U.S. Bankruptcy Judge David Jones, one of the nation's busiest bankruptcy judges for complex cases, resigned after a federal appeals court filed a formal ethics complaint against him for failing to disclose a yearslong romantic relationship with an attorney who had cases before his court.
The exit of Judge Jones could affect the reputation of the U.S. Bankruptcy Court of the Southern District of Texas in Houston, which has become known as the go-to courtroom for big companies seeking to expedite a restructuring that often includes trimming a real estate portfolio. His departure also could open the door to challenges of his prior rulings, according to legal experts.
In Jones' career that spanned 12 years as a bankruptcy judge, he helped large retailers, including Neiman Marcus and J.C. Penney during the pandemic, rework their stable of stores and navigate critical debt negotiations for companies like Serta Simmons Bedding. He was currently overseeing Party City's Chapter 11 reorganization that saw North America's largest party-goods retailer eliminate nearly $1 billion in debt.
Jones' resignation comes after a formal judicial inquiry from the 5th U.S. Circuit Court of Appeals led Chief Judge Priscilla Richman to file an ethics complaint against Jones that was made public Friday.
"There is probable cause to believe that misconduct by Judge Jones has occurred," Richman said in the ethics complaint.
That misconduct involves Jones' "intimate relationship with Elizabeth Freeman," a bankruptcy attorney who once clerked for Jones and was a partner at the Jackson Walker law firm between 2017 and December 2022. Jackson Walker attorneys regularly appeared in Jones' court during that time, and Jones approved "substantial" fees to be paid to the law firm for its services, according to the ethics complaint.
As a partner at Jackson Walker, "there is a reasonable probability" that Freeman obtained a financial benefit or had a financial interest in fees approved by Jones, according to the ethics complaint. Jones did not recuse himself from Jackson Walker cases nor did he disclose his relationship with Freeman to the parties involved in the bankruptcy cases being heard in his court, according to the complaint.
Jackson Walker said it was made aware of a potential relationship between Freeman and Jones in March 2021 and conducted its own inquiry with the help of outside counsel. At the time, Freeman was told to stop working or billing cases assigned to Jones.
Freeman started her own law practice called The Law Office of Liz Freeman at the end of 2022, according to the ethics complaint. An attorney for Freeman declined to comment about Jones' resignation when contacted by CoStar News and attempts to reach Jones for comment were not successful.
Jones was known for helping large companies get through the bankruptcy process as quickly as possible, which, especially during the pandemic, was needed for the survival of a business. He helped make Houston a destination for complex bankruptcies, taking big national bankruptcies from Delaware and New York courts.
Jones' resignation becomes effective Nov. 15. All his active bankruptcy cases have been assigned to other judges. In an order signed Monday, Jones' bankruptcy caseload will be divided between Chief Judge Eduardo Rodriguez, Judge Marvin Isgur, Judge Christopher Lopez and Judge Jeffrey Norman. Isgur is now overseeing Party City's case, according to court documents.
Greg Gartland, a bankruptcy attorney based in Chicago, told Bloomberg News that Jones' departure opens up other U.S. bankruptcy venues beyond the Houston courthouse since Jones was often the preferred judge for national and complex bankruptcies.