Texas law firm Jackson Walker agreed to pay $15 million to settle a civil case from the Justice Department over an ex-partner's undisclosed romantic relationship with the nation's former top bankruptcy judge, David R. Jones.

Jackson Walker reached the settlement with the Justice Department's bankruptcy division to resolve its allegations that the firm concealed the relationship between Jones and Elizabeth Freeman, a partner in its bankruptcy practice from 2018 to 2022.

Jackson Walker didn't admit fault, though the firm "acknowledges that it could have approached this matter differently," according to a settlement term sheet filed in the Southern District of Texas federal court on Sunday.

Jones, the former chief judge of the Houston bankruptcy court, oversaw dozens of major chapter 11 proceedings that Freeman worked on without any disclosure that they were romantically involved. He resigned his judgeship in 2023 after he confirmed his relationship with Freeman to The Wall Street Journal and the federal appeals court that appointed him to the bench found probable cause he committed misconduct.

The Justice Department's Office of the U.S. Trustee then sued Jackson Walker to seek the return of roughly $23 million in fees it collected in bankruptcies in which he was either the presiding judge or the mediator, alleging those fees were improperly gained because Jackson Walker hadn't disclosed the conflict of interest in its bankruptcy retention applications or other court papers.

The U.S. Trustee, a civil watchdog that polices the nation's bankruptcy courts, alleged that Jackson Walker failed to disclose the romantic ties between Jones and Freeman while falsely claiming in court papers that it was an unbiased, disinterested adviser to its clients. Jackson Walker has maintained it acted appropriately once it learned of the couple's relationship.

Federal prosecutors from the Justice Department launched a criminal investigation in 2024 into whether any criminal laws were broken in connection with the undisclosed relationship. The criminal probe is ongoing, according to people familiar with the situation.

After becoming chief judge of the Houston bankruptcy court in 2015, Jones put in place rules that steered all complex chapter 11 filings in the Southern District of Texas to one of two judges, either himself or his longtime mentor and colleague on the bench, Marvin Isgur. Law firm Kirkland & Ellis, the nation's leading adviser to financially troubled companies, soon began filing many of its major bankruptcy cases in Houston, followed by other leading law firms. Kirkland partnered with Jackson Walker as co-counsel on almost all such cases the firm filed in Houston.

The surge of cases in Houston turned Jones and Isgur into two of the nation's busiest bankruptcy judges. Kirkland has said in civil litigation following Jones's resignation that no one at the firm knew of his relationship with Freeman until it became public.

As part of the civil agreement filed Sunday, Jackson Walker said it would comply with all applicable bankruptcy disclosure requirements and ethical obligations. Jackson Walker also agreed to implement certain changes to its conflicts screening and disclosure practices.

If approved in court, the firm's settlement would mark the most significant legal consequence to be issued around the ethics scandal that forced Jones off the bench.