An evidentiary hearing in federal bankruptcy court that was set to determine whether expert reports should be struck took what attorneys for Jackson Walker claimed was an unexpected turn after an attorney for the U.S. Trustee began “putting on their case on the merits.”
The hearing Thursday in Houston came in the case where the U.S. Trustee is trying to claw back millions in fees awarded to the law firm Jackson Walker in 33 cases where former bankruptcy judge David Jones served as a judge or mediator. Those efforts began after a previously secret romantic relationship between Jones and then-Jackson Walker bankruptcy partner Elizabeth Freeman became public. Jones resigned his bench in October 2023, and Freeman left the Dallas-based firm in December 2022.
Following several objections lodged by Rusty Hardin, who represents Jackson Walker, Chief U.S. Bankruptcy Judge for the Southern District of Texas, Eduardo V. Rodriguez, suggested there was one way to bring an end to the testimony from Jonathan C. Lipson, a tenured bankruptcy law professor at Temple University-Beasley School of Law, that Hardin said was impermissible.
“And that’s to agree [Lipson] can testify,” Judge Rodriguez said.
Hardin chuckled at the suggestion, then requested five minutes to confer with the rest of the Jackson Walker legal team. The short break turned into a break for lunch.
And when the parties returned from lunch Thursday afternoon, they had an update for the judge.
U.S. Trustee’s office trial attorney Jaime Peña told the court the break had “actually worked out pretty well for the parties,” and that both sides would be withdrawing motions to strike and objections with prejudice.
With that, Judge Rodriguez said the hearing was terminated.
But before that breakthrough agreement, Jennifer Brevorka of Rusty Hardin & Associates began the hearing Thursday morning by arguing that the expert opinion of Lipson should be struck.
The argument echoed those put forth in briefing to the court — that Lipson’s report made conclusions of law that only the court can make and that he applied ethics standards that can only apply to individual attorneys to a law firm, rendering the opinion unreliable and irrelevant.
U.S. Trustee’s Office trial attorney Jaime Peña addressed the court next, offering what he said was an opening statement.
“This case is about misconduct, plain and simple,” he began. “It involves mixed issues of law and fact.”
Peña then took the court through a brief timeline of events, starting in 2010 or 2011, when he said the evidence shows the romance between Freeman and Jones began, highlighting when the allegations of a relationship between the two were first relayed to the firm in 2021, and when they were raised by Michael Van Deelen (a shareholder who lost everything in the McDermott International bankruptcy handled by Jones) in a fraud lawsuit he filed in October 2023.
Peña also laid out what he said was the back-and-forth between Freeman and other partners at the firm as to whether the relationship was ongoing, including when she allegedly told the firm the relationship ended as the pandemic began, and when in March 2022 she allegedly told firm leaders it was a “continual relationship,” Peña said.
“They didn’t do anything other than confront her, but they knew they had a problem,” he said, which is why the firm consulted an outside ethics expert, Peter Jarvis of Holland & Knight, about whether any disclosure was required.
Brevorka lodged her first objection at that point, arguing Peña’s presentation was irrelevant to the purpose of Thursday’s hearing, which was set to determine whether experts for both sides should be struck.
Judge Rodriguez said her objection was “noted” but allowed Peña to continue.
During a rebuttal not long after that, Brevorka told the court that what observers of the hearing just heard from Peña was “completely irrelevant and improper,” and again argued Lipson’s report should be struck because it “infringes upon the province of the court.”
After a brief, 10-minute recess, Peña then called Lipson as a witness. He appeared remotely and began discussing internal Jackson Walker emails between partners discussing the Jones-Freeman relationship and what to do about it. It wasn’t long before Rusty Hardin lodged an objection.
“They are trying their case on the merits,” he said, adding that the point of Peña’s presentation and the testimony he elicited from Lipson was only meant to “make [Jackson Walker] look bad” and to “get their case out in the public,” which he said was far afield from the point of the evidentiary hearing meant to address the admissibility of three expert reports.
Peña told the court he was trying to give it information about what Lipson used to form the basis of his opinion that Jackson Walker shirked its duty to disclose the relationship.
Several minutes later, Peña began discussing with Lipson — and displaying on the video screen — other internal 2022 emails between Jackson Walker partners Wade Cooper, Bruce Ruzinsky, firm general counsel William R. Jenkins and Patrick Cowlishaw regarding the Jones-Freeman relationship, including whether it was ongoing and if disclosure was required. Hardin again objected.
“Here’s what’s happened,” he said. “They’re trying this case on the merits under the cover of” an evidentiary hearing that is supposed to be focused on the admissibility of expert reports and opinions.
Judge Rodriguez assured Hardin that he wasn’t “considering the veracity of these hearsay documents,” and that he was only focusing on what Lipson relied on in crafting his opinion.
“I did set this as an evidentiary hearing today,” he said.
Hardin said his understanding of the purpose of the evidentiary hearing was to determine if experts for each side would be allowed to testify and said it “never occurred” to the Jackson Walker legal team that they would need to have witnesses present to rebut the testimony being presented by Lipson.
“What they are doing is trying their case to the public at large,” Hardin said. “This is very unfair to us in terms of they are putting on their case to the world at large,” and leaving Jackson Walker without an avenue to respond.
That’s when Judge Rodriguez suggested that the testimony could end if Jackson Walker withdrew its objection to Lipson’s expert opinion.
Before the parties left for the day, they also agreed on a new trial date, pushing it back from April 21 to May 9. The case number is 23-00645.