The decision to keep secret the relationship between then-U.S. Bankruptcy Chief Judge David Jones and Jackson Walker bankruptcy partner Elizabeth Freeman was made by Judge Jones in 2020 at the start of the multibillion-dollar corporate restructuring of McDermott International, a lawyer for Freeman stated in court documents filed late Monday in federal court in Houston.
Prominent Houston corporate bankruptcy lawyer Tom Kirkendall, who represents Freeman in the ongoing litigation related to Freeman’s relationship with Judge Jones, wrote that neither Jackson Walker nor Kirkland & Ellis were aware that the couple were living together or were romantically involved.
The 17-page document asks U.S. District Judge Alia Moses to dismiss the lawsuit filed by Michael Van Deelen, a former McDermott shareholder who sued Judge Jones, Freeman, Jackson Walker and Kirkland alleging that they were involved in a conspiracy to defraud him and other investors through the bankruptcy and restructuring process.
“The [lawsuit] is the convoluted product of a litigious plaintiff who refuses to accept one of the consequences of the investment risk that he took in acquiring 30,000 shares of McDermott common equity,” Kirkendall wrote. “Plaintiff exercised his rights to object to the McDermott plan that McDermott management proposed and McDermott creditors overwhelming approved, and defendants did nothing to prevent plaintiff from exercising those rights.”
“The nondisclosure of the Freeman-Jones relationship did not cause and had nothing to do with plaintiff’s damages, and plaintiff has no standing to pursue possible bankruptcy estate claims based on that non-disclosure in either the McDermott chapter 11 case or any other chapter 11 case,” Kirkendall’s motion states.
In Freeman’s first filing in the federal lawsuit, Kirkendall stated that “Freeman and Judge Jones had a close personal relationship when she joined JW [Jackson Walker] in March, 2018.”
“When JW appeared as co-debtor-in-possession counsel in the McDermott chapter 11 case, Judge Jones elected not to disclose the relationship with Freeman in the McDermott case,” Kirkendall wrote. “Neither Kirkland nor JW knew about the Freeman-Jones relationship at the time, and [Federal Bankruptcy Rules of Procedure 2014] does not require disclosure of such a relationship in connection with being approved as co-counsel for the debtor-in-possession.”
Kirkendall argued that McDermott’s chapter 11 case was a “pre-pack” case, meaning that the reorganization plan had already been approved prior to the bankruptcy filing by McDermott management and the major creditor constituencies of the company.
The McDermott restructuring plan approved by Judge Jones converted a substantial amount of the company’s debt to new equity, which allowed McDermott to obtain the financing necessary to emerge as a viable business. As happens in bankruptcy restructurings, the McDermott plan canceled more than 193 million of common equity security shares in the company that were owned by tens of thousands of shareholders, including 30,000 shares owned by Van Deelen.
Van Deelen started doing some digging and discovered property records showing that Judge Jones and Freeman lived together. He also claimed to have received an anonymous letter stating that the judge and the Jackson Walker partner were in a secret romantic relationship.
When Van Deelen filed his lawsuit in October 2023, the U.S. Court of Appeals for the Fifth Circuit announced it would investigate the allegation. Days later, Judge Jones admitted to the relationship and resigned from the bench.
“Plaintiff’s [final amended complaint] simply does not make a plausible case that the nondisclosure of the Jones-Freeman relationship or any action of the defendants caused damages to plaintiff or prevented him from exercising his rights in opposing the McDermott plan that caused his damages,” Kirkendall wrote.
Last Thursday, Kirkland filed its own motion to dismiss the case stating that it had no idea that Judge Jones and Freeman, who left Jackson Walker to start her own law firm in 2022, were involved in a relationship.