Roughly one month after deciding a bankruptcy judge should determine whether a former CEO can proceed with his lawsuit alleging he was the victim of a conspiracy carried out in proceedings before former bankruptcy judge David Jones, a federal judge changed her mind this week.
In an order issued March 6, Chief U.S. District Judge for the Western District of Texas, Alia Moses, shipped the case to U.S. Bankruptcy Judge Christopher M. Lopez in the Southern District of Texas so he could determine whether former Bouchard Transportation Company CEO Morton S. Bouchard III had derivative standing to pursue his lawsuit against Jones, Dallas-based Jackson Walker, the firm’s former bankruptcy partner Elizabeth Freeman and Kirkland & Ellis.
The lawsuit was filed in February 2024 in the wake of the public disclosure of a previously private romantic relationship between Jones, who resigned the bench in October 2023 after the revelation, and Freeman, who left Jackson Walker in December 2022.
But on Wednesday, Chief Judge Moses withdrew the case referral to Judge Lopez.
“There have since been developments in a related case that have the consequence of expanding the scope of the narrow question presented in that referral,” she explained in a four-sentence order. “As a result, the court finds it prudent to withdraw the reference to the bankruptcy court, and to determine in the first instance, after a hearing, whether the plaintiff may represent the best interests of the bankruptcy estate.”
In a separate order issued one day prior to the referral to Judge Lopez, Chief Judge Alia Moses had trimmed Bouchard’s lawsuit by dismissing Portage Point Partner and its founder, Matthew Ray, from the lawsuit. Portage Point is a bankruptcy advisory firm that former judge Jones appointed to oversee Bouchard Transportation’s bankruptcy in 2020.
Bouchard alleges the century-old ocean shipping company he formerly helmed was valued at nearly $750 million in 2019 but faced significant debt, leading it to seek restructuring. He said lawyers at Kirkland advised him to file for Chapter 11 bankruptcy in the Southern District of Texas before a friendly judge but alleges those lawyers said nothing about the relationship between Jones and then-Jackson Walker partner Freeman. Kirkland used Jackson Walker as local counsel in Houston bankruptcy cases.
Kirkland and Jackson Walker have told the court they didn’t know about the Jones-Freeman relationship and also said there was no way to know whether the Chapter 11 proceeding for Bouchard Transportation would be assigned to Jones or his colleague, U.S. Bankruptcy Judge Marvin Isgur.
Jackson Walker has said Freeman lied to the firm about the relationship until 2021, and that after she admitted it, she was prohibited from working on matters before Jones and was eventually asked to leave the partnership.
Kirkland, similarly, has maintained it did not know about the relationship until 2021 — when Jackson Walker informed it.
Bouchard claims that the defendants worked together with Portage Point and Ray to allegedly dismantle his company, which was “worth nearly three quarters of a billion dollars, for pennies on the dollar.” He alleges the defendants “orchestrated a coup” to have him removed as CEO after he “began scrutinizing professional fees” that were being paid out in the bankruptcy.
“The defendants then proceeded to hold a fire sale of the company’s assets. In the process, plaintiff lost tens of millions of dollars, which he had invested personally to help keep the company afloat,” Bouchard told the court. “He also incurred considerable costs in defending against an adversary proceeding lodged by the defendants after he scrutinized their fees and business reputation damages from their malicious attacks, which prevented him from obtaining new employment.”
Bouchard was removed as CEO on Feb. 26, 2021, by Jones, who ordered the move sua sponte, or on his own authority, without any party requesting that action. Ray was appointed as his replacement.
On April 8, one day before Chief Judge Moses recalled the case to her courtroom, Bouchard had filed an objection with Judge Lopez, asking him to deny a request lodged by Portage Point and Ray to appoint an “independent special administrator” who would “assess the potential claims and causes of action asserted in the RICO proceeding.”
“Although the plan administrator and Portage Point have been dismissed with prejudice from the RICO Proceeding, the plan administrator has determined that in his business judgment that, to ensure efficiency and protection over the general process, the plan administrator seeks to appoint the independent special administrator to handle all matters relating to Bouchard before this court, including the remand order and the other remaining matters,” Portage Point and Ray told the court in the March 27 filing.
But Bouchard argued in response that he was “well positioned to pursue the claims on behalf of the estate.”
And he questioned the “independence” of the special administrator they want to see appointed, noting Dundon Advisors had been paid “hundreds of thousands of dollars in cases in which Elizabeth Freeman, Jackson Walker, and Jones were actively pulling the strings to defraud bankruptcy participants all while hiding the intimate, domestic relationship.”
“Allowing Bouchard to pursue these claims will not burden or diminish the estate’s limited resources if there is no recovery,” he wrote. “On the other hand, paying a pawn $960 per hour to play catch up on plaintiff’s claims only to discard them in the interests of Portage and Ray and the remaining Defendants will only deplete what is left of the estate.”
Bouchard characterized the emergency motion filed by Portage and Ray as an attempt at an “end run” around Chief Judge Moses’ remand order.
“Likewise, Portage and Ray filed their motion on an emergency basis without naming the emergency after waiting over a year, and after participating with Plaintiffs before Judge Moses and keeping their intentions hidden. The only emergency is Judge Moses’ order and Plaintiff’s efforts to comply with the order.”
Bouchard is represented by Mikell Alan West and Robert W. Clore of Bandas Law Firm and Shelby A. Jordan of Jordan & Ortiz.
Portage Point and Ray are represented by Gregory F. Pesce, Ronald K. Gorsich and Doah Kim of White & Case.
Jackson Walker is represented by Rusty Hardin, Emily Smith, Jennifer Brevorka and Leah Graham of Rusty Hardin & Associates.
Kirkland is represented by John Hueston, Karen Ding, Michael Todisco and Warren Crandall of Hueston Hennigan and David Beck and Jacqueline Furlow of Beck Redden.
Freeman is represented by Thomas Kirkendall of The Woodlands.
Jones is represented by David Boies and Tyler Ulrich of Boies Schiller Flexner.
The case number is 4:24-cv-00693.