1 No. 133
State of California Public Employees' Retirement System,
Appellant,
v.
Shearman & Sterling,
Respondent.
_________________________________________________________________
2000 NY Int. 125
November 16, 2000
This opinion is uncorrected and subject to revision before publication
in the New York Reports.
Kenneth R. Puhala, for appellant.
Paul Vizcarrondo, Jr., for respondent.
_________________________________________________________________
WESLEY, J.:
Plaintiff California Public Employees' Retirement System (CALPERS) is
the largest public pension and health system in the United States. In
1988, CALPERS and Equitable Real Estate Investment Management, Inc.
entered a "Correspondent Agreement for Commercial Property Loans."
Under the Correspondent Agreement, Equitable originates and closes
commercial property loans for sale and assignment to CALPERS.
Equitable is responsible under the Correspondent Agreement for
retaining counsel to provide advice and services in connection with
the loans.
In August 1993, CALPERS agreed to purchase a $23,300,000 long-term
commercial loan that Equitable proposed to make to a New York
borrower, Nathan L. Serota. After receiving CALPERS' commitment
approving the loan, Equitable in turn executed a commitment approving
Serota's application. Serota subsequently assigned the commitment to
Sersons Corp.
Equitable retained defendant Shearman & Sterling as counsel in
negotiating and closing the Sersons loan. CALPERS and Equitable had
developed standard form loan documents, including a promissory note
that contained a prepayment and acceleration penalty, for use in
connection with the loan transactions under the Correspondent
Agreement. CALPERS alleges that Equitable asked Shearman & Sterling to
incorporate the agreed-upon standard form note into the loan
documents. At Equitable's request, Shearman & Sterling prepared the
SNIPPETS:
Plaintiff California Public Employees' Retirement System (CALPERS) is the largest public
Under the Correspondent Agreement, Equitable originates and closes commercial property loans
Equitable is responsible under the Correspondent Agreement for retaining counsel to provide
After receiving CALPERS' commitment approving the loan, Equitable in turn executed a
Equitable retained defendant Shearman & Sterling as counsel in negotiating and closing the
CALPERS and Equitable had developed standard form loan documents, including a promissory note
CALPERS alleges that Equitable asked Shearman & Sterling to incorporate the agreed-upon
In its cover letter to CALPERS' counsel, Shearman & Sterling indicated that the documents
Equitable assigned the note by an instrument entitled "Omnibus Assignment of Loan Documents."
Before commencing this lawsuit, CALPERS and Equitable entered into a Settlement Agreement
Shearman & Sterling for negligence and breach of contract."
Pursuant to the Settlement Agreement, Equitable further assigned to CALPERS all of its rights
CALPERS also alleged that its relationship with the law firm was "so close as to approach
Supreme Court granted the motion in part, dismissing only the direct causes of action based
The Appellate Division noted that, upon assignment of the loan to CALPERS, Equitable received
The court concluded that "ince injury is an essential element of a cause of action for legal
We have long held that "before a party may recover in tort for pecuniary loss sustained as a
Co. v Dewey, Ballantine, Bushby, Palmer & Wood,, 80 NY2d 377, 382 (citing Ossining Union Free
CALPERS cannot assert that it relied on Shearman & Sterling's letter when it reserved the
There certainly was a valid and binding contract between Equitable and Shearman & Sterling
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