Should the Huntington Beach City Council be able to contract with outside counsel if it feels the city attorney has a conflict of interest?

That question will be before voters in the fall.

The City Council voted nearly unanimously during its Tuesday agenda meeting to place a measure on the November general election ballot for residents to determine if it can do so. The ballot measure also clarifies the attorney-client relationship and requires the city attorney to keep all legal records to comply with requests for information.

The move comes on the heels of an age discrimination case involving city attorney Michael Gates last year. The city hired outside counsel in the case, since the city attorney’s office was involved.

It also retained an additional outside firm to conduct a probe into the city’s handling of the case overall. The City Council made that report public during a contentious meeting Tuesday.

Conducted by Craig Steele of the Richards, Watson & Gershon firm, the report did not find evidence of “any violation of the law” by Gates or any current members of his office.

But it did find a “lack of clarity” in the city’s charter regarding the responsibilities of both the City Council and city attorney, partially blaming the latter’s “overly aggressive assertion of the authority of his office” but still finding “responsibility also lies with members of the City Council.” Because of the “confusion,” the report recommended a “significant revision” of the city’s charter as well as an “education process” for the city attorney’s office, the City Council, and staff.

Gates had opposed the public release of the report, saying he wanted a chance to review its findings first. In a phone call with the Register, Gates alleged Steele had a conflict of interest given his past work with Councilman Dan Kalmick’s family and former city manager Oliver Chi. Gates also contended the report was supposed to be a review of how the city handled the discrimination case, not a “commentary and advice on how the city needs to update its charter.”

“The fact that he inserts himself into a charter discussion in the city of Huntington Beach is egregious and wrong,” Gates said. “The release of the report, the way it was released, was completely unprofessional and unethical, and it reeks of political motivation since the council clearly wanted it to be on the agenda the same night as the ballot proposal to amend the city attorney position and the city charter.”

But Councilwoman Rhonda Bolton said the report provides context for “systemic communication breakdowns (and) a lack of oversight” that made the council’s support for the ballot measure necessary.

“No department should be in charge of investigating itself if there’s an issue that is raised about that department,” Bolton said, noting language in the current charter is unclear on the authority the council has to retain outside counsel.

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Kalmick called the review an “operational audit.”

“What this was was to look at the operations of how this case was handled so the council could better understand how we don’t spend $1.5 million on something like this,” Kalmick said, referencing the legal fees paid on the age discrimination case. “The recommendations out of it are good for good governance.”

In the report, Steele disputed conflict of interest complaints, noting Huntington Beach has “ceased referring matters to RWG” and maintaining he will not accept assignments from the city in the future.

The City Council voted 6-1 to make the report public. Councilman Erik Peterson was the lone no vote, saying he did not take part in the report.

In addition to how the report was made public, Gates contended the City Council violated the law by hiring outside counsel for it anyway.

“The retainer of Craig Steele, the interactions with City Council over the past year, and the report are all in violation of the city charter,” Gates said. “The city charter gives me, the elected city attorney designated by the people, the exclusive purview of all legal matters of the city.”

“I’m surprised the council decided to publish evidence of charter violations. They know it’s a charter violation because of (the ballot measure item) on the agenda,” he said. “If council were right in hiring outside counsel, they wouldn’t need that outside counsel charter amendment. It’s evidence that they know hiring outside counsel directly was a charter violation.”

The report authored by Steele, the Monrovia and Seal Beach city attorney, said Huntington Beach was in need of a “periodic review process” for the City Council, city manager, and city attorney to improve their working relationships.

“The confusion, lack of clarity regarding roles, and evident distrust between members of the City Council, staff, and the City Attorney warrants a significant revision of the City’s Charter and policies, and an education process between the City Attorney’s office and the City Council and staff,” the report said. “I have remarked to the City Attorney and his outside attorney that, even though Mr. Gates is an independent elected official, the health of the attorney-client relationship in Huntington Beach needs more attention.”

Gates maintained Steele did not interview him, his attorney, or other appropriate parties to the discrimination case, including past City Council members, for the report.

“Mr. Steele’s investigation and subsequent report was woefully under-resourced and not complete,” he said. “And because of his bias and the under-resourced and incomplete nature of the report, it’s unreliable.”

In its review of the handling of the age discrimination case, the report found Huntington Beach spent more than $1.5 million in legal fees for a “relatively common and simple employment law case.” The report suggested that if city staff and the insurer had not noticed the rising costs resulting from the case, it was “not clear” that the city would have settled.

In May 2021, Huntington Beach paid $2.5 million to an employee and former employee who alleged age and disability discrimination. The city also spent more than $1.5 million fighting the complaint.

Gates has disputed the discrimination allegations.

“For years I worked with plaintiffs, and there was never a single mention by them to HR, their co-workers, or even their robust union representation of age discrimination — not a word,” he said. “If there had been, council would not have fought this case for two years and spent so much money preparing for trial.”

The City Council had directed Chi in April 2021 to work with Richards, Watson & Gershon on the review, according to Jennifer Carey, Huntington Beach’s public affairs manager. The city paid the firm $35,577 for the review through its general fund, Carey said.

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