Chief Bankruptcy Judge David Jones of the Southern District of Texas
Most lawyers in Texas simply tried to survive 2020. A small handful thrived. One lawyer – a judge, to be exact – has had a year for the ages.
David Jones, Chief Bankruptcy Judge of the Southern District of Texas, is a disruptor of law and business, and his actions are felt far beyond his Houston courtroom.
In fact, no federal judge in the U.S. has had more impact on corporate boardrooms, C-suites and tens of thousands of day laborers as Chief Judge Jones. Because of his efforts, law firms and financial advisors in Texas have increased their 2020 income by hundreds of millions of dollars – money that in years gone by would have gone to lawyers and bankers in New York or Chicago.
If not for COVID-19, his impact on the downtown Houston economy – especially hotels and restaurants – would have been even more enormous.
Judge Jones is overseeing the financial restructurings – also known as economic lifelines – of several multibillion-dollar corporations, including J.C. Penney, Neiman Marcus, Denbury Resources, Noble Corp., Chesapeake Energy and Rosehill Resources.
In fact, Judge Jones and fellow U.S. Bankruptcy Judge Marvin Isgur now manage more business bankruptcies of $300 million or more than any other bankruptcy court in the country.
Citing the extraordinary, commonsense reforms for complex corporate bankruptcies implemented by Judge Jones and the impact they have had on the practice of law in Texas, The Texas Lawbook is naming David R. Jones as the 2020 Lawyer of the Year.
Editor’s note: The Texas Lawbook hosted an exclusive live, 90-minute CLE webcast featuring Chief Bankruptcy Judge Jones and three prominent corporate bankruptcy experts – Shell Oil’s global bankruptcy litigation chief counsel Travis Torrence, Porter Hedges partner John Higgins and Jackson Walker partner Matt Cavenaugh – on Dec. 4. Premium subscribers can view the video by clicking here.
In 2016, Judge Jones implemented a series of substantive reforms that created a special two-judge panel to handle the biggest and most complicated corporate restructurings, to provide parties increased access to court officials and to make procedures more transparent and predictable.
“Very few [large-dollar] complex bankruptcies were getting filed here,” Judge Jones said in an exclusive interview with The Texas Lawbook. “There was not a next generation of Texas lawyers in the bankruptcy practice because there wasn’t a need. I was worried we would not have a generation of bankruptcy lawyers left in Texas.”
New data provided exclusively to The Texas Lawbook shows that Judge Jones has 875 high-dollar complex business bankruptcies, more than 15 Chapter 15 insolvency cases and about 3,000 consumer bankruptcies on his docket in Houston.
“David shows that the force of one determined person to get something done,” Judge Isgur told The Texas Lawbook. “He decided everything we did would be more consumer friendly. The fact is, he just did it. He did it, and then he persuaded me to do it.”
The changes have been effective.
“The goal was never to be busier than anyone else,” Jones said. “The goal was to have a bankruptcy court where I always wanted to practice and where it wasn’t about the judge but all about the case.”
In fact, the objective of Jones’ reforms was to persuade large Texas companies to consider restructuring through courts in Houston instead of filing for bankruptcy in Delaware and the Southern District of New York, as Enron, American Airlines, Energy Future Holdings, Radio Shack, Dynegy and dozens of other large Texas businesses had done for the past 20 years.
Those reforms have proven so successful that even several large corporations headquartered outside of Texas have filed their bankruptcies in Houston, including Chesapeake Energy of Oklahoma City, California-based Men’s Warehouse, Los Angeles-based California Pizza Kitchen and Kansas-headquartered NPC International, which is the largest Pizza Hut and Wendy’s franchisee in the U.S.
“Judge Jones has been the force behind this,” said John Higgins, a partner at Porter Hedges who practiced with Jones for several years. “He got the bankruptcy bar and the federal district bench together and made it happen.
