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Wednesday, May 22, 2024
HomeNewsLocal newsTexas Bankruptcy Judge Involved in V.I. Cases Resigns Over Misconduct Complaint

Texas Bankruptcy Judge Involved in V.I. Cases Resigns Over Misconduct Complaint

A Texas bankruptcy court judge involved in USVI cases resigned on Monday after the Fifth Circuit Court of Appeals issued a formal complaint against him, finding that he should have disclosed a romantic relationship with an attorney who until December worked for a firm that regularly brought cases before him.

Judge David Jones
Judge David Jones

Judge David Jones of the U.S. Bankruptcy Court in Houston is the mediator in a lawsuit brought by 900 Virgin Islanders over asbestos injuries when Hess Corp. subsidiary HONX owned the St. Croix refinery. His longtime girlfriend was an attorney with Jackson Walker LLP — the lead counsel for the defense in the HONX case and dozens of others — until she left to start her own firm in December.

In her complaint dated Friday, Chief Judge Priscilla Richman with the Fifth Circuit Court of Appeals in Louisiana wrote that “there is probable cause to believe that misconduct by Judge Jones has occurred.” In particular, the Code of Conduct for U.S. judges provides that they should avoid impropriety and the appearance of impropriety in all activities, she said.

The Wall Street Journal first reported on the apparent conflict Oct. 7 after a plaintiff in another case sued Jones, alleging his relationship with Elizabeth Freeman tainted his rulings while he was presiding over the 2020 bankruptcy of offshore-drilling company McDermott International, represented by Jackson Walker LLP.

The plaintiff, shareholder Michael Van Deelen, said in his pro se filing that Freeman clerked for Jones for six years before joining Jackson Walker and worked on the McDermott case for its entirety.

Deelen also alleged that on March 6, 2021, he received an anonymous letter via the U.S. mail that “complained of alleged corruption between Defendant Jones, Jackson Walker and Freeman in a scheme in which corporate bankruptcy filers would hire Jackson Walker to represent them and then get favorable treatment from Defendant Jones because of his amorous relationship with Freeman. Defendant Jones subsequently denied that he had a romantic relationship with Freeman.”

Multiple media outlets reported on the lawsuit, prompting the review by the Fifth Circuit Court of Appeals. The relationship also prompted a complaint by litigants in bankruptcy settlement talks involving prison health care provider Corizon, according to a report by Business Insider.

Jones confirmed the relationship to the Wall Street Journal and told the paper he had no duty to disclose it because while he and Freeman have lived together for years at his Houston home, they are not married, have no communal property, and agreed that she would never appear in his courtroom. (Exhibits in Deelen’s suit show that in 2016, the judge bought the home that Freeman had been living in since 2007 and that they are listed as co-owners of the property assessed at $1.07 million.)

However, Judge Richman wrote in her complaint that “the Commentary to Canon 3C of the Code of Conduct for United State Judges provides ‘[r]ecusal considerations applicable to a judge’s spouse should also be considered with respect to a person other than a spouse with whom the judge maintains both a household and an intimate relationship.’”

She found that members of the Jackson Walker LLP firm “have regularly appeared before Judge Jones since 2017. Judge Jones has approved attorneys’ fees payable to that firm in which supporting documentation, that was submitted to Judge Jones and is part of public records, reflects that services by Elizabeth Freeman were performed in connection with a number of cases for which fees were sought and approved, though Elizabeth Freeman was not shown as counsel of record on the face of pleadings. The amounts billed for Elizabeth Freeman’s services in those cases were substantial,” Richman said.

Jones did not recuse in Jackson Walker cases, nor did he disclose his relationship with Freeman to the parties or their counsel in which the firm appeared before him, said Richman.

Based on the foregoing, she said, “there is probable cause to believe that Judge Jones has engaged in misconduct, as that term is defined or described in the code of conduct applicable to federal judges including bankruptcy judges.”

Jones was invited to respond to the complaint, either orally or in writing, but instead submitted a letter of resignation to the Fifth Circuit Court of Appeals on Monday, effective Nov. 15.

In an emailed statement, Jones told Bloomberg Law: “I have become a distraction to the good work that the court does. To end that distraction and hopefully return focus, I have resigned.”

Hess Oil Virgin Islands Corp. (HOVIC), now called HONX, filed for Chapter 11 protection in Houston in April 2022, claiming in court filings that given the number of plaintiffs in the asbestos case, it would take 40 years to litigate each claim in V.I. District Court.

The Official Committee of Unsecured Creditors — seeking last year to have the case dismissed and the asbestos litigation heard outside of bankruptcy court — has alleged that HONX is just a hollow shell of a company that was revived to shield Hess Corp’s $37 billion in assets against the suits.

U.S. Bankruptcy Judge Marvin Isgur, who is presiding over the case in Houston and appointed Jones as a mediator, denied the motion to dismiss in December.

Numerous news reports have painted the U.S. Bankruptcy Court in Houston as a place companies go to get favorable rulings, with the Wall Street Journal characterizing it as “a premier landing spot for corporate reorganizations.” The Houston Chronicle published a business feature, calling Jones the judge who saved the Texas bankruptcy court.

Companies are known to take advantage of what is known as the “Texas two-step,” where they split into two parts — funneling assets into one and debts into the other, which then files for bankruptcy.

Hess and its subsidiaries ran the Limetree Bay refinery on St. Croix’s south shore from 1965 to 1998 — when its partially owned subsidiary Hovensa was formed — allegedly exposing a generation of Crucians to unchecked toxins in their workplace.

Hovensa sold the refinery to Limetree Bay in 2015, which attempted several restarts of the plant — shuttered in 2012 — to disastrous ends. In May 2021, oil spray from a flare coated homes downwind, leading the Environmental Protection Agency to order it shut down for 60 days. Limetree filed for bankruptcy protection shortly thereafter and current owner, Port Hamilton Refining and Transportation, acquired the refinery at an auction that December, presided over by Jones.

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