US court warns more Jackson Walker cases could be tainted by relationship with judge

By David Thomas Oct 5 (Reuters) — US law firm Jackson Walker is facing potential sanctions for not disclosing its work on ATM maker Diebold Nixdorf's 2023 bankruptcy, deepening the firm's potential fallout from a prior relationship between one of its lawyers and a Houston bankruptcy judge. Chief US Bankruptcy Judge Eduardo Rodriguez in Houston ordered Jackson Walker on Friday to explain why it should not be sanctioned for failing to disclose its work in the Diebold case to the court or other authorities scrutinizing its fees in cases involving former US Bankruptcy Judge David Jones.

Jones presided over Diebold's Chapter 11 case before he resigned in October 2023, after admitting he was romantically involved with a Jackson Walker partner. "Most troubling to the court is the unanswered question of how many other cases like this may be lurking on the dockets of the Southern District of Texas bankruptcy courts," Rodriguez said. Rodriguez said he was considering recommending the appointment of a special master to investigate other potentially undisclosed cases in which Jackson Walker appeared in cases before Jones. He ordered the law firm to submit a list of all such cases by October 15.

A spokesperson for Jackson Walker declined to comment. The firm was co-counsel to Diebold in the Chapter 11 along with Jones Day. A spokesperson for Jones Day did not immediately respond to a request for comment. A Diebold spokesperson declined to comment.

Jackson Walker is already mired in litigation over nearly three dozen past bankruptcy matters that Jones oversaw. The US Justice Department's bankruptcy watchdog, the Office of the US Trustee, is seeking to force the law firm to disgorge its fees in those cases. Jackson Walker has been negotiating a $15 million settlement to end its fee dispute with the US Trustee, which is currently set for trial in January. The settlement is subject to court approval by ‌US District ⁠Judge Alia Moses.

A Justice Department spokesperson declined to comment but referred Reuters to its Friday status report in the case, in which the US Trustee said it faced "procedural impediments" in reaching a settlement with the law firm. Jones, based in Houston, once oversaw the busiest bankruptcy docket in the country. Jackson Walker has said it was deceived into thinking its partner's relationship with Jones had ended in March 2020. The partner is no longer at the firm.

1 billion. A hearing in the Diebold case is scheduled for October 22. Read more: Top US bankruptcy judge resigns amid ethics inquiry Law firm Jackson Walker to pay $15 million in case tied to judge scandal (Reporting by David Thomas)