The former Houston judge who presided over some of the biggest corporate bankruptcies during the past decade can be questioned under oath about his secret personal relationship with a partner at a law firm that earned millions of dollars in legal fees in cases that involved the judge and the partner, a federal judge ruled late Saturday.
U.S. Chief Bankruptcy Judge Eduardo Rodriguez ruled that the U.S. Trustee may depose former Bankruptcy Judge David Jones and his former case manager, Albert Alonzo, about the details of the secret relationship the judge had with former Jackson Walker partner Elizabeth Freeman and may force them to turn over personal documents about the relationship but only under the chief judge’s direct supervision.
The U.S. Trustee, which is an arm of the U.S. Justice Department designed as a watchdog over bankruptcy matters, is seeking to claw back more than $13 million in fees paid to Jackson Walker over several years in cases that involved Jones as a judge or mediator and involved Freeman as a lawyer.
Lawyers for Jackson Walker and the plan administrator for the J.C. Penney bankruptcy will also be permitted to ask Jones and Alonzo questions and demand the production of documentation.
In all, the U.S. Trustee has identified 35 “affected cases” that the office is investigating, including those involving Neiman Marcus, Denbury Holdings, J.C. Penney, Chesapeake Energy, McDermott International and EXCO Resources.
One of the more controversial areas of questioning proposed by the U.S. Trustee, Jackson Walker and the J.C. Penney plan administrator relates to ex parte communications between Jones and Freeman during mediations, why Freeman was involved in the mediations at all and who asked her to participate.
“The U.S. Trustee urges, the entire Miscellaneous Proceeding is about preventing the perpetration of fraud or injustice in the affected cases, and special consideration must be given in promoting transparency as appropriate,” Chief Judge Rodriguez wrote in his 64-page opinion. “The Court agrees, however, as discussed further infra, this topic may only be asked within the parameters of a Court-supervised deposition.”
Another critical question is whether Jones’ relationship with Freeman resulted in favorable treatment toward Freeman or Jackson Walker.
“The U.S. Trustee takes this topic a step further, insisting that it is only the judge and what he knew when making his rulings that can determine if the undisclosed relationship permitted bias and fraud into the bankruptcy system,” the chief judge wrote. “As such, the U.S. Trustee asserts that this is a unique case about disclosure, where the essential questions must be answered to ensure the prevention of injustice.”
Jones objects, claiming that the Judiciary Regulations are “designed to prohibit parties from delving into the mental process of the judiciary.”
But Chief Judge Rodriguez said he is “not deciding whether the mental process privilege is applicable at this stage of discovery, but rather if the Judiciary Regulations should gatekeep even the contemplation of such questions to the former judge.”
“The Judiciary Regulations suggests that if the ‘testimony is necessary to prevent the perpetration of fraud or injustice in the case or matter in question’ such testimony may be appropriate,” the chief judge wrote. “To prevent injustice and definitively address the difficult issues at hand, the Court as Determining Officer will not allow Mr. Jones to use the Judiciary Regulations as a shield. However, as discussed further infra, this topic may only be asked within the parameters of a Court-supervised deposition to carefully address the permittable scope of questions under this topic.”
A third topic in dispute is whether the lawyers can ask Jones about his analysis and conclusions to not disclose his relationship with Freeman to the parties in the 35 cases.
“The U.S. Trustee asserts that while traditionally the deliberative process is off limits, Mr. Jones has opened the door on this issue by expressing in public interviews with media that he made the call,” Chief Judge Rodriguez wrote. “Specifically, U.S. Trustee asserts the inquiry is not whether recusal was proper, but rather there should have been disclosures.”
Lawyers for Jones argue that “any insinuation that he ‘opened the door’ as to this topic is incorrect.” They say that Jones merely told reporters that the decision regarding disclosure “was his and his alone.”
The chief judge wrote that he found the line of questioning to “be overly broad and intrusive” and stated that “there is a delicate line as envisioned by the Judiciary Regulations between permittable information that may be obtained from former judges and information that is off limits.”
“However, this line shifts when misconduct plagues the courts,” Chief Judge Rodriguez wrote. “As this is a unique case, certain information that normally would be absolutely prohibited may be asked.”
The chief judge said that he would set a date for the depositions to take place at a future court hearing.
The case is Professional Fee Matters Concerning the Jackson Walker Law Firm, Case No. 23-645.