The two-year-old allegations are as scandalous as they come: Mayor Jerry Sanders or one of his deputies fired a high-level city of San Diego employee because he was helping investigate contracting involving one of the mayor’s supporters.

And the lawsuit that makes those allegations doesn’t show signs of going away.

Last month, the City Council approved an additional $250,000 to defend the case on top of the $200,000 the city has already spent on outside attorneys. The $450,000 cost doesn’t include more than a year of work by the City Attorney’s Office before it bowed out of the case. A trial date in San Diego Superior Court has been set for Oct. 7.

The city’s outside lawyer, Janice Brown, said the money for her bills is well spent. The former employee’s current settlement offer is at least three to four times the entire bill, she told the City Council.

The gulf between the two sides is as wide as the allegations’ seriousness.

Former city deputy economic development director Scott Kessler filed suit in July 2009, alleging the Mayor’s Office directed him to bend contracting rules to favor Marco Li Mandri, a well-known civic leader in the city’s Little Italy neighborhood and a Sanders supporter. Kessler says he refused. Kessler also argues the Mayor’s Office ultimately fired him after he gave a copy of a joint FBI and San Diego Police Department investigation he obtained about Li Mandri’s involvement in a North Bay parking and business improvement district to the city’s Ethics Commission. (That criminal case never came to anything. San Diego District Attorney Bonnie Dumanis’ office didn’t pursue charges in that case, and Li Mandri has denied any wrongdoing.)

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Sanders’ office says it never told Kessler to improperly favor Li Mandri. It maintains Kessler wasn’t laid off for his cooperation with any investigation. Instead, it argues it laid off Kessler, along with numerous other high-level managers, as part of mid-year budget cuts in 2008.

The lawsuit has been contentious and included a rare deposition of Sanders. The mayor has denied repeatedly all of the allegations including as recently as in an interview last week. Brown, the city’s outside attorney, said the same to City Council last month.

“We believe that we’ll have an opportunity in front of a jury to show that they’re not true,” she said. “That’s why we’re opposing it.”

But for the last eight months, the case hasn’t focused on these scandalous claims. Instead, both sides have fought primarily over an administrative issue: whether Kessler needed to complain formally to the city’s Ethics Commission about his firing before filing suit.

This legal defense, Brown said, not only protects the city in this case, but also sets a precedent for any future employment lawsuits against the city. If successful, she said, it could save the city time and money going forward. Brown, who is a former federal Justice Department attorney and former board member of the city’s downtown redevelopment agency, added she has cut her hourly rate almost in half to $260 for her work on the case. Through the end of May, lawyers at her firm had spent more than 700 hours on the lawsuit, invoices show.

Settling the case hasn’t been an option because Kessler is asking for too much money, Brown added. His most recent settlement offer is for $1.5 million. The city hasn’t bothered countering.

“Do you respond to that in real numbers or do we say, ‘You’re out of the stratosphere?’” Brown said in an interview.

Kessler’s attorney, Joshua Gruenberg, said the city should bother with a counter offer. It’s typical for plaintiffs to take less than their initial demand, he said. Gruenberg added that he made his first settlement offer in November 2009 for less than $1 million. The cost has increased because of all the hours he’s worked since.

“I don’t know if I’ve ever spent more time on a case than this one,” Gruenberg said. He added he believed Kessler would prevail in court.

Regardless, both Gruenberg and Brown said they were open to settlement talks before the Oct. 7 trial. A lot of legal issues remain. Gruenberg is trying to depose the mayor for a second time and Brown is fighting it. The question about Kessler needing to make a formal complaint about his firing to the Ethics Commission before filing a lawsuit is unresolved. Then, of course, there’s Kessler’s actual wrongful termination claims to decide.

Asked if the cost of defending the lawsuit was justifiable, Sanders replied, “I would imagine you would want an attorney defending you if you were sued also.”

Correction: We’ve corrected the headline and beginning of this story to provide a better description of the kind of allegations made in the lawsuit. Thanks to commenter Brant Will for noticing the mistake and we regret the error.

Please contact Liam Dillon directly at or 619.550.5663 and follow him on Twitter:

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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