There are scandals that happen in court and ones that change the way people trust the whole legal system. The $15 million Jackson Walker settlement paid to the Justice Department’s bankruptcy watchdog is a clear example of the second type. It didn’t begin with fraud or wrongdoing with money in the usual sense. Two people kept their relationship a secret for way too long at the start.
The backstory, which is now well known in the legal world, is about David Jones, a former U.S. Bankruptcy Judge, and Elizabeth Freeman, who used to be a bankruptcy partner at Jackson Walker in Houston. Jones was not a small person. Some said he was the busiest bankruptcy judge in the country. The decisions he made in court affected cases worth billions of dollars. Freeman often showed up in front of him. In the end, it turned out that they had been living together.
Jones quit his job in October 2023 after admitting the relationship. After that, there was the kind of institutional reckoning that law firms don’t usually have to go through in public. The group in the Justice Department that oversees bankruptcy cases, called the Office of the U.S. Trustee, moved to take more than $20 million in fees that Jackson Walker had earned from 33 to 34 cases where Jones had been the judge. The argument was pointed: how can fees earned in front of a judge who has a personal relationship with your firm that you don’t want to talk about be considered properly obtained?
What does the $15 million settlement mean? It was filed in a federal court in Texas, so the court still has to approve it. Jackson Walker admitted that it “could have approached this matter differently” in settlement papers. This is careful, lawyerly language that doesn’t mean they did something wrong. The company has always said that Freeman lied to its employees and told them that the relationship ended in March 2020. When asked about it two years later, Freeman reportedly admitted that the relationship had started up again. The company may have a valid account. Also, there may have been clues that someone, somewhere, chose not to look too closely at.
It’s not just the romance that makes this case tense for the profession. One of the firm’s former clients sued, saying that several Jackson Walker lawyers knew about the relationship between Jones and Freeman but did nothing about it. If that’s the case, it’s not a matter of being tricked, but of institutions remaining silent. The company doesn’t agree with that description, but the claim has stuck around, and the fact that former bankruptcy clients have paid nearly $5 million in private settlements suggests that the legal risk went beyond just the U.S. Trustee’s case.
In addition to the money, the settlement includes something that may be more important in the long run: a review by a third party of the firm’s ethical and bankruptcy disclosure duties, as well as changes to how it checks for conflicts of interest. These changes are to how things are done; they are not major reforms. But they do matter in bankruptcy law, where disclosure is pretty much the most important part of the whole system. The system works on the idea that everyone in court has told the judge what it needs to know. The consequences of that assumption not being true are often slow, expensive, and systemic, especially when it comes to a federal judge who is still in office.
As we watch this unfold, it seems that the legal community is still figuring out what it means to be accountable in situations like these. Jones and Freeman had nothing to do with the U.S. Trustee’s effort to get the money back. The business pays. Most of the partners who were at the center of it have moved on. It probably depends on where you are—inside or outside of a law firm—whether that’s fair or just settlement math.
