Jackson Walker has agreed to pay $1.4 million to resolve potential claims from JCPenney related to a romantic relationship between a former partner and a former Houston bankruptcy judge, according to a motion filed Thursday.
This latest proposed settlement, filed with Chief Judge Alia Moses of the Western District of Texas, requires the court’s approval. But the U.S. Trustee’s Office, often referred to as the watchdog of the bankruptcy system, opposes individual settlement efforts by Jackson Walker. Instead, the trustee is demanding a full trial in an effort to claw back several million in fees awarded to the law firm in 33 cases where former bankruptcy judge David Jones served as a mediator or judge.
The Dallas-based firm, which represented the department store in its bankruptcy in 2020, would receive liability releases as part of the settlement, according to the motion.
The proposed settlement is one of five Jackson Walker has submitted to Judge Moses for approval with its former clients in the aftermath of the disclosure in 2023 of a romantic relationship between Jones and former Jackson Walker partner Elizabeth Freeman. The four proposed settlements are:
- Sungard AS New Holdings for $385,000;
- 4E Brands North America for $617,000;
- Basic Energy Services for $783,000; and
- Seadrill Partners for $485,000.
In May, Jackson Walker agreed to mediate the dispute with the trustee over the 33 cases, including JCPenney. Judge Moses had given Jackson Walker and the trustee until July 15 to inform her how mediation was going in the case, but when the deadline came, the parties informed the court that attempts to reach an agreement had failed.
On Aug. 15, lawyers for the trustee told Judge Moses, who herself previously expressed skepticism over the settlement efforts, that Jackson Walker’s recent motions “seek to prematurely and improperly short circuit the U.S. Trustee’s prosecution.” The trustee is demanding a full trial with potentially significant penalties and punishments beyond just disgorgement of fees.
A spokesman for Jackson Walker declined to comment.
The U.S. Trustee is represented by Laura Steele, Millie Aponte Sall and Vianey Garza.
Streusand, Landon, Ozburn & Lemmon partner Stephen Lemmon is representing the estate of JCPenney.
Norton Rose Fulbright’s Jason Boland, Paul Trahan, William Greendyke, Julie Goodrich Harrison and Maria Mokrzycka represent Jackson Walker, along with Rusty Hardin & Associates’ Rusty Hardin, Emily Smith and Leah Graham, and Jennifer Brevorka of Hodgson Russ.
The case is In re: Professional Fee Matters Concerning the Jackson Walker Law Firm, 4:23-cv-04787.
Mark Curriden and Michelle Casady contributed to this report.