Although it may have been better for Greenberg Traurig to raise a certain defense earlier for an ex-client in bankruptcy litigation, the firm's failure to assert the argument ultimately led to no harm, a Manhattan judge has ruled, dismissing a malpractice suit against it.

The malpractice claim against Greenberg Traurig, a firm with South Florida roots, was brought by NextEra Energy Inc., formerly known as FPL Group, a Sunshine State utility company that had hired the firm as defense counsel in bankruptcy litigation for Adelphia Communications Corp.

In the underlying suit, Adelphia was seeking to recover from FPL an allegedly constructive fraudulent transfer from a $149 million stock sale.

NextEra, in a malpractice suit filed last summer, argued that Greenberg Traurig failed to assert and preserve a specific affirmative defense, Section 546(e) of the bankruptcy code, which provides a safe harbor for certain transfers involving the purchase or sale of securities. After FPL discovered that Greenberg Traurig had “profoundly misinterpreted” the rule, the company claimed that it hired Skadden, Arps, Slate, Meagher & Flom as replacement counsel, according to its complaint.

U.S. Bankruptcy Judge Robert Gerber of the Southern District of New York ultimately found in favor of FPL after trial, but NextEra claimed it was damaged in the form of legal fees paid to Skadden and trial and appeal fees “amounting to millions of dollars,” according to NextEra's malpractice lawyers, Keith Fleischman and June Park of the Fleischman Law Firm.

NextEra contends that had the defense been asserted, it would have resulted in a victory on a motion for summary judgment and avoided the expense of trial.

In an April 11 decision in the malpractice case, Manhattan Supreme Court Justice Shirley Werner Kornreich said that Gerber, now retired, had made it clear that even if the defense had been timely pleaded by NextEra, it would have failed on the merits.

Gerber in 2011 ruled that Greenberg Traurig “thought it could lie back and raise the [Section 546(e) defense] whenever it chose to—a tactic that the court finds to be debatable in its legal reasoning, and offensive in its gamesmanship.” But Gerber also told Skadden lawyers during oral argument that the defense is “not a likely winner.”

Kornreich, in her decision this week, said, “there is no question of fact” that the only way NextEra could have had the opportunity to assert a Section 546(e) defense was if Greenberg Traurig asserted it earlier in the bankruptcy action. But had it done so, at that point in time, Gerber would have stricken the defense on the merits, Kornreich said.

“Hence, Greenberg Traurig's failure to plead a Section 546(e) defense cannot be said to be the proximate cause of NextEra's need to expend money on a trial,” Kornreich said.

There is nothing that Greenberg Traurig could have done to avoid a trial and, therefore, the firm's alleged malpractice was not the “but for” cause of NextEra's trial and appellate expense, Kornreich wrote in her decision.

“While it surely would have been better practice for Greenberg Traurig to plead a Section 546(e) defense at the outset if that was a defense it intended to assert,” the judge said, “the failure to do so in this instance did not end up harming NextEra.”

NextEra said in a statement that it was disappointed in the ruling and plans to appeal.

Steptoe & Johnson's Michael Miller, Justin Chu and Roger Warin represented Greenberg Traurig. A spokeswoman for Greenberg said, “We are grateful that the court recognized that our firm's conduct did not cause the alleged harm claimed here and that the failure to plead the potential defense at issue is not a basis for a claim.” The spokeswoman noted the law was unsettled as to whether the defense was available on the facts in the underlying litigation.