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Ableco Fin. LLC v. Hilson – Case Brief Summary (New York)

In Ableco Fin. LLC v. Hilson, 109 A.D.3d 438, 970 N.Y.S.2d 775 (1st Dept. 2013), the plaintiff was in "the business of making commercial loans."

Plaintiff loaned money to Bay Harbor, in order to finance Bay Harbor's purchase of assets from the bankruptcy estate of Steve & Barry's, a retail clothing chain. Plaintiff retained defendant as its counsel for the transaction.

The deal closed. Without repaying the loan, Bay Harbor later filed its own bankruptcy petition.

In relevant part, plaintiff claimed legal malpractice, alleging that defendant failed to "adequately advise it that its first priority security interest on Bay Harbor's assets was collateralized by only a portion of the Steve and Barry's inventory, as opposed to the entire inventory."

Plaintiff maintained that it would not have made the loan had defendant provided it with the correct information that it was not acquiring a first priority lien on the entire inventory.

The court held that the claim should have been dismissed "on the basis of information plaintiff indisputably possessed prior to the closing."

The Court also specifically referenced an email from plaintiff's senior vice president to a member of plaintiff's deal making team, which had a press release attached to the email.

The press release indicated that the assets to be acquired included "all Steve & Barry's merchandise, with the exclusion of any product located at stores not purchased by Bay Harbor."

The Court explained that the documentary evidence refuted plaintiff's "pivotal" claim that it made the loan without knowing that it was not getting a first priority lien on the entire inventory.