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A federal court in southern Texas quickly moved to reassign about 3,500 bankruptcy cases after the sudden resignation of U.S. Bankruptcy Judge David Jones in Houston, transferring his large-company chapter 11 cases to two judges who are already among the busiest in the U.S., Reuters reported. Judge Jones resigned Sunday, days after a federal appeals court opened an ethics probe into his failure to disclose a long-term romantic relationship with an attorney whose firm had many cases before his court. Replacing Jones, the busiest bankruptcy judge in the U.S., is an enormous lift for a Houston bankruptcy court that is one of the top three destinations for big corporate debtors' chapter 11 filings in the U.S., along with Wilmington, Delaware and Manhattan. In recent years, Judge Jones has managed the bankruptcies of high-profile retailers like JC Penney and Nieman Marcus and complex debt disputes in mattress maker Serta Simmons' and aircraft part supplier Incora's chapter 11s. "Judge Jones was highly regarded and highly respected by the bar and by his colleagues," Chief U.S. Judge Randy Crane in the Southern District of Texas told Reuters. "Everybody's still in shock, so to speak." Judge Jones has handled more corporate bankruptcies in recent years than any other U.S. bankruptcy judge. He has overseen 17% of cases with more than $1 billion in liabilities since 2020, according to data from Debtwire, which provides research and intelligence on credit markets.

There are few bankruptcy courts in America busier than the one in Houston. The top judge there, David R. Jones, has handled more than 1,000 corporate insolvencies in his time on the bench and routinely oversees the nastiest debt fights that come out of Wall Street. So when Jones resigned following revelations that he has dated and lived with a top Houston bankruptcy lawyer since 2017, it rocked the insolvency world, Bloomberg News reported. Beyond the shock felt by those who have come to know him as a towering figure in restructuring, the move has cast a pall over cases he was overseeing — like that of Platinum Equity-backed Incora — and ones he ruled on in the past. At a minimum, Jones’ departure will delay by weeks or months decisions about how much creditors can recover from the companies under his purview. It also makes way for challenges to past rulings in some of the world’s most contentious bankruptcy disputes and may cause big firms to take their restructurings elsewhere. “This is a nightmare for the bankruptcy bench there,” said Nancy Rapoport, a law professor at the University of Nevada, Las Vegas. “At best, the judges are divvying up all those cases now. At worst, there are going to be more inquiries.” Jones came under fire for failing to disclose that his girlfriend, Elizabeth Freeman, was a high-ranking bankruptcy attorney at a prominent Texas law firm with frequent business before his court. He approved fees in dozens of cases for her firm, Jackson Walker, which she left in late 2022. His resignation ended a formal judicial inquiry into the matter. But the fallout has only just begun. The court is working to redistribute cases and come up with a plan until it can appoint a replacement, which it hopes to do quickly, according to Chief U.S. District Judge Randy Crane. Not only did Judge Jones oversee around 1,100 corporate bankruptcies, but he also presided over 3,000 cases for individuals — what amounts to a Herculean case load.

Bankruptcy Judge David R. Jones resigned from the bench while under a misconduct investigation by a federal appeals court over his failure to disclose his yearslong romantic relationship with a bankruptcy lawyer who had business before his court, WSJ Pro Bankruptcy reported. Judge Jones’s resignation from the U.S. Bankruptcy Court in Houston comes after the appellate court that appointed him found probable cause that he committed misconduct by failing to disclose his romantic relationship with bankruptcy lawyer Elizabeth Freeman. Jones told the Wall Street Journal earlier this month that he and Freeman have been in a relationship for years and live together at a home in the Houston area. Neither Judge Jones nor Freeman had previously disclosed their relationship in court while Freeman worked on major corporate reorganizations that he oversaw. “I have always said that the bankruptcy process should be about the participants and the preservation of jobs,” Jones said on Sunday. “I have become a distraction to the good work that the court does. To end that distraction and hopefully return focus, I have resigned.” The bankruptcies that Freeman worked on and that Judge Jones oversaw included some of the largest chapter 11 cases of recent years, such as retailers JCPenney and Neiman Marcus and oil-and-gas driller Chesapeake Energy. In each of those cases and others, Freeman, then a partner at the Texas law firm Jackson Walker, billed hours along with her colleagues for their work representing the companies in bankruptcy, according to chapter 11 records. Judge Jones approved more than $1 million in legal fees billed by Freeman over 16 corporate bankruptcy cases from 2018 to 2021 when they shared an address. Judge Jones had said in a Friday court hearing that he would step down from overseeing large corporate reorganizations, though didn’t say at the time that he was resigning from the bench. Judge Jones faces an ethics investigation by the U.S. Court of Appeals for the Fifth Circuit, which appointed him to the bench in 2011. On Friday, the chief justice of the Fifth Circuit U.S. Court of Appeals filed a complaint against Jones, finding that there was probable cause he had committed misconduct by failing to disclose his relationship with Freeman.