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Nobody likes to pay $132,000 a month in rent for office space that they’re not even allowed to use. But that’s exactly what Epicentric Inc. did for five months because of mistakes they say were committed by their lawyers. A suit filed in San Francisco Superior Court in December charges Cleveland-based Arter & Hadden with legal malpractice, negligence and breach of fiduciary duty. Arter & Hadden’s advice, the suit alleges, caused the Internet company to enter into a seven-year, $20 million lease that was illegal. “Had defendants exercised proper care and skill in researching and counseling as to the land-use issues and risks regarding the property, Epicentric would not have entered into the lease for property that it cannot lawfully occupy as its corporate headquarters,” reads the suit. According to the suit, Epicentric retained Arter & Hadden during the spring of 2000 as they began a search for new corporate headquarters in San Francisco’s burgeoning South of Market district. In September 2000, the company signed a seven-year, $20 million lease for a property on 15th Street. Epicentric secured the lease with a $1 million irrevocable letter of credit and paid an additional $1.2 million for tenant improvements. The problem was that Epicentric’s intended use of the property, as office space, was in violation of the San Francisco planning code. And the city had not issued any of the necessary permits and authorizations. When Epicentric became aware of this situation, in January 2001, it rescinded the lease. The company also sought to recover the cash it had already paid from the landlord. This ended with a settlement in which Epicentric incurred additional, unspecified damages. Now the company is trying to recover its money by going after the lawyers. “Defendants knew, or should have known, that Epicentric’s lawful use of the property would require a letter of determination from the San Francisco Zoning Administrator,” says the suit. Pamela Phillips, of San Francisco’s Rogers, Joseph, O’Donnell & Phillips, who is representing Arter in the suit, says the case has absolutely no merit. “This is a case in which Epicentric executed a lease and decided to rescind it and sue its landlord. Those decisions are completely independent of anything that my client did.” The case is also somewhat unusual in that Palo Alto, Calif.-based Fenwick & West is representing Epicentric. According to some legal malpractice experts, plaintiffs in such cases are typically represented by smaller, specialty firms. “Sometimes — let’s say this outfit is a good client of Fenwick’s — Fenwick may stay behind the scenes kind of helping but wouldn’t exactly be the attorney of record,” says malpractice attorney Guy Calladine, of San Francisco’s Carlson, Calladine & Peterson. “Usually it’s just because some people are concerned about showing up as plaintiff’s counsel in a malpractice case.” In February, five of Arter’s San Francisco real estate attorneys, led by veteran Martin Orlick, jumped ship to Los Angeles-based Jeffer, Mangels, Butler & Marmaro. The defection left a single real estate attorney in Arter’s San Francisco outpost. But people close to the situation say the two events are not related. “I’m confident their departure has nothing to do with this case,” says Arter’s San Francisco Managing Partner Kim West. “I was fairly close to [Eugene Chiarelli] and [Orlick] and that group that left, and none of them ever expressed any concern at all to me about that case.” The only Arter attorney specifically named in the suit moved to Holland & Knight before the case was filed.

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