Milpitas denies wrongdoing in city manager lawsuit

Milpitas is denying wrongdoing in an ongoing legal dispute with its former city manager, and has started investigating claims made in a wide-ranging lawsuit.

A wrongful termination lawsuit filed by former City Manager Steve McHarris in December laid out several accusations of incompetence, unethical behavior and intimidation by city officials including the mayor. In a late January answer to the lawsuit, the city denied every allegation, according to McHarris’ attorney Stephen Jaffe.

While the city and Jaffe conduct sworn depositions as part of the discovery phase of the case, Jaffe is accusing the city of wasting taxpayer money by hiring an outside law firm to conduct a separate employment investigation into the same issues.

“I don’t understand the city spending thousands and thousands of dollars on this parallel investigation,” Jaffe told San José Spotlight.

The Milpitas City Council approved spending up to $150,000 to hire law firm Meyers Nave in summer 2023 for a general services contract to help support the city attorney’s office, HR Director Kelli Parmley told San José Spotlight.

Under that contract, Meyers Nave is handling the McHarris lawsuit for the city. City Attorney Michael Mutalipassi is one of the officials named in the complaint as contributing to a hostile work environment for McHarris.

Parmley said Meyers Nave has brought on another firm, Oppenheimer Investigations Group, to run the employment investigation. However, it’s unclear how much the investigation could cost the city.

Parmley said it could exceed the $150,000 approved by council, but any potential additional spending would be run through a transparent city approval process.

While City Manager Ned Thomas told San José Spotlight earlier this month the investigation has been underway for “a bit,” Parmley declined to offer any further details, including the investigation’s start date, expected end date, its purpose and who authorized it.

“The city does not comment on ongoing personnel matters,” Parmley said.

 Unclear costs 

Jaffe said he doesn’t see the need for the internal investigation, because it would duplicate work being done by the city’s attorneys in the course of handling the lawsuit, such as conducting depositions or interviews with people involved in the allegations. He noted Meyers Nave is “not a cheap” law firm.

“They call it an independent investigation, which of course it is not. This is an investigation that is 100% funded by one party to a lawsuit,” Jaffe said. “In all my years, I have not seen an employer funded investigation reach the conclusion that the employer was wrong and should whip out their checkbook.”

Parmley said Meyers Nave is a respected firm that will help protect the city’s interests, and added that city officials are committed to minimizing costs.

“We are pushing them to summarize the investigation and get what they need over to our decision makers,” Parmley said. “Everybody is concerned about the cost, and I appreciate that, especially as taxpayers. We are doing our best to manage that to the lowest cost possible.”

Councilmember Hon Lien, who opposed the decision to let McHarris go, said she is concerned that people named in the lawsuit, such as Mayor Carmen Montano and Vice Mayor Evelyn Chua, have had a say over the direction the city takes in response to the lawsuit. She’s also concerned about the potential increasing costs to the city if leaders don’t choose to settle the case quickly.

“I am very frustrated,” Lien told San José Spotlight. “How much more money are we going to spend on doing the investigation for this claim?”

McHarris is suing for an undisclosed amount of damages. One of his key claims is that he was unceremoniously let go within a six-month window following the November 2022 election, during which his contract barred the council from firing him. He first made his formal accusations in a claim filed May 2023, and filed the lawsuit in December following the city’s rejection of his claim.

McHarris alleges Montano and Chua “maliciously and falsely accused” him in August 2022 of conspiring with the city clerk in addressing public records requests that would harm them politically. In retaliation for that, he said the duo worked with Mutalipassi to cut McHarris out of all public records requests going forward.

He claims Montano and former Mayor Rich Tran pressured McHarris to fire an employee without credible reasoning. When McHarris resisted, he felt their attitudes and behavior toward him shifted. He also claims Montano tried to pressure him to hire her friend to a city position.

Montano did not immediately respond to requests for comment. Tran previously denied all the allegations against him.

Jaffe said he is always open to a “reasonable and fair” settlement offer to put an end the case against Milpitas, but wouldn’t clarify how much the city might have to fork over.

“I am always open to mediating my cases. That’s the view from my side of the case. Is the city open to it? I don’t know, I get mixed messages from them on that,” Jaffe said.