One of the defendants named in a lawsuit brought by a group of GWG bondholders who allege they are victims of a racketeering conspiracy has asked Chief U.S. District Judge Alia Moses to dismiss the lawsuit, characterizing it as full of “conclusory allegations” that mirror those put forth in a related lawsuit that has been dismissed.
Elizabeth Freeman and her law firm filed the 54-page dismissal motion, which includes more than 1,000 pages of exhibits, on Tuesday. The bondholders had filed suit in June, alleging she was among a group of individuals “work[ing] together to prey upon distressed entities for their own financial gain.”
The bondholders named as defendants Freeman, her firm, former Bankruptcy Judge David Jones and the law firms Jackson Walker and Porter Hedges as defendants. Freeman had a previously undisclosed live-in relationship with Jones that, once publicly reported in October 2023, prompted him to resign the bench.
Freeman, who had practiced at Jackson Walker as a bankruptcy partner during the relationship, left before the news broke to start her own firm, The Law Office of Liz Freeman, in December 2022.
Jackson Walker has become the target of actions by the U.S. trustee to claw back millions in fees awarded to the firm in 33 bankruptcy proceedings where Jones served as judge or mediator.
The bondholders allege that Porter Hedges — where Jones and Freeman previously practiced before Jones was named to the bench and Freeman became his law clerk — also knew about the relationship because Freeman’s ex-husband, a partner at the firm, was aware of it and his “knowledge of the continuing relationship is imputed to Porter Hedges.” Porter Hedges also served as counsel to the bondholders committee.
But, quoting Yogi Berra, Freeman told the court that those allegations probably feel like “déja vu all over again” because it is.
“The déja vu is caused by the complaint which is nearly identical to the complaint filed by plaintiffs’ counsel in Michael D. Van Deelan v. David R. Jones, et al, and Morton S. Bouchard, III, et al v. David R. Jones, et al,” referencing the lawsuit that first made public allegations about the romance scandal in October 2023 and a subsequent lawsuit filed in February 2024 by a bankruptcy petitioner who alleged he was wronged as a result of the secret relationship.
“Thus, much of the argument and briefing in this motion mirrors Freeman’s arguments and briefing in those two earlier filed cases. The plaintiffs’ complaint rests primarily on the conclusory allegations that Jones and Freeman were in a romantic relationship during the time GWG’s bankruptcy was pending, and no one disclosed the existence of the romantic relationship. This is not enough to maintain the plaintiffs’ causes of action against the Freeman defendants.”
The Van Deelan case was dismissed by Chief Judge Moses in August 2024, Freeman told the court, and this lawsuit contains the same claims “based on the same conclusory allegations.”
But she said unlike the Van Deelan and Broussard cases, where Jones served as the judge, it was Judge Margin Isgur who presided over the GWG bankruptcy case.
“The plaintiffs are now asking this court to unwind the fruits of a voluntary mediation, a confirmed plan of reorganization in which the plaintiff trusts were co-proponents, and the litigation trust and wind down trust that were established under the confirmed plan,” the motion argues. “This court should reject the plaintiffs’ brazen request.”
The same law firm that brought the Van Deelan case, she wrote, is bringing this one, and the court has previously warned The Bandas Law Firm about “the limits of Article III standing,” the motion argues.
“And yet here we are again,” Freeman argued. “The Bandas Law Firm has now filed another complaint that flies in the face of Article III standing. The Bandas Law Firm is attempting to pull one over on this court by raising the same arguments that this court has already rejected in a well-reasoned 38-page opinion.”
GWG, a Dallas-based financial services firm that sells bonds backed by life insurance policies, filed for Chapter 11 bankruptcy in April 2022. Judge Isgur was assigned to the case and Jones was appointed to serve as mediator.
“Then, without warning at the mediation, Jones advised the parties and stakeholders that there would no longer be a reorganization,” the lawsuit alleges. “Despite the promise of a reorganization that management believed would recover 100% to the bondholders, the company would be liquidated and none other than newly ‘solo’ attorney Freeman would be appointed as wind down trustee.”
The lawsuit alleges that liquidating the company means that Freeman, “and indirectly Jones,” would receive more than $1 million in fees and could direct millions to select firms, too.
“Unlike some other cases, Jackson Walker cannot argue in the GWG bankruptcy, filed on April 20, 2022, that it learned of the Jones-Freeman relationship after-the-fact. Jackson Walker knew from the inception of the bankruptcy,” the suit alleges.
The lawsuit accuses the defendants of breaching their fiduciary duties to the bondholders.
“Shockingly, Freeman continues to serve as wind down trustee to this day, compounding her ethical breaches without any challenge to her ongoing role in the GWG bankruptcy,” the suit alleges.
That Freeman remains the wind down trustee for the GWG bankruptcy was raised by a bondholder opposed to the proposed settlement agreements at a hearing in April. The bondholder, who called in remotely to attend the hearing, raised the issue of Freeman’s illicit relationship with Jones.
“How can we trust her?” the caller asked.
The bondholders are seeking unspecified damages.
Freeman is represented by Matthew Probus of The Probus Law Firm.
Counsel for Jones, Jackson Walker and Porter Hedges had not filed appearances as of Tuesday afternoon.
The plaintiffs are represented by Mikell Alan West of Bandas Law Firm in Corpus Christi.
The case number is 4:25-cv-02761.