“Having a consistency on rulings and constant access to the courts was a huge problem before,” Higgins said. “When you seek an emergency hearing on a billion-dollar filing and restructuring, it would sometimes take a couple weeks. Judge Jones and Judge Isgur rule quickly and decisively.”
Judge Jones, who is 58, was born and raised in rural North Carolina. His mother was an elementary school teacher for 43 years. There were no lawyers in the family.
After receiving his degree in engineering from Duke University in 1983, he worked for a large defense contractor doing chip design for missile guidance systems. A year later, he moved to Dallas to get an MBA from Southern Methodist University. He graduated in 1986 and went to work for an accounting firm.
In 1987, Jones’ life took a turn. He was hired to design a document management system for defense lawyers representing about 120 developers, appraisers and bankers in the I-30 savings and loan/fraudulent condominium scheme. One of the lawyers he worked with was Richard “Racehorse” Haynes of Houston.
“Being around such great lawyers was a fun experience, and was the push I needed to go to law school,” he said.
Eighteen months later, Jones started law school at the University of Houston Law Center.
During his second year, a couple of Houston lawyers, Tom Kirkendall and Marvin Isgur, asked him to be a consultant overseeing their development of a computer networking system. They were impressed and hired Jones to join the law firm as an associate when he received his law degree in 1992.
“We knew he was going to be a great lawyer,” Kirkendall said. “Plus, David showed great deductive reasoning early in his life when he realized that there was not much of a future for him as a 6’2” walk-on power forward at Duke.”
Isgur and Kirkendall agree that Jones skills as a lawyer were self-evident.
“Right after he passed the bar, we went to a hearing together, and it was clear right away that he was going to be a star,” Judge Isgur said. “He was a very aggressive lawyer.”
Jones’ First Big Case
Jones’ first big case came during his second year at Kirkendall & Isgur, a Houston boutique that specialized in complex corporate bankruptcy litigation.
The firm was hired by the court-appointed trustee in the restructuring of Guyana Development Corp., an oil and gas-focused holding company that owned and managed assets in multiple countries.
GDC filed for bankruptcy protection in Houston in 1993 citing $8 million in assets, but undetermined liabilities were the subject of dispute with the IRS.
“It started off as a small asset bankruptcy involving a tax dispute over the sale of a Massachusetts office complex, but it blossomed into a $100 million case,” Jones said. “There was one point when I was in Zurich, Marvin was in the Isle of Man and someone else was in London.
“We were tracking down money flying all around the world,” he said. “We learned how to operate simultaneously in several countries at once.”
Court records show that the GDC bankruptcy trial unearthed the “existence of fraud in the operation of the estate” involving company insiders, including GDC principal Edward Callan.
Over a period of two years, Isgur, Kirkendall and Jones pursued litigation in five different countries and seized property in multiple states and a handful of foreign nations.
“The trustee discovered that debtor’s books and records were in total disarray,” U.S. Bankruptcy Judge Karen Kennedy Brown wrote in awarding $2.4 million in fees to the law firm. “Some records were maintained on a computer so old that access was difficult, some were contained in locked file cabinets.”
“The disorganization of debtor’s records was compounded by debtor’s insiders’ deliberate attempts to misappropriate records,” Judge Brown wrote. “Insiders moved records all over the world.”
Jones and the others found some records in the back of a car in London and others on a truck in Houston.
But the highlight of the case for Jones came in 1994 when he learned that Callan had used estate funds to purchase a 65-foot yacht called the M/V Scorpion for $385,000.
“We got a tip that the boat was at the [Hurricane Hole] Marina in Nassau, and we got a court order that we got to take the boat,” Jones said. “I flew to Miami and hired a boat captain. I had $25,000 in cash in case I had to pay an ‘exit fee’ to take the boat out of the harbor.
“We arrived in the dead of night [in Nassau] – no one there except the harbor captain,” Jones said.
They found the boat and plotted their return. Everything was going smoothly, according to Jones, when the boat suddenly stalled about halfway between Nassau and Fort Lauderdale.
