After hearing oral argument today, U.S. District Judge Alia Moses has reserved judgment on motions to dismiss former McDermott shareholder Michael Van Deelen’s
RICO suit over former judge David R. Jones’
undisclosed relationship with Elizabeth Freeman.
Van Deelen alleges that Jones and three other defendants -
Kirkland & Ellis,
Jackson Walker and
Freeman, a former partner at Jackson Walker - fraudulently concealed and profited from the secret romantic relationship. The defendants urge the court to toss the suit, arguing that Van Deelen asserted meritless claims under RICO, Texas law and the
Fourth Amendment to the U.S. Constitution.
During the four-and-a-half hour hearing, Judge Moses said it was clear that Jones should have disqualified himself from the McDermott bankruptcy proceedings under
28 U.S. Code section 455 “from day one.” Section 455 states that a judge “shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned,” she pointed out. Judge Moses remarked that Jones’ disqualification was “mandatory,” not discretionary, because of his relationship with Freeman.
Moreover,
when Van Deelen filed a motion in the McDermott case seeking Jones’ disqualification or recusal, “the motion to recuse should have been granted. Period,” the judge said. She acknowledged that Judge Marvin Isgur (who was assigned the matter) denied the recusal motion, and that the U.S. District Court for the Southern District of Texas affirmed Judge Isgur’s ruling after Van Deelen appealed.
The judge expressed surprise that the district court did not “have a hearing
de novo” to assess Van Deelen’s allegations after he reportedly received an anonymous message in the mail informing him of the secret relationship. Van Deelen’s allegations “turned out to be true,” the judge emphasized.
“How does anybody think it’s fair to be keeping this quiet? How?” Judge Moses asked. She suggested Van Deelen has raised valid questions about the “fundamental fairness” of his treatment in the McDermott cases.
When Tom Kirkendall of the Law Office of Tom Kirkendall, counsel for Freeman, suggested that the disclosure requirements of Bankruptcy Rule 2014 “do not talk about relationships with judges,” Judge Moses commented, “That’s a real thin ledge to be hanging yourself on.”
Judge Moses also said the “difficult part of this case” is that she can’t “say that the result would have been different” for Van Deelen “with a disinterested judge.” She repeatedly pressed Van Deelen on whether he has standing to pursue his claims. The judge signaled that she will scrutinize whether the defendants’ alleged misconduct caused injury to Van Deelen specifically, or the McDermott bankruptcy estate - making his claims a kind of “derivative shareholder litigation” barred by the McDermott plan confirmation order.
During today’s proceedings, Judge Moses also took under advisement Kirkland’s
motion for sanctions against Van Deelen and his attorneys at Bandas Law Firm.