Within hours of each other late Wednesday, three key players in the romantic relationship scandal that has infected the Southern District of Texas Bankruptcy Court filed motions in two separate cases seeking to have the cases against them dismissed — and all three for different reasons.
Former Southern District Bankruptcy Judge David Jones, who resigned in October after admitting that he had a multi-year romantic relationship with a lawyer involved in cases he was handling, said he should be dismissed as a defendant in a racketeering lawsuit because “a judge is entitled to absolute immunity from civil liability for all actions taken in the course and scope of the judge’s office.”
That lawyer, Elizabeth Freeman, in a separate motion, said the case against her should be dismissed because “the non-disclosure of Judge Jones’ relationship with Freeman” caused the plaintiff to suffer no damages.
And Freeman’s former law firm, Jackson Walker, in a separate motion in a separate case, said it “cannot be held liable for former Judge Jones’ misconduct” and thus the petition by the U.S. Bankruptcy trustee to claw back tens of millions of dollars in legal fees paid to the corporate law firm in cases approved by Judge Jones should be rejected.
In October, a former shareholder of McDermott filed a lawsuit claiming he was defrauded in an alleged conspiracy involving Freeman, lawyers for Jackson Walker and Kirkland & Ellis and Judge Jones in the McDermott bankruptcy case. The shareholder, Michael Van Deelen, accused the judge and Freeman of having a secret romantic relationship and the two law firms with knowing about it and profiting from it.
Judge Jones admitted to The Texas Lawbook and other news outlets that he and Freeman had been living together for years but denied that their relationship had any impact on his rulings. The judge resigned after the U.S. Court of Appeals for the Fifth Circuit opened a judicial investigation into his conduct — an inquiry that was closed by the appellate court after he resigned.
In November, the U.S. Bankruptcy trustee, an arm of the U.S. Justice Department, announced it was investigating dozens of business bankruptcy cases in which Freeman and Jackson Walker were paid millions of dollars in legal fees — approved by Judge Jones. The trustee accused the Dallas-based firm of knowing about the misconduct between the judge and Freeman and is seeking at least $11 million of those legal fees to be paid back.
The fact that the trio of targets, who are accused of conspiring together, filed their separate motions within hours of each other on the same day was described by lawyers involved as “pure happenstance” and unplanned.
In an 88-page motion filed Wednesday in the Neiman Marcus Group Chapter 11 bankruptcy, lawyers for Jackson Walker argued that the Dallas-based corporate law firm violated no laws, ethics rules or disclosure requirements and should not be forced to pay back money that the firm’s lawyers earned, including in many cases in which Freeman was not even involved.
“The actions of former Judge David R. Jones and Ms. Elizabeth Freeman should not be condoned, and JW does not in any way,” Norton Rose Fulbright partners Jason Boland and William Greendyke, who represent Jackson Walker, wrote in their petition. “But neither former Judge Jones nor Ms. Freeman are parties to this contested matter, and the U.S. Trustee’s requested relief not only fails to impose any consequences on former Judge Jones or Ms. Freeman, but it inequitably and improperly targets JW and each of its partners and employees who were misled by former Judge Jones and Ms. Freeman about the couple’s secret relationship.”
Jackson Walker argues that it “acted reasonably and responsibly” by relying on Freeman’s promise to the firm that there was no relationship.
“It is ironic that the U.S. Trustee alleges JW should have disclosed the nature of the relationship to the same judge who knew of the relationship, allegedly had a duty to disclose or recuse himself, and who knowingly declined to do so,” Boland and Greendyke —who served 17 years as a Southern District Bankruptcy judge in Houston until 2004 — wrote in the motion. “Over and over, the U.S. Trustee has conceded that the inappropriate conduct at issue in the various challenged cases was that of former Judge Jones.
“JW agrees — it is former Judge Jones’s conduct that is the cause of any concern, not JW’s,” the defense lawyers argue.
Jackson Walker argues that it had “no knowledge of any romantic relationship, cohabitation or joint home ownership” between Judge Jones and Freeman in 23 of the 33 cases the U.S. trustee challenges.
“When JW confirmed the relationship, JW took appropriate action and ultimately severed ties with Ms. Freeman,” the lawyers for Jackson Walker wrote.
In the federal civil RICO lawsuit, lawyers for Judge Jones keep their arguments simple: Everything the judge did was as an official judicial officer.
“All of the plaintiff’s claims asserted against Jones in this lawsuit arose out of Jones’ actions as a judge in adjudicating bankruptcy cases assigned to him,” McKool Smith partners John Sparacino and Gary Cruciani, who represent Judge Jones, wrote in their 11-page motion. “Apparently recognizing the breadth of judicial immunity, the plaintiff attempts to blur the predicate connection between Jones’ alleged non-judicial acts, the asserted claims, and the alleged injury. The plaintiff’s alleged injuries all arose out of court proceedings and orders entered by Jones in the McDermott chapter 11 bankruptcy case.”
“While the plaintiff clearly believes that Jones was wrong to not disqualify himself, that belief indisputably hits the bullseye of judicial immunity,” lawyers for Judge Jones wrote. “Whether right or wrong and irrespective of any driving motive, Jones’ decision regarding disqualification is entitled to judicial immunity.”
Meanwhile, Houston lawyer Tom Kirkendall, who represents Freeman in the various litigation matters involving the scandal, wrote in a 13-page motion that allegations by Van Deelen should be dismissed because the plaintiff’s “failure to establish causation dovetails with his failure to establish his standing to pursue claims against the defendants based on non-disclosure of the relationship.”
“Plaintiff’s damages were caused by the investment risk that he took in buying 30,000 of common equity shares in McDermott,” Kirkendall wrote. “One of the consequences of that risk was the cancellation of those shares under a Chapter 11 reorganization plan that McDermott management proposed and McDermott creditors overwhelmingly approved.”
“The non-disclosure of the relationship did not prevent him from pursuing any of his objections, some of which he is still pursuing,” Freeman’s brief argues. “None of the compensation that the lawyer Defendants received in the McDermott case caused damage to Plaintiff’s equity security interest, which was worthless long before defendants received any compensation in the McDermott Chapter 11 case.”
The federal RICO lawsuit is Michael Van Deelen v. David R. Jones, SDTX, No. 4:23-cv-3729. The bankruptcy trustee’s litigation is In Re: Neiman Marcus Group, SDTX, Case No. 20-32519.