Top US bankruptcy judge resigns following revelation of undisclosed romantic relationship

•  Insider recently revealed that prominent bankruptcy judge David Jones was in a romantic relationship with a bankruptcy attorney.
• Both Jones and the attorney had involvement with the bankruptcy case of the prison healthcare company Corizon.  
• On Friday, a Fifth Circuit judge wrote that there was "probable cause to believe" that Jones had engaged in misconduct. 

David Jones has resigned his post as chief bankruptcy judge for the Southern District of Texas– a stunning turn of events for one of the country's most powerful bankruptcy judges who has overseen a series of high-profile cases during his tenure.

Chief District Judge Randy Crane of the Southern District of Texas confirmed Jones' resignation in an interview with Insider. He said that the decision would go into effect on November 15. 

The more than 3,000 cases that were on Jones' docket will be redistributed to other judges, Crane added.

The resignation follows a week of controversy surrounding Jones: Less than two weeks ago Insider first reported that Jones was in a previously undisclosed romantic relationship with attorney Elizabeth Freeman, who had worked as his law clerk and as a partner at Jackson Walker, a Texas-based law firm that had cases before Jones' court.

Both Jones and Freeman were also involved with the bankruptcy case that centered around Corizon Health, once one of the nation's largest prison healthcare providers. Last year, Corizon split in a maneuver known as the Texas Two-Step, with most of Corizon's assets placed in a new company called YesCare, while another company, Tehum Care Services, was saddled with most of the debt. Tehum then filed for bankruptcy.

Jones oversaw the settlement talks in Tehum's bankruptcy; Freeman represented YesCare — and signed off on Jones' appointment as mediator in May. That mediation process helped Tehum and a committee of creditors reach a $37 million proposed settlement deal that would protect most of YesCare's assets, which court filings indicate total more than $173 million.

Until Insider disclosed it, neither Jones nor Freeman had acknowledged their relationship. The allegations first emerged in a suit filed earlier this month by pro se plaintiff Michael Van Deelen, who shared the complaint with Insider.

Jones later confirmed to The Wall Street Journal that he and Freeman are in a romantic relationship and had shared a home for years.

Crane told Insider that Freeman was recently removed from the Attorney Admissions Fund Committee, which administers the fees collected when attorneys join the bar. It's unclear whether she'll remain in her role as the chair of the court's bankruptcy bench bar conference, he added.

"I have become a distraction to the good work that the court does"

On Friday, Jones said in a federal court hearing that he was under investigation by the US Court of Appeals for the Fifth Circuit following media reports about the relationship, and that he would  be stepping down from his cases. Later that day, Judge Priscilla Richman of the Fifth Circuit issued a formal complaint against Jones, writing that there was "probable cause to believe" that Jones had engaged in misconduct. 

Richman specifically cited Jones' role as mediator in a matter involving Freeman, alluding to the Tehum case. "Judge Jones did not disclose his relationship with Ms. Freeman to the parties, to their counsel or to the bankruptcy judge who appointed Judge Jones," the misconduct complaint says.

It's unclear what Jones's resignation will mean to the Tehum settlement. Judge Christopher Lopez, who is overseeing the case, will hold a hearing on Tuesday. Creditors will be able to object to the plan and other documents.

"If someone wants it reconsidered, I'm sure Judge Lopez will review that and consider that carefully and make an appropriate decision," Crane said about Tehum's settlement.

Already, the disclosure of Jones' relationship has encouraged the US Trustee to intervene. On Friday, the trustee noted that "recent admissions by the judicial mediator may raise issues about the propriety of the mediation that serves as the basis for the global settlement — and thus about the very propriety of the settlement and plan itself."

In an emailed statement, Jones told Bloomberg Law:  "I have become a distraction to the good work that the court does. To end that distraction and hopefully return focus, I have resigned."

Jones and Tehum did not immediately respond to requests for comment. Freeman's attorney said his client would not be making any public comments at this time. The law firm of Jackson Walker declined to comment on Jones' resignation. 

"We're all very surprised," Crane told Insider. "Judge Jones was highly regarded and so we're just very, very disappointed about this."