A secret romance between a bankruptcy judge and an attorney has turned into a very expensive problem for one of Texas’s largest law firms. We’re talking a $15 million settlement and 33 known cases that are now problematic. Former Houston bankruptcy judge David R. Jones was romantically involved with Elizabeth Freeman, an attorney who worked at Jackson Walker, a large Texas law firm. The relationship was not disclosed while the firm was representing clients in bankruptcy cases before Jones. When the relationship became public in October 2023, Jones resigned from the bench. The trustee wanted Jackson Walker to return $23 million in fees that it was paid in relevant bankruptcy cases, but the issue was resolved with a $15 million settlement.

The facts here are kind of wild. David Jones was apparently a very well-respected bankruptcy judge. Elizabeth Freeman was an attorney doing work for Jackson Walker on bankruptcy cases pending before Jones. Freeman and Jones lived together in a jointly-owned house and were in a romantic relationship since at least 2017. It seems that neither thought it was important to disclose their romantic relationship to anyone, nor did Jones think he should recuse himself from any of the cases she worked on.

Jones apparently said he didn’t have to disclose the relationship because:

• Freeman didn’t appear in his courtroom (even though she was paid for work on cases in front of him)
• Jones did not benefit economically from Freeman’s work on the cases (even though her earnings presumably helped pay for the home they owned together)
• They weren’t married

Here’s what I always consider in situations like this: If you think what you’re doing is fine and everything is on the up-and-up, then why not disclose it? Surely, everyone else will agree that you don’t have a conflict of interest! Well of course, it seems more likely that Jones and Freeman knew this situation didn’t pass the smell test, they just thought no one would find out. How hard would it have been for Freeman to say to a partner at the law firm, “Just so you know, Jones is my main squeeze and we live in a house that we bought together. You still okay with me working on cases that are in front of him?”????

At some point in 2021 or 2022, the firm knew that Freeman was (or had been) in a romantic relationship with Jones. According to court records, Freeman told the firm in March 2021 that she had a PAST relationship with the judge, but there was no current relationship and they didn’t live together. In January 2022, someone at the firm was told that Freeman and Jones were living together. By the end of 2022, Freeman left Jackson Walker to start her own firm, but still no one disclosed anything about the romantic relationship. The relationship didn’t become public until sometime in 2023, and Jones resigned in October 2023.

Obviously, a judge is supposed to be impartial. People involved in cases Jones was hearing deserved to know about relationships that could affect his decisions. Jones didn’t necessarily rule in favor of Jackson Walker because Freeman was his girlfriend, but how could anyone appearing in his courtroom be confident that the firm wasn’t receiving favorable treatment?

Jackson Walker has been dealing with this for three years. They’ve got the $15 million settlement now, and $4.8 million in settlements with other clients. It looks like there are more cases that they still have to deal with. The law firm doesn’t admit to any wrongdoing in these settlements, of course. But they have agreed to change their conflict screening and disclosure procedures and have some independent oversight of this process.

I am curious what the law firm REALLY knew about this romantic relationship and when. How does one of their attorneys live with a judge that the firm goes in front of regularly… FOR YEARS… and no one else at the firm knows? This sounds like a pretty big secret to be keeping, and I can’t imagine that no one else at the firm had any idea until 2021. And then once they knew about it, who at the firm decided they were going to keep it completely quiet? That part is even more disturbing.

Let’s talk about the professional responsibility involved here. As a forensic accountant and expert witness, I always have to consider potential conflicts of interest before accepting an engagement. Attorneys need to know about relationships or circumstances that could affect my independence, and I need to disclose information that could be relevant to that evaluation. Even when there are things that don’t necessarily represent a conflict of interest, I try to disclose them. For example, I’ll tell an attorney if I have a current or past case with opposing counsel. If I’ve already heard of the case being presented to me, I might mention that too, so the attorney knows that I’m not coming into this completely blind. Certainly family and romantic relationships are really important to disclose too.

The financial consequences to Jackson Walker are substantial, but the reputational damage could be even worse. Professional services firms depend on clients trusting their judgment and integrity. Once questions arise about whether a firm received special treatment in court, it’s difficult to make those questions disappear. Imagine how different things would be if the relationship would have been disclosed years ago and the conflict had been addressed right away. Instead, the failure to disclose it has resulted in years of litigation, millions of dollars in legal exposure, and scrutiny of cases that everyone probably thought were finished. What an expensive secret!