Information technology company Sungard AS New Holdings has asked the court to approve a $385,000 settlement it reached with Jackson Walker that would end its bankruptcy fee dispute with the Dallas-based law firm.
Sungard filed for Chapter 11 bankruptcy in April 2022 and hired Jackson Walker as its counsel. Its bankruptcy is among the 33 cases where the U.S. Trustee’s office is trying to claw back millions in fees awarded to Jackson Walker in cases where former judge David Jones 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, who practiced at Jackson Walker while many of the 33 cases were being decided, left the firm before news of the relationship broke.
On Tuesday, Sungard filed a 12-page motion asking Chief U.S. District Judge for the Western District of Texas Alia Moses to approve the deal. For work done on its bankruptcy, Sungard told the court, Jones approved Jackson Walker’s final fee application on Dec. 30, 2022, for “fees aggregating $414,495.” That means the settlement is for about 93 percent of the total fees the firm had been awarded
The company explained in the motion that Jackson Walker has maintained that the approval of Sungard’s bankruptcy plan and related fee orders “bar any potential claims against JW and relieve JW from any and all potential liability in relation to the Chapter 11 case.”
“The wind-down debtors and the plan administrator vigorously disagree with JW’s alleged defenses and believe that the release and exculpation provisions of the plan will provide no defense for JW in the Chapter 11 case,” the motion argues, later adding that the settlement will allow it to avoid the “time, expense and uncertainty of litigation.”
While the possibility of success in the litigation “is high,” and there is a “significant likelihood that the order approving JW’s final fee application will be vacated,” Sungard’s plan administrator told Chief Judge Moses this settlement is the best outcome for it.
“A settlement now brings finality and eliminates any meaningful litigation and collection risk, and ends future fees and costs being incurred,” the motion reads. “However, that risk could increase with the passage of time and continued litigation.”
Last week, another company whose bankruptcy is among the 33 cases being examined by the U.S. Trustee, offshore drilling rig operators Seadrill Partners and Seadrill Limited, sought approval of a $485,000 settlement. Jackson Walker has also reached settlements in a few other cases, including with 4E Brands North America and Basic Energy Services.
Earlier this month, Jackson Walker and the U.S. Trustee informed Judge Moses that attempts to mediate the dispute had failed, which she said would trigger her to schedule a trial in the case.
On July 3, Jackson Walker filed a demand for a jury trial. The U.S. Trustee hit back on July 16, telling the court the law firm “has no substantive right to a jury trial.”
As of Friday, the court had not ruled on a motion Jackson Walker filed July 21 asking the court for a scheduling conference where the parties can address:
- A deadline for Jackson Walker to respond to the U.S. Trustee’s motion to consolidate and a related hearing date;
- A hearing date for the pending settlement motions and any additional settlement motions filed in advance of such hearing;
- A hearing date regarding Jackson Walker’s and the U.S. Trustee’s standing briefs; and
- Dates related to pretrial and trial, including what issues will proceed to trial first.
Sungard is represented by Daniel F.X. Geoghan of Cole Schotz.
Jackson Walker is represented in the litigation by Jason Boland, William Greendyke, Julie Goodrich Harrison and Maria Mokrzycka of Norton Rose Fulbright and Rusty Hardin, Leah Graham and Emily Smith of Rusty Hardin & Associates.
The U.S. Trustee is represented by Millie Aponte Sall, Vianey Garza and Alicia Barcomb.
The case number is 4:23-cv-04787.