The wind-down trustee for the bankruptcy estate of JCPenney settled with Jackson Walker LLP over the Texas law firm’s failure to disclose an intimate relationship between a former partner and a prominent Houston bankruptcy judge.
The law firm agreed to pay $1.4 million to resolve potential claims from the estate related to the once-secret romance, according to a motion filed on Thursday in the US District Court for the Southern District of Texas. The settlement requires court approval.
In exchange, Jackson Walker, which represented the department store in its 2020 bankruptcy, would receive liability releases, according to the motion.
The settlement comes as Jackson Walker continues litigation tied to allegations by the Justice Department’s bankruptcy watchdog, the US Trustee, that the firm breached its ethical duties by failing to disclose the relationship between former Houston bankruptcy judge David R. Jones and ex-firm partner Elizabeth Freeman.
The US Trustee is seeking to recover for creditors more than $23 million in fees the firm collected across 33 bankruptcy cases involving Jones, including JCPenney’s.
The department store’s estate said it could have sought full disgorgement of $3.4 million it paid in fees and and investigation costs.
Jones resigned from the bench in 2023 after his relationship with Freeman was publicly revealed. Freeman left Jackson Walker in late 2022. Freeman and Jones are alleged to have been in a romantic relationship beginning in 2013, and co-owned a home starting in 2017.
Jackson Walker, which regularly represented clients before Jones, has maintained that it acted appropriately once it learned of the relationship.
JCPenney filed for Chapter 11 in May 2020, and Jones initially presided over the proceeding. Jackson Walker was retained as co-counsel and conflicts counsel, which Jones approved in July that year.
JCPenney’s plan administrator had alleged Jackson Walker disregarded its duties to clients and courts and ignored ethical advice after it learned of the relationship allegations. In a complaint, it accused Jackson Walker of a deliberate cover-up of the romance.
The scandal involving Jones and Freeman has also sparked a federal criminal probe.
Jim Wilkinson, a spokesman for Jackson Walker, declined to comment.
The former JCPenney company, now called Old Copper Co. Inc., is represented by Streusand, Landon, Ozburn & Lemmon LLP. Jackson Walker is represented by Norton Rose Fulbright US LLP and Rusty Hardin & Associates LLP.
The case is J. C. Penney Direct Marketing Services LLC and Dean Grantham, Bankr. S.D. Tex., No. 20-20184, motion 9/11/25.
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