On Friday, January 31, 2025, Bloomberg Law reported that Jackson Walker LLP, a Texas law firm, rejected advice from its outside ethics expert regarding the disclosure of a relationship between a partner and a bankruptcy judge. The firm chose instead to enter a confidentiality agreement that prohibited discussions about the relationship, according to a report commissioned by the government.
The report, submitted to the US Bankruptcy Court for the Southern District of Texas, indicated that Jackson Walker did not fulfill its disclosure obligations under bankruptcy law. It described a consistent pattern of “ignoring, obfuscating and concealing” the relationship between Elizabeth Freeman, a former partner at the firm, and David R. Jones, a former Houston bankruptcy judge.
Jonathan Lipson, a law professor at Temple University and the author of the report, stated that at critical moments in the case, Jackson Walker opted to conceal information rather than disclose it. The firm has faced allegations from the US Trustee’s office that it breached ethical duties, a claim that Jackson Walker denies.
Freeman and Jones were involved in cases overseen by Jones prior to the revelation of their relationship, which became public in late 2023. A trial is scheduled for April to determine whether Jackson Walker should forfeit as much as $23 million in fees awarded to the firm and whether it should face sanctions.
Following the disclosure of the relationship, Jones resigned from his position as a bankruptcy judge. Freeman left her position at Jackson Walker in December 2022. The report indicates that once the firm became aware of the relationship, which was known by at least February 2022, it had an obligation to update its bankruptcy disclosures where it had previously stated there were no conflicts.
Instead of making the necessary disclosures or withdrawing from relevant cases, Jackson Walker opted to further conceal evidence of the relationship through a confidential withdrawal agreement with Freeman in November 2022. Lipson pointed out that Jones’ misinterpretation of his ethical responsibilities did not absolve Jackson Walker from its duty to investigate, disclose conflicts, or withdraw from cases in which they had a vested interest.
The report also referenced opinions from attorneys at Holland & Knight LLP, who were consulted by Jackson Walker in 2021 for ethical guidance regarding the relationship. The Holland & Knight team advised the firm in June 2022 to either disclose the conflict or withdraw from cases involving Jones, a recommendation that Jackson Walker did not follow.
Lipson noted that Jackson Walker failed to inform its co-counsel, Kirkland & Ellis LLP, about the relationship and did not seek consent from clients. No amendments were made to the firm’s bankruptcy disclosures concerning the relationship, which Lipson stated should have been reported.
Under the agreement established in 2022, Freeman resigned as an equity partner but maintained the ability to collaborate with the firm on matters not involving Jones. The agreement stipulated that discussions regarding her relationship with Jones would remain confidential, with certain legal exceptions.
In response, Jackson Walker commissioned a rebuttal report from Renee Knake Jefferson, chair of legal ethics at the University of Houston Law Center. Jefferson argued that the confidentiality agreement did not mandate secrecy about the relationship itself but applied only to internal discussions regarding it. She contended that Lipson lacked expertise in legal ethics and professional responsibility, specifically concerning Texas disciplinary rules.
Jefferson stated that Jackson Walker took appropriate measures to address the situation as new information emerged and that the firm had acted promptly in seeking conflicts disclosures when Freeman was hired. She emphasized that the firm’s actions should not be evaluated based on hindsight and noted that Freeman provided information to the firm gradually over time.
Jefferson further explained that Texas disciplinary rules primarily apply to individual lawyers rather than law firms as entities. She asserted that these rules do not create standards for civil liability or a private cause of action, and she countered Lipson’s claims that conflict rules should be applied retroactively.
The ongoing litigation and the findings from the report highlight significant ethical concerns regarding the practices of Jackson Walker and the implications of their decisions in relation to bankruptcy law and professional conduct.
Source: Bloomberg Law
