By David Thomas

July 13 (Reuters) - Law firm Jackson Walker has moved a step closer to a resolution with nine former clients whose bankruptcy cases were allegedly tainted by a judicial ethics scandal involving the firm.

Chief U.S. Bankruptcy Judge Eduardo Rodriguez in Houston on Friday recommended the court approve nearly $5 million in settlements Jackson Walker reached with the ex-clients, as the firm contends with a larger effort by the U.S. Justice Department's bankruptcy watchdog to strip all fees it was awarded by former U.S. Bankruptcy Judge David Jones.

Jones, once the nation's busiest bankruptcy judge, resigned in October 2023 after acknowledging he was in a romantic relationship and shared a home with Elizabeth Freeman, who was a Jackson Walker partner.

The settlements involve nine cases in which Jackson Walker represented clients in bankruptcy cases overseen by Jones. A lawsuit by one of the clients alleged multiple Jackson Walker lawyers knew about the relationship between Jones and Freeman but kept it hidden, violating bankruptcy disclosure requirements and professional rules.

Under the settlements, Jackson Walker would return $4.785 million of the $10.7 million in fees it received in the cases, amounting to a 44% recovery for the former clients, Rodriguez said in his 337-page report.

A spokesperson for Jackson Walker declined to comment. The law firm has argued it acted responsibly in its handling of the relationship between Freeman and Jones.

Rodriguez noted in his report that Jackson Walker and the Office of the U.S. Trustee reached a deal in March allowing the law firm to proceed with the settlements in parallel with the U.S. Trustee's disgorgement case against Jackson Walker. The Trustee pursuing the case, Kevin Epstein, is continuing efforts to claw back all fees Jackson Walker earned in cases heard by Jones — more than $11 million.

A spokesperson for the Office of the U.S. Trustee declined to comment.

U.S. District Judge Alia Moses, who is overseeing fee‑dispute litigation between Jackson Walker and the Office of the U.S. Trustee, will now consider the chief judge's recommendations. Moses has been critical of the settlements, previously describing them as "an attempt to circumvent this process and this court's authority."