Top US bankruptcy judge resigns amid ethics inquiry

By Dietrich Knauth and Nate Raymond

(Reuters) - U.S. bankruptcy Judge David Jones in Houston has resigned after a federal appeals court opened an ethics probe spurred by a previously undisclosed romantic relationship with an attorney whose firm had cases before his court, ending his tenure as the busiest bankruptcy judge in the U.S.

Chief U.S. District Judge Randy Crane of the Southern District of Texas told Reuters on Sunday that Jones resigned, effective Nov. 15. Jones had already stepped back from overseeing large bankruptcy cases and began reassigning them to two other judges on the court.

Neither Jones nor his courtroom deputy immediately responded to requests for comment.

The New Orleans-based 5th U.S. Circuit Court of Appeals issued a formal misconduct complaint against Jones on Friday, after the judge revealed he has been in a years-long romantic relationship and shared a home with bankruptcy attorney Elizabeth Freeman. Until December 2022, Freeman had been a partner at Jackson Walker, a local law firm that filed many cases in Jones' Houston courthouse.

The 5th Circuit said Jones had kept information about his personal relationship from two other judges who oversaw an effort to recuse him from a dispute involving bankrupt energy company McDermott International.

Ethics experts have said the undisclosed relationship casts doubt on the integrity of Jones' court. The misconduct complaint has already led to a call for further review in the case of Tehum Care Services, a bankrupt affiliate of prison healthcare company Corizon, and could lead to similar challenges in other cases in which Freeman or Jackson Walker were involved.

Jackson Walker declined to comment on the resignation, but resisted any suggestion their work could be up for further review. "From the time we first learned of this allegation Ms. Freeman was instructed not to work or bill on any cases before Judge Jones. We are confident that we acted responsibly,” the firm said in a statement.

Freeman did not immediately respond to requests for comment.

The office of the U.S. Trustee, which serves as the Department of Justice's bankruptcy watchdog, said on Friday that Tehum's restructuring should not be approved given new questions about the "propriety" of Jones' role in the case. Jones served as mediator during bankruptcy negotiations in which Freeman also took part.

Jones has been the most active bankruptcy judge in the U.S. since January 2016, overseeing 11% of all Chapter 11 bankruptcies involving more than $100 million in liabilities, according to data from Debtwire, which provides research and intelligence on credit markets.

(Additional reporting by Shubhendu Deshmukh in Bengaluru; Editing by Bill Berkrot and Alexia Garamfalvi)