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Jackson Walker and a bankruptcy watchdog face tough

choices

after an ex-partner's judicial romance

*

Latham tops rankings as M&A deal value surges

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Kellogg Hansen, other law firms seek millions in J&J case

By David Thomas

July 10 (Reuters) - (Billable Hours is Reuters' weekly

report on lawyers and money. Please send tips or suggestions to

[email protected].)

An ethics scandal that rocked the corporate bankruptcy world

nearly two years ago is ratcheting up again, with pressure

mounting for law firm Jackson Walker and the U.S. Justice

Department's bankruptcy watchdog to reach a deal or go to trial

over efforts to claw back millions of dollars in legal fees from

the firm.

For months, the U.S. Trustee has demanded that Jackson

Walker disgorge $11 million or more in fees that the firm was

awarded by former U.S. Bankruptcy Judge David Jones, whose

romance with one of Jackson Walker's partners threw his Houston

court in turmoil when it became public and the judge resigned

two years ago.

U.S. District Judge Alia Moses in Houston this week gave

Jackson Walker and Kevin Epstein, the U.S. Trustee for the

Southern and Western Districts of Texas, until July 15 to reach

a settlement after weeks of mediation in the trustee's case

against the firm. If they fail at the mediation, which is being

overseen by a retired bankruptcy judge, Moses said she will

schedule the case for trial.

Jackson Walker has acknowledged that it knew by March 2022

that its then-partner Elizabeth Freeman was in a relationship

with Jones but told no one, a federal bankruptcy judge said in

September 2024.

The firm has argued it acted responsibly in its handling of

the relationship. In December 2022, Freeman left the firm. Jones

publicly disclosed the relationship and resigned from the bench

in the fall of 2023.

The trustee objected to fees Jackson Walker earned in at

least 26 cases, arguing that Jones' failure to recuse himself

from any case involving Jackson Walker tainted the fee awards

the firm received from him.

Spokespersons for Jackson Walker and the U.S. Trustee

declined to comment.

Legal experts watching the case say the stakes are high for

both sides, and the settlement could hinge both on the size of

any deal and the trustee's interests in policing the bankruptcy

system.

A purely financial settlement "lets people set the

payment price for a failure to disclose," said Nancy Rapoport, a

law professor at the University of Nevada focused on ethics and

bankruptcy law.

The U.S. Trustee is charged with overseeing the integrity of

the bankruptcy system, said Robert Lawless, a law professor at

the University of Illinois at Urbana-Champaign. A "nominal"

financial settlement could signal that corporate bankruptcy

lawyers play by a different set of rules than everyone else,

Lawless said.

"What happened was very troubling," Lawless said. "From the

U.S. Trustee's perspective, if there's no consequence to this,

it's bad for the system."

A trial on the trustee's claims would be a major event for

the Houston bankruptcy bar, potentially airing internal firm

communications, details about Jones' relationship and returning

scrutiny to the parties' actions in long-closed bankruptcy

cases.

That could be averted even if Tuesday's mediation deadline

passes without a deal, Rapoport noted, since the firm and the

trustee could still hammer out a settlement on their own.

-- Leading U.S. and international law firms jostled for market

share as global M&A activity rose in the first half of the year,

despite uncertainties stemming from U.S. President Donald

Trump's trade war, high interest rates and broader geopolitical

tensions.

The value of global M&A deals announced during the first

half of 2025 hit $1.98 trillion, a 33% increase compared to the

first half of 2024 and the "strongest opening period for deal

making since 2022," the London Stock Exchange Group said in its

rankings of M&A legal advisers released last week.

But the volume of deals has hit a five-year low, LSEG found.

More than 24,000 deals were announced during the first half of

the year, a 10% decline compared to the first half of 2024.

Latham & Watkins, the second highest-grossing U.S. law firm

by revenue, was the top principal adviser on global M&A deals in

LSEG's rankings for the period by deal value, working on 372

global announced deals worth $257 billion. The firm said in a

statement it was grateful to clients for trusting its lawyers on

major deals.

Latham was followed by New York law firm Wachtell Lipton

Rosen & Katz, which served as principal adviser on 55 deals

worth $204 billion. Wachtell's lawyers are "quite busy across a

wide range of industries, and with some large deals in the

pipeline as well," said Andy Nussbaum, the co-chair of

Wachtell's executive committee.

Wachtell served as a legal advisor to U.S. Steel, which was

acquired by Japan's Nippon Steel in a politically sensitive

$14.9 billion deal that closed last month. Nussbaum said in an

email the firm was pleased to see that deal close.

Wachtell and Latham are serving as legal advisers to Charter

Communications and Cox Communications, respectively, for

Charter's $34.5 billion acquisition of the privately held Cox.

The deal is the largest of the year, according to LSEG.

-- Kellogg Hansen and other firms have asked a U.S. judge in

California to award them nearly $20 million in fees after they

prevailed at trial in May against Johnson & Johnson ( JNJ ) subsidiary

Biosense Webster.

Plaintiff Innovative Health in 2019 accused Biosense Webster

of anticompetitive practices focused on clinical services tied

to Biosense's cardiac mapping catheters. Innovative alleged it

was being excluded from the market. The jury awarded damages of

$147 million that were automatically trebled under antitrust law

to more than $442 million.

The 100-lawyer Kellogg Hansen firm jumped into the

litigation last year as lead trial counsel. Kellogg Hansen's

Derek Ho was the firm's highest biller at $1,795 an hour. Ho did

not immediately respond to a request for comment.

Kellogg Hansen, Berger Montague, Theodora Oringher and the

other firms for Innovative said the complexity of the case and

risk of taking it on justified their fee request. Biosense had

denied any wrongdoing. Johnson & Johnson ( JNJ ) did not immediately

respond to a request for comment.

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Mike Scarcella contributed reporting from Washington. D.C.