Ethics complaint against law firm over secret judge romance withdrawn

By David Thomas

Feb 3 (Reuters) - A Houston bankruptcy judge has withdrawn his ethics complaint against U.S. law firm Jackson Walker for not earlier disclosing a relationship between David Jones, another Houston bankruptcy judge who resigned from the bench in October 2023, and one of its partners.

U.S. Bankruptcy Judge Marvin Isgur referred the entire Jackson Walker firm for disciplinary proceedings in September. But Isgur has agreed to withdraw his complaint because court rules do not allow judges to sanction law firms, only individual attorneys, U.S. District Judge Lee Rosenthal said in her three-page order Monday.

"The basis for that limitation is that it is often unwarranted and unjust to sanction an entire firm for actions that are primarily, if not entirely, those of a few individuals within the firm," Rosenthal wrote.

A representative for Isgur did not immediately respond to a request for comment.

Jackson Walker said in a statement that "the evidence overwhelmingly demonstrates that Jackson Walker acted responsibly and appropriately at all times under the circumstances."

In his September letter seeking disciplinary proceedings, Isgur said Jackson Walker has acknowledged that it knew in March 2022 that Elizabeth Freeman, one of its former bankruptcy partners, was in a relationship with Jones and told no one.

Instead, the firm billed $11 million in fees in cases where Jones was the judge or mediator while never identifying the relationship, Isgur said.

Jackson Walker "did nothing to inform the court. I reject the concept that Jackson Walker had no duty to inform the court because Judge Jones, a judge on the court, obviously knew," Isgur wrote.

Jones was once the busiest bankruptcy judge in the United States and presided over the bankruptcies of JCPenney, Neiman Marcus, Party City and Chesapeake Energy, among many others. He resigned from the bench after admitting to sharing a home with Freeman.

Since then, the U.S. Trustee, the Justice Department's bankruptcy watchdog, has been trying to force Jackson Walker to disgorge millions of dollars in legal fees that Jones approved in at least 35 bankruptcy cases filed by the law firm. Isgur recused himself from overseeing those disputes.

Rosenthal noted that Jackson Walker is facing these "severe sanctions," adding that there is "no risk that Jackson Walker and some of its lawyers will escape scrutiny and potential punishment for the failure to disclose that led to this complaint in the first place."

In August, Jones said he was under criminal investigation. He was also sanctioned for offering testimony outside of the court's supervision.