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A San Francisco couple’s suit against East Bay real estate titan Miller, Starr & Regalia moved a step closer to trial earlier this month when a judge denied the firm summary judgment. Rodney and Gertrude Medeiros say the Walnut Creek firm gave them bad advice during a 1991 land deal with Kmart. The pair invested nearly $3.2 million in a Lake Elsinore property with a Kmart store on it. The unusual sale-leaseback deal, however, contained a provision that put the couple on the hook for Kmart’s lease payments if Kmart breached its agreement with Camelot Property Counselors, another party in the deal. When Kmart went bankrupt in 2002, Camelot demanded that the couple pay up. Leslie Johnson, the Miller, Starr partner who was paid $6,500 by the couple for her advice on the deal, “never raised it as a potential risk,” said their San Francisco attorney, Stephen Ledoux. If the plaintiffs had known about the risk, they would have rejected the deal and completed escrow on a San Francisco apartment building instead, according to their suit, filed in Alameda County Superior Court. That investment would have netted the couple $11 million, the suit says. The plaintiffs want Miller, Starr to pay them either $3.17 million �� the initial lost investment — the $11 million they would have earned from the alternative investment, or $6.5 million, the reasonable rate of return on the investment in the Kmart property, the suit says. The plaintiffs are taking on one of the most respected real estate law firms in the region. Founded in 1964, the firm was one of the first in the area to specialize in land law. Founding partners Marvin Starr and Harry Miller co-authored “California Real Estate,” a definitive book on real estate law that is widely used by attorneys. Miller, Starr attorneys often serve as speakers and expert witnesses. Miller, Starr’s attorney, Thomas Alborg, of Walnut Creek’s Alborg, Veiluva & Epstein, was in depositions Tuesday and unavailable for comment. Johnson also did not return a call for comment. Eugene Miller, the chairman of Miller, Starr, called the lawsuit “baseless.” “They have some concept that we could have predicted Kmart’s bankruptcy 13 years ago,” Miller said. To win, the plaintiffs would have to prove that the firm advised the couple about which property to invest in, something that was the broker’s role, Miller said. The law firm is being dragged into the suit merely because it is a “deep pocket,” he said. “There are lots of lawsuits without merit and this is one of them,” Miller added. On Jan. 6, Judge James Richman ruled against Miller, Starr’s summary judgment motion, which cleared the way for a trial. Miller, Starr has appealed that ruling and plans to argue that the parties should delay the trial until some related Kmart bankruptcy proceedings are complete, Miller said. Ledoux said he would not comment on the bankruptcy issue until Miller, Starr had filed court papers. The case is tentatively scheduled to go to trial on Jan. 30.

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