Clock ticks for Jackson Walker, US Trustee in ethics case involving ex-judge

By David Thomas

July 10 (Reuters) - (Billable Hours is Reuters' weekly report on lawyers and money. Please send tips or suggestions to D.Thomas@thomsonreuters.com.)

An ethics scandal that rocked the corporate bankruptcy world nearly two years ago is ratcheting up again, with pressure mounting for law firm Jackson Walker and the U.S. Justice Department's bankruptcy watchdog to reach a deal or go to trial over efforts to claw back millions of dollars in legal fees from the firm.

For months, the U.S. Trustee has demanded that Jackson Walker disgorge $11 million or more in fees that the firm was awarded by former U.S. Bankruptcy Judge David Jones, whose romance with one of Jackson Walker's partners threw his Houston court in turmoil when it became public and the judge resigned two years ago.

U.S. District Judge Alia Moses in Houston this week gave Jackson Walker and Kevin Epstein, the U.S. Trustee for the Southern and Western Districts of Texas, until July 15 to reach a settlement after weeks of mediation in the trustee's case against the firm. If they fail at the mediation, which is being overseen by a retired bankruptcy judge, Moses said she will schedule the case for trial.

Jackson Walker has acknowledged that it knew by March 2022 that its then-partner Elizabeth Freeman was in a relationship with Jones but told no one, a federal bankruptcy judge said in September 2024.

The firm has argued it acted responsibly in its handling of the relationship. In December 2022, Freeman left the firm. Jones publicly disclosed the relationship and resigned from the bench in the fall of 2023.

The trustee objected to fees Jackson Walker earned in at least 26 cases, arguing that Jones' failure to recuse himself from any case involving Jackson Walker tainted the fee awards the firm received from him.

Spokespersons for Jackson Walker and the U.S. Trustee declined to comment.

Legal experts watching the case say the stakes are high for both sides, and the settlement could hinge both on the size of any deal and the trustee's interests in policing the bankruptcy system.

A purely financial settlement "lets people set the payment price for a failure to disclose," said Nancy Rapoport, a law professor at the University of Nevada focused on ethics and bankruptcy law.

The U.S. Trustee is charged with overseeing the integrity of the bankruptcy system, said Robert Lawless, a law professor at the University of Illinois at Urbana-Champaign. A "nominal" financial settlement could signal that corporate bankruptcy lawyers play by a different set of rules than everyone else, Lawless said.

"What happened was very troubling," Lawless said. "From the U.S. Trustee's perspective, if there's no consequence to this, it’s bad for the system."

A trial on the trustee's claims would be a major event for the Houston bankruptcy bar, potentially airing internal firm communications, details about Jones' relationship and returning scrutiny to the parties' actions in long-closed bankruptcy cases.

That could be averted even if Tuesday's mediation deadline passes without a deal, Rapoport noted, since the firm and the trustee could still hammer out a settlement on their own.

-- Quinn Emanuel has escalated its fight for $30 million in legal fees the firm says it's owed by a former client, 3D printer Desktop Metal, after it prevailed in litigation that forced Israeli tech firm Nano Dimension to follow through with a planned merger with the company.

Quinn Emanuel on Tuesday sued Nano Dimension and its CEO Ofir Baharav in Massachusetts state court, alleging that Nano and Baharav, now in charge of the merged company, are refusing to pay.

"Now under Nano’s control, Desktop Metal is employing the same playbook of delay, deception, and sharp tactics against Quinn Emanuel that Nano previously deployed against Desktop Metal itself," the firm said in its lawsuit.

The lawsuit said the firm could receive triple damages from Nano and Baharav. A Quinn Emanuel spokesperson had no immediate comment.

A spokesperson for Nano and Baharav did not immediately respond to a request for comment.

Quinn Emanuel is pursuing litigation over the same fees against Desktop Metal in New York state court, and is in arbitration with its former client.

-- Leading U.S. and international law firms jostled for market share as global M&A activity rose in the first half of the year, despite uncertainties stemming from U.S. President Donald Trump's trade war, high interest rates and broader geopolitical tensions.

The value of global M&A deals announced during the first half of 2025 hit $1.98 trillion, a 33% increase compared to the first half of 2024 and the "strongest opening period for deal making since 2022," the London Stock Exchange Group said in its rankings of M&A legal advisers released last week.

But the volume of deals has hit a five-year low, LSEG found. More than 24,000 deals were announced during the first half of the year, a 10% decline compared to the first half of 2024.

Latham & Watkins, the second highest-grossing U.S. law firm by revenue, was the top principal adviser on global M&A deals in LSEG's rankings for the period by deal value, working on 372 global announced deals worth $257 billion. The firm said in a statement it was grateful to clients for trusting its lawyers on major deals.

Latham was followed by New York law firm Wachtell Lipton Rosen & Katz, which served as principal adviser on 55 deals worth $204 billion. Wachtell's lawyers are "quite busy across a wide range of industries, and with some large deals in the pipeline as well," said Andy Nussbaum, the co-chair of Wachtell's executive committee.

Wachtell served as a legal advisor to U.S. Steel, which was acquired by Japan's Nippon Steel in a politically sensitive $14.9 billion deal that closed last month. Nussbaum said in an email the firm was pleased to see that deal close.

Wachtell and Latham are serving as legal advisers to Charter Communications and Cox Communications, respectively, for Charter's $34.5 billion acquisition of the privately held Cox. The deal is the largest of the year, according to LSEG.

-- Kellogg Hansen and other firms have asked a U.S. judge in California to award them nearly $20 million in fees after they prevailed at trial in May against Johnson & Johnson subsidiary Biosense Webster.

Plaintiff Innovative Health in 2019 accused Biosense Webster of anticompetitive practices focused on clinical services tied to Biosense's cardiac mapping catheters. Innovative alleged it was being excluded from the market. The jury awarded damages of $147 million that were automatically trebled under antitrust law to more than $442 million.

The 100-lawyer Kellogg Hansen firm jumped into the litigation last year as lead trial counsel. Kellogg Hansen's Derek Ho was the firm's highest biller at $1,795 an hour. Ho did not immediately respond to a request for comment.

Kellogg Hansen, Berger Montague, Theodora Oringher and the other firms for Innovative said the complexity of the case and risk of taking it on justified their fee request. Biosense had denied any wrongdoing. Johnson & Johnson did not immediately respond to a request for comment.

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Mike Scarcella contributed reporting from Washington. D.C.