Jackson Walker Steps Down From 4E Ch. 11 Amid Fees Probe Mr. Mark Smith, LL.M., CLDP

Jackson Walker LLP, the firm at the center of a legal ethics scandal over the undisclosed relationship between a lawyer and a bankruptcy judge, has stepped down as Chapter 11 counsel to hand sanitizer maker 4E Brands Northamerica LLC as a Texas bankruptcy judge considers revoking $800,000 in legal fees paid to the firm in the case. Jackson Walker on Tuesday exited a Chapter 11 case in which its client's claimants and the U.S. Trustee's Office are demanding that the law firm return $800,000 in legal fees. (iStock) In the brief notice filed Tuesday and signed by Jackson Walker attorneys Matthew D. Cavenaugh and Genevieve M. Graham, the firm told the court it no longer represents the debtor or its plan agent. The announcement comes as the court is considering requests from creditors and the Office of the U.S. Trustee to order the return of legal fees in the case after it came to light that ex-Jackson Walker attorney Elizabeth Freeman was the live-in romantic partner of former U.S. Bankruptcy Judge David R. Jones, who oversaw the case. 4E is one of over a dozen cases where the Office of the U.S. Trustee, the U.S. Department of Justice's bankruptcy watchdog, is trying to claw back payments to Jackson Walker in cases overseen by Jones between 2017 and 2022 when Freeman worked at the firm. Jackson Walker has represented 4E since it filed for bankruptcy in 2022. During that time period, neither Jones nor Freeman, who left Jackson Walker at the end of 2022 to start a solo bankruptcy practice, disclosed that they were live-in-romantic partners. In December 2023, the Office of the U.S. Trustee said it plans to file up to 35 disgorgement motions to recover tens of millions of dollars in legal fees Jones approved for the firm while Freeman worked there. Jones resigned in October 2023, hours before the Fifth Circuit Court of Appeals issued a complaint against him stating there was probable cause that his actions rose to judicial misconduct. 4E, a Mexican subsidiary of consumer products maker Kimberly-Clark, filed for bankruptcy to wind down its business following a 2020 recall of its hand sanitizer products for potential methanol, or wood alcohol, contamination. The company also faced a wave of personal injury and wrongful death litigation connected to the recall. In October 2022, 4E confirmed a Chapter 11 liquidation plan. According to information from the Office of the U.S. Trustee in November 2023, Jones awarded Jackson Walker $859,462 in legal fees and $7,301 in expenses in connection with representing 4E. Following Jones' resignation, the trustee and one of 4E's creditors, the estate of Joshua Maestas, who died after consuming 4E sanitizer, asked U.S. Bankruptcy Judge Marvin Isgur, who took over the case after Jones resigned, to order Jackson Walker to return fees from the case. Judge Isgur, who survived a bid to remove him from the case due to his friendship with Jones, is currently considering the matter alongside a motion from 4E's official committee of unsecured creditors to amend the confirmed Chapter 11 plan. The committee argued in January that any recouped Jackson Walker payments should be added to the $2.6 million set aside for unsecured creditors under the Chapter 11 plan. It also argued that the plan hasn't been fully consummated and can be amended since the plan agent, David Dunn, hasn't taken possession of the $2.6 million pool, has left claims from the IRS and others unresolved and hasn't met the requirements of the plan. The notice of withdrawal filed Tuesday did not indicate if 4E has a successor lined up to take over from Jackson Walker. A spokesperson for Jackson Walker declined to comment. Counsel for Dunn did not respond to request for comment Wednesday. Since his resignation, Jones' caseload has been redistributed to Judge Isgur and U.S. Bankruptcy Judge Chris Lopez. Before his resignation, Jones and Judge Isgur made up the Southern District of Texas' controversial "mega" bankruptcy panel. The Jackson Walker scandal added fuel to critiques of the district's method of diverting complex cases, which it defines as bankruptcies involving over $200 million in liabilities, to select judges. Dunn, in his capacity as the plan administrator, is represented by Ken Green, Aaron Guerrero and Bryan Prentice of Bonds Ellis Eppich Schafer Jones LLP. Jackson Walker is represented by Jason L. Boland, William R. Greendyke and Julie Harrison of Norton Rose Fulbright LLP. The official committee of unsecured creditors is represented by Thomas D. Berghman of Munsch Hardt Kopf & Harr PC and Thomas R. Fawkes and Brian J. Jackiw of Tucker Ellis LLP. Maestas' estate is represented by Johnie Patterson of Walker & Patterson PC. The Office of the U.S. Trustee is represented in-house by Millie Aponte Sall. The case is In re: 4E Brands Northamerica LLC, case number 5:22-bk-50009, in the U.S. Bankruptcy Court for the Southern District of Texas.