UST, Jackson Walker Reach $15M Deal to Resolve Agency’s Fee Claw Back Litigation Stemming From Jones-Freeman Romantic Relationship

Relevant Document:
Term Sheet

The U.S. Trustee and Jackson Walker have agreed to a $15 million settlement to resolve the UST’s Rule 60(b) vacatur motions in 33 bankruptcy cases, according to a term sheet filed yesterday, Aug. 2. The deal also provides that the UST will file a report on the docket disclosing the facts of its investigation into the firm’s conflict of interest stemming from the secret romantic relationship between former judge David R. Jones and former firm partner Elizabeth Freeman.

According to the term sheet, Jackson Walker does not admit fault but acknowledges it never disclosed the Jones-Freeman relationship and that “it could have approached this matter differently.”

The UST originally sought to claw back approximately $13 million in fees paid to the firm in 26 cases that the UST argued were tainted by the undisclosed conflict of interest, later expanding the number of affected cases to 33.

The deal comes ahead of a scheduling conference for trial on the vacatur matters tomorrow, Tuesday, Aug. 4 at 2:30 p.m. ET.

The parties previewed a potential deal on July 17 when they sought a 60-day adjournment of the scheduling conference, citing ongoing settlement negotiations. However, Chief Bankruptcy Judge Eduardo V. Rodriguez denied the continuance request, saying the prospect of a settlement is not a sufficient ground to delay scheduling especially when the UST’s vacatur motions have been “pending for an extended period.”

The term sheet indicates that Jackson Walker agrees to pay $15 million “in the Affected Cases to fully resolve and settle the Litigation” and retain an independent third party to review the firm’s compliance protocols with “all applicable bankruptcy disclosure requirements and ethical obligations” as well as its implementation of changes to the firm’s conflicts screening and disclosure practices. The third party would then file a full report of its findings on the docket.

The UST and Jackson Walker also agree to grant mutual releases of all claims relating to the litigation. However, the deal terms contemplate the inclusion of “customary language” to preserve “all other rights of the United States,” including the UST’s right to share information with other federal agencies subject to applicable confidentiality and protective orders.

The terms also provide a carve-out allowing the UST to pursue further relief in the event “there has been a material omission of fact, that if contained on the record in the Litigation would have made a material difference to this settlement, and that would have established that a member of JW’s management committee had knowledge (other than constructive or imputed) relating to the Jones/Freeman relationship.”

According to the term sheet, Jackson Walker and the UST will further document the terms of their settlement in a consent order, “subject to Bankruptcy Court or District Court approval, as applicable.”

In November 2023, the UST sought disgorgement of fees from Jackson Walker and withdrawal of the reference so that the U.S. District Court could hear the conflict-vacatur litigation. The UST amended its request for relief in February 2024, adding requests for sanctions and for vacatur of Jackson Walker retention orders. The UST alleged that Jackson Walker violated its disclosure obligations under the rules of professional conduct and common law fiduciary duties when it failed to disclose the romantic relationship. The firm continued to violate these duties when it continued to file cases before Jones and retain him as a mediator in several cases, asserted the UST.

Ultimately, Chief District Judge Alia Moses withdrew the reference but referred certain pretrial proceedings back to the bankruptcy court in April 2025. At a May 2025 status conference, Judge Moses said that there is “no doubt” that Jackson Walker colluded with Jones and suggested that Jackson Walker be required to disgorge only 50% of the professional fees sought by the UST.

In July, Judge Rodriguez issued a separate report and recommendation to Judge Moses recommending approval of nine settlements between Jackson Walker and the representatives of nine bankruptcy estates totaling $4.8 million. These settlements did not affect the UST’s vacatur motions in the same bankruptcy cases.