“Apparently there was algae growing in the fuel lines and clogged the engine, and the boat died near Bimini,” he said.
After having the boat towed to a marina and repaired, Jones and the captain set out through the Straits of Florida toward Fort Lauderdale when they were hit with another surprise.
“This Coast Guard helicopter was hovering over us, yelling sat us to turn off the engine and told us, ‘Don’t throw anything overboard,’” Jones said. “I was standing in the back of the boat waving this court order in the air.”
The Coast Guard finally reviewed the court order, and Jones and the boat captain were on their way. They ended up selling the M/V Scorpion for $300,000.
“David was a good lawyer because he was not afraid of taking on difficult cases,” Kirkendall said. “He understood he had to be creative.”
Jones said he chose to work with Kirkendall & Isgur over other law firms that recruited him for one simple reason: “I told them that I want to go to court every day and I want to be a self-supportive, talented bankruptcy lawyer,” he said. “They told me that if I went to work for them, I would go to court tomorrow.”
In 2004, Isgur left the firm to become a federal bankruptcy judge in Houston.
“Marvin trained me. We’ve been friends for 30 years. We have great communications,” Jones said. “He taught me patience. He taught me to always try to leave a little something for the other side. This is who Marvin is – he is the essence of a judge.
“I love him like a father,” he said.
A year later, Jones moved his legal practice to Porter Hedges.
“David would come to the office on Saturdays wearing a Duke T-shirt and shorts and would have documents all over the floor looking for potential new clients,” said Higgins, who officed next to Jones for nearly seven years.
“David frequently took no depositions in cases, and he just showed up for trial like an old-fashioned criminal defense attorney,” he said. “The joke around the firm was that David never ran conflicts checks.
“Simply put, David Jones is one of the best bankruptcy lawyers I have ever met,” Higgins said.
In 2011, Judge Jerry Smith of the U.S. Court of Appeals for the Fifth Circuit asked Jones to accept an appointment to the bankruptcy court in the Southern District of Texas. It was an opportunity to join his mentor, Isgur, who was then the chief judge, on the bench.
“I had no designs to be a judge,” Jones said. “I loved being a lawyer. It was one of the true privileges of my life.”
To be truthful, much of the Texas bankruptcy bar had doubts about Jones as a judge, too.
“There were a lot of concerns about my temperament early on,” he said. “I was a litigator with a litigator’s mentality. It didn’t bother me as a lawyer to turn up the tension in a case.”
The lawyers who know him best admit there were widespread concerns.
“David, in his practice, was never one to take any prisoners,” Higgins said. “He was an aggressive lawyer, and there was fear that he would inject himself into cases and even start calling his own witnesses.”
On the bench, Judge Jones has put those fears to rest.
“David realizes that nobody knows everything about business,” Kirkendall said. “David has no problem telling the lawyers, ‘Whoa, slow down and explain this to me again.’ He is an outstanding judge.”
Jones said that Judge Isgur has been as much of a mentor on the bench as he was practicing law. But he said they do have differences.
“Isgur is black and white and writes a lot,” Jones said. “I’m very gray and I don’t like to write.”
To be sure, Jones has his pet peeves that attorneys should avoid.
“The biggest is that he does not like it when people interrupt him or start talking while he is still talking,” Higgins said. “And he is still pissed that the Boy Scouts did not file for bankruptcy here.”
The Dallas-based Boy Scouts filed for Chapter 11 protection in Delaware earlier this year.
The other Southern District of Texas judges elected Jones to be their chief in 2015. That’s when he started focusing on creating the complex business docket for Chapter 11 restructurings.
“A key was convincing my colleagues that consistency was a critical factor,” he said. “There were some tough discussions. There could only be two judges doing this to make it work.
“The engineering mentality is engrained in everything I do,” Jones said. “We engineers fix things. And that is what we are trying to do in bankruptcy cases. It has been a constantly evolving process.”