Milpitas: Ex-city manager sues city, alleges former mayor exchanged endorsements for political favors

The council voted not to renew Steve McHarris' contract earlier this year.

MILPITAS — A new lawsuit from former City Manager Steve McHarris alleges that ex-Mayor Rich Tran exchanged endorsements for political favors and that he and current Mayor Carmen Montano overstepped their authority by trying to get a city employee fired — accusations that Tran vehemently denies.

McHarris, who was hired in June 2019 and left in February after the Milpitas City Council decided not to renew his contract, filed a lawsuit against the city in Santa Clara County Superior Court last week. He’s seeking at least $25,000 in damages, claiming the council violated a provision in his contract that barred them from taking action on his employment within six months of an election, and that they essentially terminated him without cause and frequently scheduled unsanctioned performance evaluations.

In early November 2021, McHarris began observing conduct of city officials that he “believed to be unlawful and/or unethical,” the lawsuit said.

Tran, Montano — who was vice mayor at the time — and then-Councilmember Evelyn Chua expressed concerns about an individual who had been recently hired in the city’s Office of Economic Development, according to the lawsuit. They accused McHarris of nepotism, claiming the staff member was friends with Councilmember Anthony Phan, and said the individual was fired from a previous job “for racial reasons.” Tran and Montano allegedly demanded the individual be fired — a power outside the scope of councilmembers’ jurisdiction. At the time, McHarris informed them it would be considered a personnel matter that staff would handle. Former City Manager Chris Diaz later sent out a “warning memo” to the council about the legal issues of elected officials “pressuring McHarris to fire any employee.”

McHarris also alleged in his lawsuit that Councilmember Hon Lien told him in late 2022 that during the most-recent election cycle, Tran had offered herself and “more than likely” Montano, Councilmember Gary Barbadillo, Dipak Awasthi and Juliette Gomez “his active campaign endorsement, which included his active social media platforms, and walking city precincts door to door, in exchange for the successful candidate’s commitment, if elected, to remove McHarris as their first order of business.”

Lien refused and Tran “demanded she remove his name from her campaign materials,” the lawsuit said.

Tran told The Mercury News he didn’t pressure the former city manager to fire anyone, nor did he try to exchange endorsements for a promise to fire McHarris.

“I’m not an official at all,” he said. “I’m just a citizen. I’m only responsible for things that happen while I’m there. I’ve been completely gone and enjoying my life.” Tran termed out of office at the end of 2022.

Starting in early January 2022, Tran began requesting performance evaluations for McHarris, despite him having a scheduled evaluation in April that was set in his contract. According to the lawsuit, McHarris felt it was “inconsistent with past practice” and “constituted further wrongful workplace retaliation” for previous disputes with the former mayor. Several evaluations were held without McHarris present.

“From April through May 2022, Tran, Montano, and Chua rebuffed and sabotaged McHarris’ attempts through facilitator Rod Gould to schedule a legitimate facilitated 2022 performance evaluation per the terms of his Employment Agreement,” the lawsuit said.

Gould told McHarris that attempts to schedule the evaluation with the councilmembers were unsuccessful ,and that it seemed as if they didn’t want to participate.

In a charge against the current mayor, McHarris said in his lawsuit that Montano, as well as Chua, “pressured” council retreat facilitator Christine Butterfield in January 2023 into changing the agenda to eliminate the city manager’s presentation. She later told McHarris the retreat was the “most difficult she has encountered” Chua and Montano.

Butterfield said the pair had a “fundamental misunderstanding of the council-city manager form of government, their respective roles, especially Montano sought far greater authority that exists over the city manager,” the lawsuit said.

A city spokesperson and Montano both declined commenting on McHarris’ claims, citing a policy not to comment on ongoing litigation.

On Feb. 3, 2023, City Attorney Michael Mutalipassi told McHarris’ staff that the council was forming a subcommittee to replace him. The council had voted the previous day not to renew his contract.

“McHarris removed most of his personal effects from his office the following day to avoid the shame of being walked out of the building by security personnel,” the lawsuit said.

McHarris originally filed a claim with the city in May, and according to a summary of facts appended to the lawsuit, Mutalipassi offered $10,000 at the latest settlement negotiation between the two parties. McHarris’ counteroffer, which was not disclosed, was denied by the city attorney who said “bargaining has run its course, further bargaining cannot be done in good faith,” according to the lawsuit.

McHarris and his lawyers believe the attorney “acted unilaterally” without first consulting with the council during a closed session meeting.