On Monday, January 12, 2026, Law360 reported that the U.S. Supreme Court declined to review a case brought by James Dondero, the founder of hedge fund Highland Capital Management, alleging bias on the part of U.S. Bankruptcy Judge Stacey Jernigan. Dondero argued that Judge Jernigan, who presided over Highland’s bankruptcy case in Texas federal court since 2021, demonstrated bias against him and his affiliates.
Dondero’s petition centered on Judge Jernigan’s refusal to recuse herself from the Highland bankruptcy proceedings after publishing two novels. Dondero claimed the novels contained thinly veiled commentary about the case, portraying a “heroic bankruptcy judge against a nefarious hedge-fund manager bearing striking similarities” to himself.
Dondero had previously appealed Judge Jernigan’s denial of his recusal motion to the Fifth Circuit. The Fifth Circuit upheld the lower court’s decision, stating that while recusal may have been justified, Judge Jernigan did not abuse her discretion.
Dondero’s petition to the Supreme Court argued that the Fifth Circuit’s standard of review, which requires a showing of “clear and indisputable” abuse of discretion, conflicted with the standards applied by the Seventh and Third Circuits. He contended that these circuits apply lesser amounts of deference, with the Seventh Circuit reviewing such decisions “de novo.”
The petition included excerpts from Judge Jernigan’s novels, with passages allegedly targeting Dondero highlighted. The case attracted attention, with conservative organizations and an investment industry advocacy group filing amicus briefs in October supporting Dondero’s position. These briefs focused on the circuit split, the deference afforded to bankruptcy judges, and concerns about potential bias against the investment fund industry.
Highland Capital Management filed for Chapter 11 bankruptcy protection in 2019, initiating a complex legal battle involving numerous appeals and litigation between Highland, Dondero, and affiliated companies.
In 2023, Judge Jernigan approved a revised Chapter 11 plan, which was modified from a 2021 version she had also approved. However, the Fifth Circuit later struck down certain nondebtor protections included in the plan.
Source: Law360
