Bankruptcy judge's novels appear to be based on me, litigant says in seeking her removal

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The former CEO of Highland Capital Management is seeking the recusal of a bankruptcy judge on the ground that she has written two novels that “roundly criticize” the financial industry and include an “evildoer” character who appears to be based on him.

The former CEO, James D. Dondero, sought the removal of Chief U.S. Bankruptcy Judge Stacey Jernigan in an April 4 petition for mandamus filed in the U.S. District Court for the Northern District of Texas.

Dondero is involved in the Highland Capital Management bankruptcy because of allegations by a litigation trustee that Dondero siphoned money from the company and transferred its assets to evade litigation claims, according to previous reporting by Law360.

The federal court ordered that Dondero’s mandamus petition be unfiled April 5 because it can’t be filed with a previous bankruptcy appeal that has been dismissed. He has the option of filing a new action, however.

In the unfiled petition, Dondero and four other companies target two fictional books written by Jernigan: He Watches All My Paths and Hedging Death.

The books’ protagonist, a Dallas bankruptcy judge, is pitted against a Dallas hedge fund manager named Cade Graham, who closely resembles Dondero, the petition alleges.

According to the petition, the first novel “describes the ‘high-flying hedge fund managers’ as individuals that ‘suck up money like an i-robot vacuum,’ seem to ‘make money no matter what,’ and show ‘outrageous amounts of hubris’ as part of their ‘bro culture.’ It strongly suggests a judge harboring bias against those operating in the hedge fund industry.”

The petition alleges several similarities to Dondero and his company in the second novel. They include:

  • The novel involves a Dallas-based hedge fund called Ranger Capital; Highland Capital Management was formerly known as Ranger Asset Management.
  • Ranger Capital’s manager is described as a reckless investment manager and a “nasty” litigant; Jernigan had used the same language to describe Dondero in the bankruptcy proceedings.
  • The novel describes the life settlement industry as “creepy;” Dondero was involved in the life settlement industry.

Dondero had been removed as CEO of Highland Capital Management at the insistence of unsecured creditors committee, which reached a settlement with the company in the bankruptcy litigation, according to Jernigan’s description of the case. He continued as a portfolio manager, but he was asked to resign by independent board members in October 2020.

Dondero filed the petition for a writ of mandamus after Jernigan denied his amended and renewed motion to recuse March 6.

Jernigan said her novels are “entirely fiction” and “are not about Mr. Dondero or the hedge fund industry in general.”

The first novel is about a federal judge who receives death threats, Jernigan said. The perpetrator is not a person in the hedge fund industry. The second novel involves a manhunt for a criminal in the first book. The Cade Graham character fakes his death after linking up with Mexican drug cartels, she said.

As for the Ranger Capital coincidence, Jernigan said she “has never once heard” that it was a prior name for Highland Capital Management.

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