Jackson Walker has agreed to attempt to mediate claims brought by federal officials that the Dallas-based law firm should be forced to return millions of dollars it was paid in legal fees from 33 bankruptcy cases in which Jackson Walker lawyers failed to disclose that one of its former partners had a romantic relationship with the Houston judge who was presiding over those cases.
The U.S. Bankruptcy Trustee in the Southern District of Texas and lawyers for Jackson Walker filed a joint notice Friday stating that they “intend to participate in an in-person mediation” between June 16 and July 1.
The trustee, which is the bankruptcy court watchdog division of the U.S. Justice Department, wants Jackson Walker to refund $23 million the firm was paid by business clients in Chapter 11 restructuring cases before then-U.S. Bankruptcy Judge David Jones from 2019 to 2023, including bankruptcy cases involving J.C. Penney, Chesapeake Energy, Neiman Marcus, Denbury Holdings and GWG Holdings.
The decision by Jackson Walker to mediate came nine days after U.S. Chief Judge Alia Moses of the Western District of Texas, who was appointed to oversee the dispute, told the lawyers during a hearing that “there is no doubt” that certain Jackson Walker lawyers knew about the unethical relationship between its former bankruptcy partner Elizabeth Freeman and former judge Jones.
Chief Judge Moses told the lawyers that she is “tired of the games” and said she is losing patience.
“Sanctions are going to start coming,” she said.
RELATED: SDTX Bankruptcy Court Scandal Timeline
Lawyers for Jackson Walker have repeatedly claimed that they did not know about the relationship between Freeman and the judge because Freeman lied to them throughout by claiming that their romantic involvement had ended.
Numerous debtors and creditors involved in the 33 bankruptcies in which Freeman was involved as a lawyer and Jones was either the judge or a mediator have filed motions seeking to claw back legal fees paid to Jackson Walker and to Freeman.
The mediation was the result of the U.S. Trustee’s May 12 motion seeking to have the 33 separate bankruptcy cases combined into one matter before Chief Judge Moses.
“This motion seeks to consolidate the U.S. Trustee’s motions to vacate the orders approving Jackson Walker’s retention and compensation, objections to Jackson Walker’s final fee applications and requests for sanctions,” assistant U.S. Trustee Millie Aponte Sall stated in the eight-page petition. “Consolidation allows the court to consider common issues of fact and law and avoid inconsistent results.”
“All these cases arise from the same facts — namely the failure to disclose an intimate, financial, romantic and cohabitating relationship between former Judge Jones and Elizabeth Freeman, a former Jackson Walker partner,” Sall argued in the motion.
According to the May 30 joint notice, the parties agreed to have retired U.S. Bankruptcy Judge Joan N. Feeney of Boston conduct the mediation. Judge Feeney is a highly respected bankruptcy judge who retired in 2019 after 27 years on the bench.
Jackson Walker is represented in the litigation by Jason Boland, William Greendyke, Julie Goodrich Harrison and Maria Mokrzycka of Norton Rose Fulbright and Rusty Hardin, Leah Graham and Emily Smith of Rusty Hardin & Associates.
The U.S. Trustee is represented by Sall, Vianey Garza and Alicia Barcomb.
The case is In re: Professional Fee Matters Concerning the Jackson Walker Law Firm, SDTX, Case No. 4:23-cv-4787-AM.