Hedge Fund Manager Calls for Recusal of ‘Biased’ Bankruptcy Judge Who Allegedly Wrote Novels Based on Him

An embattled federal judge accused of basing novels on parties currently before her court and implicated in insider trading allegations connected to Amazon's 2021 purchase of MGM for $8 billion is again facing calls for her recusal from the Highland Capital Management bankruptcy case.

According to a Jan. 22 court filing, parties led by James Dondero, hedge fund manager of Dugaboy Investment Trust, continue to seek the removal of Stacey G.C. Jernigan, Chief Bankruptcy Judge for Northern District of Texas, from the Highland Capital Management case, through a writ of mandamus, an order from a higher court that would require Judge Jernigan to recuse herself due to her bias.

But during a hearing on Jan. 24, she expelled interested parties, including lawyers, media and members of the public from the courtroom in apparent defiance of recent policy revisions by the Judicial Conference of the United States expanding public access to bankruptcy proceedings.

A lawyer, who spoke on condition of anonymity, said that they and other lawyers, reporters and members of the public were suddenly expelled from the hearing after Jernigan and Highland Capital urged them all to identify themselves or face expulsion. Jernigan’s actions raise serious concerns around the transparency of her courtroom.

Under consideration at that hearing was Highland and its Trustee James Seery's filing seeking nearly $1 million in lawyers' fees over a proof of claim that the Dondero-affiliated party had already attempted to withdraw. During the hearing, it came to light that more than half of the fees accrued after the Dondero-affiliated party attempted to withdraw its claim.

“Instead of taking a win,” Highland and its lawyers “chose to generate fees to get to the same result," attorneys claimed in the Dondero-affiliated party's response to Highland's filing.

Their response also noted that Highland even admitted "that the trial [they] insisted on ‘was a complete waste of judicial resources and of the Claimant Trust’s assets.'"

This is just the latest from the Highland Bankruptcy saga, as last year, there were calls for Jernigan's recusal from the case on the grounds that she has a strong bias against hedge fund managers, and in particular, Jim Dondero of Dugaboy Investment Trust, evidenced in novels she wrote.

Dondero filed an objection to the transfer of proceedings to her court that includes an expert report from former federal appellate judge and law professor Steve Leben.

“Courts have required disqualification when a judge displays hostility toward a type of party and when a judge chooses to speak publicly about issues that are pending before the judge,” Leben stated in his report.

Judge Avery Lassiter, the protagonist in Jernigan’s first self-published novel, “He Watches All My Paths,” and its sequel, “Hedging Death,” makes “strong negative comments about hedge-fund operators in both books,” according to the report, and a "major villain" in the second book bears a striking resemblance to Dondero.

More recently, Jernigan promoted the novels on her travel blog and underscored how they mirror real life, writing: “I’m not going to reveal the name of the hotel, since this website is not about advertising things. Rather, I will merely mention that the hotel is referred to by name in Chapters 32 and 33 of my first novel, 'He Watches All My Paths.' So if you really want to know …. (oh wait, maybe that sounds like advertising).”

Attorneys for Dondero also say Jernigan engaged in "unethical promotion" of her novels based on Dondero, while he still has proceedings before her court.

Highland Capital Management initially filed for bankruptcy in Delaware in 2019, per reports, but the petition was transferred to the U.S. Bankruptcy Court for the Northern District of Texas, where Jernigan presides.