(Recasts lead paragraph; adds quote from judge in paragraph 4, comment from law firm in paragraphs 7-8)
NEW YORK, Oct 13 (Reuters) - U.S. Bankruptcy Judge David Jones in Houston, who oversees more major Chapter 11 cases than any other U.S. judge, said on Friday that he is facing an ethics review over a previously undisclosed romantic relationship and is stepping down from handling large cases.
Jones said over the weekend that he has been in a years-long romantic relationship and shared a home with bankruptcy attorney Elizabeth Freeman, who had previously been a law clerk for him. Until recently, Freeman worked at Jackson Walker, a local law firm that filed many cases in Jones' Houston courthouse.
Jones said at a court hearing in the bankruptcy case of drilling company Arethusa Offshore that he is under investigation from the New Orleans-based 5th U.S. Circuit Court of Appeals and that all his bankruptcy cases involving large companies would be assigned to other judges during the investigation.
"I hope that you can appreciate that the integrity of the process is simply more important than a single case and you have my genuine apologies for the inconvenience that I am causing," Jones told the company's attorneys.
The 5th Circuit declined to comment about the ethics investigation but the Houston bankruptcy court updated its case assignment rules Friday to remove Jones from a two-judge panel that oversees all complex cases involving more than $200 million in debt.
Legal ethics experts have said that Jones should have disclosed the relationship or recused himself from cases involving Jackson Walker.
A spokesman for Jackson Walker said the firm consulted outside ethics counsel after learning about the romantic relationship in March 2021.
"From the time we first learned of this allegation Ms. Freeman was instructed not to work or bill on any cases before Judge Jones," Jackson Walker spokesman Jim Wilkinson said. "We are confident that we acted responsibly."
Freeman, through her attorney, declined to comment.
Jones has been the busiest bankruptcy judge in the U.S. since January 2016, overseeing 11% of all Chapter 11 bankruptcies involving more than $100 million in liabilities, according to data from Debtwire, which provides research and intelligence on credit markets. He has recently presided over the bankruptcies of JC Penney Co Inc, Neiman Marcus Group, Party City and Chesapeake Energy Corp, among many others.
The two-judge panel for complex cases is an outlier among U.S. bankruptcy courts, which typically assign cases randomly among all of their judges.
U.S. Bankruptcy Judge Marvin Isgur, who stepped down from the panel a year ago, will replace Jones, and all of Jones' complex cases will be randomly assigned to Isgur or the panel's other member, U.S. Bankruptcy Judge Christopher Lopez. (Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi, Leslie Adler and Rod Nickel)
