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Charter Sues Law Firm for Malpractice

Charter Communications alleged that malpractice by its Los Angeles-based law firm cost the company and its holding companies more than $150 million on its 2000 deal to acquire Bresnan Communications, according to a federal civil suit filed Friday.

The suit, filed in U.S. District Court for the Central District of California in Santa Ana, alleged that Charter's legal counsel in the deal -- the firm of Irell & Manella -- erred in its legal preparation for the transaction, in which Charter holding companies acquired the systems from the Bresnan family and investors including AT&T.

The deal called for the Bresnan owners to get units in a Charter holding company, which they could later convert to Charter stock or cash. But before the deal closed, AT&T realized that the terms of the transaction would put the then-cable-system operator over the federal ownership cap.

The law firm revised the deal, adding an amendment that would eliminate the regulatory glitch but end the transaction with the same result: Charter Holding would end up with 100% ownership of the former Bresnan systems.

But before the deal closed Feb. 14, 2000, the law firm further amended the transaction and an associate with the firm erroneously deleted the key provision, according to the lawsuit. Because of the change, Charter Holding ended up with only 70% ownership in the former Bresnan properties, with Charter owner Paul Allen owning the other 30%.

The mistake was rectified in 2005, with Charter issuing a note to Allen in settlement.

The suit also alleged that Irell & Manella lawyers discovered the error sometime in 2002 but didn't notify Charter until December of that year. In the meantime, the firm worked to rectify the error while billing Charter for the hours, the suit charged.

Calls for comment on the suit were directed to Irell & Manella partner David Gindler, who did not immediately respond. He told the Los Angeles Times he is confident that his firm will prevail in the dispute.

The suit asked for $150 million in damages, plus attorney's fees and court costs.