About four months after Dallas-based Jackson Walker filed a demand for a jury trial in the cases where the U.S. Trustee is trying to claw back millions in fees awarded to the firm, a judge this week denied the request.
Chief U.S. District Judge Alia Moses issued an eight-page order Wednesday holding that the right to a jury trial “does not” attach to the motions filed by the U.S. Trustee seeking to vacate the fee awards.
“Put simply, both the cause of action and the remedy arise in equity; thus the Seventh Amendment is not implicated,” she wrote.
In response to a query as to whether the firm planned to appeal the ruling, a spokesman for Jackson Walker said the firm would decline to comment.
The U.S. Trustee, referred to as the watchdog of the bankruptcy system, is attempting to recover fees awarded to Jackson Walker in 34 bankruptcy cases in which David Jones, a former Southern District of Texas bankruptcy judge, served as a mediator or judge. Jones resigned the bench after a secret relationship with a former Jackson Walker bankruptcy partner, Elizabeth Freeman, was publicly reported. Freeman had left the firm before that news broke.
“Procedural posture is determinative here,” Chief Judge Moses wrote. “The Seventh Amendment preserves the right to a jury trial in ‘[s]uits at common law.’ ‘Suits at common law’ means cases involving legal rights; it does not reach cases involving equitable rights. Bankruptcy courts are courts of equity.”
But even if the Seventh Amendment is implicated in this case, Chief Judge Moses wrote that Jackson Walker’s “demand is untimely, and thus any right to a jury trial is waived.” She ran through a timeline of events, explaining that Jackson Walker filed sur-replies to the vacatur motions Aug. 12, 2024, meaning the deadline for the firm to demand a jury trial was Aug. 26, 2024.
That deadline was missed by “nearly a year,” she wrote.
In April, Western District of Texas Chief Judge Moses took control of the 34 cases, granting a request from the U.S. Trustee to move the cases out of the courtroom of Southern District of Texas Chief U.S. Bankruptcy Judge Eduardo V. Rodriguez.
“The court knows of no reason to think that the bankruptcy judges, after Nov. 15, 2023, who have overseen these proceedings thus far have done so other than ably and honorably, to the highest standard of judicial professionalism,” her order reads. “No party claims otherwise. This memorandum order and opinion should not be read to cast doubt on their service or on any order or decision they have made in these proceedings to date.”
“This unique case nevertheless requires stiff measures. The need to reestablish public trust and confidence in the court system alone impels withdrawal in this highly unusual case.”
The cases had been set for a two-week trial to begin May 12.
In her Wednesday order, Chief Judge Moses consolidated the 34 cases, granting a request from the U.S. Trustee and referred the cases back to Chief Judge Rodriguez, directing him to commission a report and further recommendations
“Though deeply intertwined with bankruptcy matters, the overarching violation is one of judicial misconduct,” Chief Judge Moses wrote. “Referral allows the affected parties to benefit from the knowledge and proficiency of the bankruptcy court, while acknowledging these motions only exist because Jones and Freeman may have violated the trust the bankruptcy parties placed in them. For these reasons, the vacatur motions, the miscellaneous motions and adversary proceeding No. 25-2002 are referred to Chief Judge Rodriguez for a report and further recommendations to this court.”
Some of the companies involved in the 34 affected cases have struck proposed settlements with Jackson Walker over the fee dispute. Those proposed settlements have been repeatedly opposed by the U.S. Trustee.
In her Wednesday order, Chief Judge Moses held those settlements in abeyance, writing that she would not “overlook” the judicial misconduct allegations and approve settlements for a few parties.
“Even more concerning is Jackson Walker’s attempts to settle claims with individual private parties,” she wrote. “This can be seen only as an attempt to circumvent the process and this court’s authority, as well as that of the bankruptcy court, and stymie the U.S. Trustee’s case before it gets off the ground.”
Jackson Walker is represented by Jason L. Boland, William R. Greendyke, Julie Harrison, Maria Mokrzycka, Paul Trahan and Emily D. Wolf of Norton Rose Fulbright and Rusty Hardin, Leah M. Graham, Jennifer Brevorka and Emily Smith of Rusty Hardin & Associates.
The U.S. Trustee is represented by Vianey Garza, Alicia L. Barcomb, W. Joel Charboneau and Brian P. Thill of the U.S. Department of Justice.
The case is 4:23-cv-4787.