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Heller Ehrman White & McAuliffe has agreed to settle a suit charging that the firm drove a now-defunct dot-com into the ground by making a first-year associate its lead attorney. E-Compare Corp., which developed online shopping technology, filed suit against Heller in 2002 in San Francisco Superior Court. The busted dot-com sought about $200 million — the purported value of the company — in damages on claims of fraud, breach of contract, negligence and breach of fiduciary duty. The terms of the settlement are confidential, said E-Compare’s attorney, William Veen, and Ragesh Tangri, a Keker & Van Nest partner who represented Heller. Veen said the parties agreed to the settlement on Oct. 18, but have yet to sign off officially on the deal. “I’m pleased that the parties were able to resolve the dispute prior to fully litigating,” he said. Heller and E-Compare had been scheduled to go to trial Nov. 5. In court filings, the startup had argued that between 1998 and 2000, first-year Heller associate Deborah Wagner made errors in the firm’s capitalization and corporate governance records that caused a major investor to back out, forcing the company out of business in 2001. E-Compare also complained that Wagner did not have a license when she began representing the company. But Heller argued that it was the demise of the dot-com market — not any action or inaction by the firm — that led to the tech firm’s fall. In an interview about the case several months ago, Veen said E-Compare’s demise could not be blamed on the dot-com bust. “You can’t excuse a murder because it happened during a flu epidemic,” Veen said at the time. He added that other comparative shopping companies had done well and that E-Compare “would have been a viable company” if it had proper legal counsel. According to Pamela Phillips, a partner at Rogers, Joseph, O’Donnell & Phillips who specializes in legal malpractice defense, the wave of malpractice claims that was expected after the dot-com bust never crested. “It’s been amazingly quiet on that front,” she said. “We all worried � but very little bust fallout has happened,” she said. Phillips said the larger law firms specializing in tech capitalization recognized the high risk that accompanied startup funding and buffered themselves by keeping clients informed of these risks. Phillips — who has represented Heller in malpractice suits — said she had trouble believing E-Compare’s claim that an unlicensed attorney was the lead lawyer for a multimillion-dollar startup. “It sounded kind of flimsy. The notion that there’s an associate out there working with no supervision is pretty unbelievable,” she said. Senior Writer Brenda Sandburg contributed to this report.

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