Wisconsin Supreme Court Punts on Question of U.S. DOJ Attorney Practicing in State Court

One of the many casualties of the 2008 securities market collapse was Ambac Assurance Corp.; they were involved with those complex transactions we hear so much about — CDO’s, debt swaps, mortgage-backed securities, etc. 

In re Ambac began as a rehabilitation procedure, which is sort of like bankruptcy for insurance companies — the company, court, and creditors work together to come up with a plan that keeps the company afloat while attempting to protect the interest of creditors and insureds.

The process generated a proposed rehabilitation plan that, among other things, prevented the IRS from pursuing a claim against a tentative $700 million refund.  The United States was formally made aware of this, but chose not to participate by commenting on or arguing against the proposed plan.  Instead, they waited until the plan was finalized, at which point a U.S. Department of Justice attorney — not admitted to practice in Wisconsin courts — filed an appeal to the court of appeals.

The court of appeals dismissed the appeal because that attorney was not licensed to practice law in Wisconsin and did not file for "pro hac vice" status (a temporary order allowing somebody unlicensed in Wisconsin to practice with assistance from a local).

However, the Supreme Court dismissed the appeal unanimously (sans Justice Prosser, who recused from this and many other cases for health reasons in December) for another reason — that by failing to participate in the discussion of the proposed plan, the United States had waived any challenge to the plan it might have.  By law, any argument not made at a lower court, which could have been made, typically can’t be raised at a higher court.