“Talked to Jones. He’s got us.”
The text was sent in May 2020 by a then-Jackson Walker LLP attorney in a secret relationship with then-judge David R. Jones to her colleague—days before her firm filed the massive JCPenney Chapter 11 case in the Texas judge’s court.
The newly revealed texts from Elizabeth Freeman shed light on how she interacted behind the scenes with Jones and colleagues while her firm represented large, financially distressed companies in the Southern District of Texas, where he oversaw some of the most high-profile bankruptcies in the country.
The exchange also provides a glimpse into the opaque world of maneuvering to place large corporate bankruptcies into the hands of preferred judges.
The romance revelation has prompted the Justice Department’s bankruptcy watchdog, the US Trustee, to challenge millions of dollars in fees Jackson Walker collected in cases involving Jones while it employed Freeman, saying the firm breached its ethical duties by failing to disclose the relationship.
On May 12, 2020, three days before department store retailer JCPenney filed for bankruptcy, Freeman texted her colleague Veronica Polnick and told her the company planned to file its Chapter 11 case in Corpus Christi, Texas, according to texts displayed in records viewed by Bloomberg Law. Jackson Walker was serving as local counsel to JCPenney’s lead bankruptcy lawyers at Kirkland & Ellis LLP.
Corpus Christi is one of seven court locations within the Southern District of Texas bankruptcy court district. Under the local rules, a filing in that location would guarantee that Jones would be assigned the case if it wasn’t immediately designated as “complex”—and JCPenney’s wasn’t.
Freeman told Polnick on May 12 that there were “too many fights” in the JCPenney case and that the company couldn’t afford a “process hawk,” referring to Jones’ judicial colleague and friend, Judge Marvin Isgur.
Isgur would instead get the bankruptcy of Ultra Petroleum Corp., Freeman told Polnick. Ultra, which was also represented by Kirkland and Jackson Walker, filed for Chapter 11 on May 14, the day before JCPenney. Ultra’s case ended up being assigned to Isgur, just as Freeman said.
“They know Jones will cut through the bullshit,” Freeman told Polnick about the JCPenney case. “Not so much a case of dodging Isgur.”
Freeman, who was also Jones’ former law clerk, also told Polnick in the same series of texts that “Jones has been softening up for this for a month.” The meaning of that statement wasn’t immediately clear.
“We are keeping this down loooooooowww,” Freeman told Polnick.
“Got it,” Polnick responded.
Freeman and Jones had lived together continuously since 2017 except during Covid-19 school closures, when she lived with her children at another location, according to court records from the US Trustee. The pair’s relationship may go back as far as 2013, Jones’ former case manager has said.
The texts viewed by Bloomberg Law, which suggest Freeman had communications with Jones about corporate bankruptcy case assignments in Houston through her relationship with him, comes as they and Jackson Walker have been mired in litigation for keeping the romance under wraps.
Jones’ attorney, Benjamin I. Finestone of Quinn Emanuel Urquhart & Sullivan LLP, didn’t immediately respond to a request for comment. But in a court hearing over the US Trustee’s motions to disgorge Jackson Walker’s fees in August, Finestone insisted there were no “ex parte” communications between Jones and any other lawyer about the substance of any case the judge was involved in.
Polnick and her attorney didn’t immediately respond to requests for comment. Freeman’s attorney, Tom Kirkendall, declined to comment.
The attorney for JCPenney’s bankruptcy plan administrator, Stephen W. Lemmon of Streusand Landon Ozburn & Lemmon LLP, declined to comment.
A Jackson Walker spokesman declined to comment.
Complex Rules
The relationship between Freeman, a partner who left Jackson Walker in late 2022, and Jones, the prominent bankruptcy judge who resigned from the bench last year after admitting to the romance, has roiled the Houston bankruptcy community and prompted several legal actions. Isgur last month referred Jackson Walker for disciplinary action. A federal criminal probe into the situation is also ongoing.
In JCPenney’s $4.9 billion bankruptcy, Jones approved about $1 million in fees for Jackson Walker, with Freeman’s fees accounting for roughly $286,000 of that, according to a filing by the US Trustee.
The JCPenney case was filed as the number of large bankruptcies being filed in Houston had exploded. Kirkland, the biggest player in giant corporate bankruptcies and the largest law firm in the world by revenue, was often partnering with Jackson Walker as counsel in those cases. In 2020, Kirkland filed or co-filed 24 cases in the Southern District of Texas.
A spokeswoman for Kirkland didn’t immediately respond to a request for comment.
Freeman’s conversation with Polnick suggests a type of intradistrict venue shopping that allowed attorneys to single out a specific judge to oversee their cases.
Large Chapter 11 cases designated as “complex” under rules Jones helped implement as chief judge funneled those cases to either Jones or Isgur. But petitions filed in Corpus Christi and Laredo that aren’t designated as complex were automatically assigned to Jones in 2020.
When JCPenney filed its bankruptcy petition on May 15, 2020, in Corpus Christi, its attorneys didn’t ask for the case to be assigned as complex. That meant it wasn’t placed into the two-judge random draw between Jones and Isgur, and was assigned to Jones.
Jones himself designated the bankruptcy as complex in a May 15 order, and kept the case.
Isgur, in a February 2022 podcast hosted by law firm Sheppard Mullin and the American Bankruptcy Institute, said that type of intradistrict divisional forum shopping was changed to promote both the “perception and reality of fairness,” and to give the public confidence.