The Story of Judge Jones, the Judge who Made Restructuring Cool Again

Welcome to the 58th Pari Passu newsletter.

After the complex Lumen Deep Dive of last week, today we have a lighter topic. We will learn more about the story of David Jones, the famous and inspirational restructuring judge who was recently at the center of a scandal that led to his resignation.

Introduction

In 2011, upon returning home from work, David Jones informed his wife that he had decided to resign from his $1mm/year position at Porter Hedges, a Texas-based law firm known for handling sophisticated transactions and complex litigation for companies. Instead, he opted to pursue a career as a federal bankruptcy judge, a role that came with an annual salary of $160,000 [1]. His wife was not happy with his decision, but David did not care, Jones’ objective was simple: to persuade large Texas companies to consider restructuring in Houston courts instead of filing for bankruptcy in Delaware and the Southern District of New York, as Enron, American Airlines, Radio Shack, and dozens of other large Texas businesses had done for the past 20 years.  

Fast forward a decade, and Jones became the chief judge of the U.S. Bankruptcy Court in the Southern District of Texas (SDTX) and is widely regarded as the sole force that made Houston the most popular venue for complex corporate restructurings. His tenure was prosperous: having handled over 10% of all cases with over $100mm in liabilities since 2016 and almost 17% of all cases with over $1bn in liabilities since 2020, Jones helped make SDTX the go-to district for large companies that needed to undergo the bankruptcy process [2]. With very few large-dollar complex bankruptcies getting filed in SDTX prior to Jones' tenure, his bold attitude resulted in hundreds of millions of dollars in annual revenue for lawyers, bankers, and financial consultants in Houston, making him a revolutionary of sorts.  

You might be wondering how a mere bankruptcy judge was so pivotal. From the famed liberalism of Ruth Bader Ginsberg to the staunch conservatism of Clarence Thomas, different Supreme Court justices can have different interpretations of the law. For example, some like Ginsberg, view the Constitution in a loose, evolutionary sense while others, like Thomas, prefer to interpret it exactly as it was written over two centuries ago.  This same principle can be applied to bankruptcy law and the Bankruptcy Code, where the outcome of a case can depend on the type of judge presiding over it, which makes them quite important in the Chapter 11 process.  

Houston, we have a problem 

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