One Lawyer’s Loss Is Another’s Gain

A Florida bankruptcy trustee knew just which lawyer he wanted on his team if it comes time to defend a landmark forfeiture ruling at the Supreme Court. Unfortunately for him, President Obama called up the lawyer to his judicial team.

Michael Goldberg, who is wrapping up the liquidation of convicted Ponzi-scheme operator Scott Rothstein’s law firm, recently asked the bankruptcy court for permission to hire Patricia Ann Millett and her colleagues at Akin Gump Strauss Hauer & Feld LLP to defend a crucial court ruling in the event the government tries to challenge that ruling at the nation’s highest court.

Ms. Millett, the co-chair of Akin Gump’s Supreme Court and national appellate practices, is a noted lawyer who has argued 32 cases before the Supreme Court. But the same experience and prominence that Mr. Goldberg cited in his request to hire Ms. Millett is what garnered the attention of President Obama, whose administration nominated her to the U.S. Court of Appeals for the District of Columbia. The U.S. Senate confirmed her nomination last week.

While the move throws a wrench in Mr. Goldberg’s plans, he told Bankruptcy Beat Wednesday that he’s “very confident that the Akin team is deep enough that we can still utilize them” if needed.

“She’s certainly a top, top-notch appellate lawyer,” Mr. Goldberg, the chairman of Akerman LLP’s bankruptcy and reorganization practice, added of Ms. Millett. “We were disappointed, but we’re thrilled for her.”

The ruling Mr. Goldberg wanted Ms. Millett on call to defend if needed concerns a victory for bankruptcy trustees in an ongoing battle with federal prosecutors over the fate of assets that are implicated in both bankruptcy and criminal proceedings. That’s been a major issue in the wind-down of the Rothstein Rosenfeldt Adler law firm, whose founder used his firm to defraud investors in a $1.2 billion-plus Ponzi scheme. Once the scheme collapsed, prosecutors and the law firm bankruptcy trustee clashed over whether Mr. Rothstein’s cheated investors or his law firm’s creditors were entitled to certain assets.

The 11th U.S. Circuit Court of Appeals this summer sided with the bankruptcy trustee, ruling that the government went too far in seizing assets, namely several law-firm bank accounts. The court pointed to a prior ruling that when criminal proceeds are mingled with legitimately obtained funds and can’t easily be separated, then those funds aren’t forfeitable.

Write to Jacqueline Palank at [email protected]. Follow her on Twitter at @PalankJ.