Paul Hastings Faces $55M Suit over Loan Advice
Posted Dec 15, 2009 9:38 AM CDT
By Debra Cassens Weiss
Paul, Hastings, Janofsky & Walker is facing a lawsuit over legal advice it gave to a private equity firm making a loan for the purchase of assets owned by troubled retailer Steve & Barry’s.
Ableco Finance, a unit of Cerberus Capital Management, claims in the suit that it lost $55 million on a $125 million loan, the New York Law Journal reports. Ableco says it would not have made the loan if it had been advised that the buyer would not have the rights to all of the inventory of Steve & Barry’s, which was in bankruptcy.
Ableco says it asked Paul Hastings lawyers for a first priority lien on the inventory, and was not told about an earlier agreement that would have made it impossible to obtain that right, the story says.
A spokesman for Paul Hastings told the New York Law Journal the firm looks forward to defending itself in court. "Paul Hastings adheres to the highest standards of professionalism and integrity in the representation of its clients, and its representation of Ableco in this matter was no exception," the spokesman said. "It's unfortunate that Ableco has chosen to sue its longtime legal adviser to recoup business losses caused by the economic downturn."
The law firm has filed a motion to dismiss the suit, filed in state court in Manhattan.