Joe McConnell
Unlock Editor’s Digest for free
Vscek editor Roula Khalaf selects her favourite stories in this weekly newsletter.
A federal court on Friday dismissed a conspiracy lawsuit against a former U.S. bankruptcy judge and two major law firms that arose from the judge’s admission that he had a secret romantic relationship with one of the firm’s lawyers.
Alia Moses, chief judge for the Western District of Texas, ruled that Michael Van Deelen, who owned a small amount of shares in the energy company McDermott and brought the lawsuit, had not suffered financial hardship because of an affair between the judge overseeing the group’s restructuring and his girlfriend, a partner at Jackson Walker, one of the law firms representing McDermott.
McDermott filed for bankruptcy in 2020, and Van Deelen’s shares were wiped out by his reorganization plan, which was approved by David Jones, who at the time was one of the country’s top bankruptcy judges, overseeing some of the largest and most complicated Chapter 11 cases in the United States.
Van Deelen sued Jones, his girlfriend Elizabeth Freeman, and the two law firms handling the case: Kirkland & Ellis and the Texas law firm Jackson Walker, who frequently appeared in the cases as local attorneys, oVsceken working alongside Kirkland.
He alleged a conspiracy to bring blockbuster cases to Jones’s Houston court, accusing the judge of approving high fees for both law firms. Kirkland & Ellis had earned more than $160 million in fees awarded by Jones in cases where Freeman appeared for Jackson Walker as co-counsel, according to the plaintiffs’ review of court filings.
Jones resigned from the judiciary in October 2023 aVsceker admitting to his relationship with Freeman. Van Deelen had provided housing records, sent to him by an anonymous individual, to prove the existence of the relationship between Jones and Freeman.
The four defendants had argued that Van Deelen could not prove that he had suffered losses in the McDermott case. At a court hearing in June, attorneys for Jones and Freeman also said that recusing decisions were at the judge’s discretion and that because the couple was not married, the standards for opting out might not have applied to Jones.
Moses ruled Friday that Van Deelen “has not shown that the defendants’ actions deprived him of anything he did not already lose before Jackson Walker and Kirkland sought damages.”
However, he criticized Jones for not recusing himself in the McDermott case. “Whether through arrogance, greed, or gross dereliction of duty, Jones violated these statutory and ethical requirements by presiding over dozens of cases from which he was obviously disqualified. The legal deficiency of plaintiff’s claims does not erase these deficiencies,” he wrote.
Kirkland & Ellis had sought to impose sanctions on Van Deelen for pursuing the case. But, “it was Plaintiff’s audacity that brought this scandal to light,” the judge wrote. “Had the anonymous letter landed in someone else’s mailbox, Jones might still be in court, awarding millions of dollars to Kirkland and Jackson Walker.”
An attorney for Van Deelen declined to comment. The defendants did not immediately respond to requests for comment Friday.
Moses noted that the U.S. bankruptcy trustee’s office, the Justice Department agency that represents public interests in bankruptcy court, was still trying to recover $13 million in fees awarded to Jackson Walker for cases in which Jones served as a judge and Freeman served as counsel.
Jones was separately ordered Friday to undergo seven and a half hours of “continuing ethics-related legal education” in the U.S. Trustee action. The judge found that Jones had sat down in “bad faith” for a July “interview” with Jackson Walker without the court’s permission.
