A $55 million lawsuit by a unit of Cerberus Capital Management L.P. can proceed against Paul, Hastings, Janofsky & Walker over allegations the firm gave faulty advice on a loan made in connection with a private equity firm’s 2008 acquisition of bankrupt retailer Steve & Barry’s.

In a decision filed last week, Manhattan Supreme Court Justice Shirley Kornreich said Paul Hastings had “conclusively rebutted” Cerberus’ lending arm’s claim that it would not have made a $125 million loan if it knew the recipient, an affiliate of Bay Harbour Management L.C., was acquiring less than all of Steve & Barry’s inventory. But the judge said the law firm had not shown that it accurately advised the Cerberus affiliate on acquisition documents and their impact on the loan’s security.

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