuits and the bankruptcy challenges — surrounding the Judge Jones scandal.
Three weeks ago, Anne Johnson and Jeff Tillotson of Tillotson Johnson & Patton entered the case representing Van Deelen for the sole purpose of opposing a recent motion by lawyers for Kirkland seeking court-imposed sanctions against Van Deelen.
Two weeks ago, Michael Lynn of Lynn Pinker joined the litigation representing Portage Point Partners, seeking to have the claims against the firm thrown out.
Here is a list of some of the lawyers representing each of parties in the pending lawsuits and the bankruptcy disputes:
Judge David Jones: John Sparacino, Gary Cruciani and Patrick Pijls of McKool Smith and David Boies and Tyler Ulrich of Boies Schiller.
Michael Van Deelen: Mikell West and Robert Clore of Bandas Law Firm of Corpus Christi; Anne Johnson and Jeff Tillotson of Tillotson Johnson & Patton; and Del Rio attorney Michael Bagley.
Morton Bouchard: Mikell West and Robert Clore of Bandas Law Firm of Corpus Christi.
Kirkland & Ellis: David Beck and Jacqueline Furlow of Beck Redden; John Hueston, Michael Todisco, Karen Ding and Warren Crandall of Hueston Hennigan; and Eagle Pass lawyer Gregory Torres.
Jackson Walker: Rusty Hardin, Jennifer Brevorka, Leah Graham and Emily Smith of Rusty Hardin and Associates; Jason Boland, William Greendyke, Maria Mokrzycka and James Copeland of Norton Rose Fulbright.
Elizabeth Freeman: Tom Kirkendall of Houston.
Portage Point Partners: Mike Lynn, Christopher Akin, Jamie Drillette and Andy Kim of Lynn Pinker; and Duane Loft, Shireen Barday, Anastasia Cembrovska and John McAdams of Pallas Partners.
U.S. Trustee’s Office: Kevin Epstein, Millie Sall, Aubrey Thomas, Vianey Garza, Alicia Barcomb, Ramona Elliott, Nan Eitel and Danielle Pham.
4E Brands Plan Agent: Ken Green, Aaron Guerrero and Bryan Prentice of Bonds Ellis Eppich Schafer Jones.
4E Brands Unsecured Creditors Committee: Thomas Berghman of Munsch Hardt and Thomas Fawkes of Tucker Ellis.