Can you handle the truth?

In urging City Council last December to approve new four-year contracts with the public safety unions, City Manager John Russo came up with a last-minute argument calculated to quiet the budget conservatives.  True, Mr. Russo admitted, the contracts would increase police and fire costs by a minimum of $1.6 million over four years.  But they would also resolve a festering grievance filed by the firefighters’ union that the City was likely to lose and that would drain $7.1 million from the municipal coffers during the term of the contracts.

The first the public had heard of any union grievance was two business days earlier.  With so little information having been provided so late, few could challenge Mr. Russo’s argument.  Even City Treasurer Kevin Kennedy, an ardent advocate for austerity, was forced to concede that paying a net $1.6 million in compensation was better than paying $7.1 million in damages.  If the City’s legal position was truly as weak as Mr. Russo described it, Council really had no choice other than to take the deal to which the unions generously had agreed.

But was the City’s case in fact so indefensible?  Not according to a written analysis prepared by Mr. Russo’s immediate predecessor, acting city manager Lisa Goldman, who had worked for the City since 2007 and whom Mr. Russo had made his second-in-command after he became city manager.  Indeed, in her view, the City, not the union, held the stronger hand.

Back in 2010, after holding a hearing at which negotiators for both sides participated, Ms. Goldman concluded that the provision upon which the grievance was based had been included in the contract by mistake, as the City’s negotiators contended.  The union’s contrary arguments, she found, were neither persuasive nor supported by the record.

Of Ms. Goldman’s findings and conclusions Mr. Russo said nothing either in the staff report or at the public hearing.  By omitting any reference to a well-reasoned analysis by a well-respected City official, Mr. Russo was able to present a one-sided case supporting the result he was recommending.  It might not have made any difference to a Council poised to approve whatever contracts the police and fire unions already had ratified.  But the public – or at least those of us outside the Inner Ring – were, to put it most politely, sold a bill of goods.

The Merry-Go-Round learned about Ms. Goldman’s report when the City responded to our public records request for documents relating to the grievance.  (We had been struck by the similarity of the circumstances – a contract term included allegedly by mistake – underlying the grievance and those involved in the current dispute between BART and its unions).

To Mr. Russo’s credit, he did not instruct staff to withhold the Goldman report from the City’s response to our request.  And, as he always does, he replied to our follow-up inquiries promptly.  But his explanations – which we’ll paraphrase now and reprint in full here (RTS-Russo emails) – fall far short of satisfactory.

  • Why not make the Goldman report public when you were releasing a memo from the current city attorney supporting your position?  I didn’t know the Goldman report existed until you brought it up, Mr. Russo said.  Besides, Ms. Goldman’s not an attorney.
  • All right.  Then why not at least tell the Council and the public that Ms. Goldman had held a hearing and found that the grievance lacked merit?  Because I assumed that everyone at City Hall already knew prior staff’s position on the grievance.  But it doesn’t really matter.  Prior staff was wrong and my staff and I were right.

With all due respect, this incident marks yet another instance in which Mr. Russo has displayed a disturbing disdain for public discourse.  It’s as if he can’t resist channeling Jack Nicholson as Col. Jessep in “A Few Good Men.”  “You want answers?” Col. Jessep demands of his tormentor, Tom Cruise as Lt. Kaffee. “I want the truth,” Kaffee responds.  Snarls Col. Jessep (in classic Nicholsonian fashion): “You can’t handle the truth.”

Well, the Merry-Go-Round thinks our readers can handle the truth.  Had the City Manager chosen to lay all the cards on the table, here’s what the public would have learned:

The Memorandum of Understanding (“MOU”) between the City and IAFF Local 689 that was in effect from October 2001 through January 2008 contained a section entitled, “Same Level.”  Sub-section 28.1 provided that, if the City granted an increase in wages or benefits to any other public safety union, it would give the same increase to the firefighters.  But sub-section 28.2 then provided that the “me, too” clause would not apply if the police unions got “retention pay” or other wage or benefit increases as the result of resolving outstanding issues relating to retirement benefits.

This MOU was superseded by a new contract that covered the period through January 2010.  The 2008-10 IAFF MOU also included a section entitled, “Same Level.”  But this section contained only a paragraph labeled 28.1, whose language was identical to sub-section 28.1 in the prior contract.  Sub-section 28.2 was omitted entirely.

Council approved the 2008-10 IAFF MOU in August 2009.  As it happened, back in March, the City had entered into a new contract with the police officers’ union that provided for retention pay and a uniform allowance.  After the 2008-10 IAFF MOU was approved in August, the firefighters’ union demanded that the City give its members the same retention pay and uniform allowance granted to the cops in March.  Stating that section 28.1 had been retained in the 2008-10 IAFF MOU “due to a clerical error,” City Human Resources Director Karen Willis denied the demand.

The firefighters’ union filed a grievance with Fire Chief Dave Kapler.  The chief rejected the grievance for the same reasons stated by Ms. Willis.  The union then submitted the grievance to Interim City Manager Ann Marie Gallant and requested a hearing.  Ms. Gallant appointed Ms. Goldman to conduct the hearing, which she did on January 14, 2010.  Both Fire Chief Kapler and IAFF Local 689 president Dom Weaver participated.  On March 5, 2010, Ms. Goldman rendered her findings and conclusions.

She began by pointing out that it made no sense to leave only one of the two sub-sections of Section 28 in the 2008-10 IAFF MOU.  Keeping them both or deleting them both would produce the same result: no additional pay for the firefighters based on the police union contract.  In either case, section 28.1 “would be render[ed] null and void.”  Further, she noted, “it stands to reason” that if the City had intended to retain only one of the sub-sections of former Section 28, “it would not number it 28.1, implying there was also a 28.2.”

Ms. Goldman then looked to the written record of the parties’ negotiations.  The “last, best, final” offer made by the City “clearly states that they intended to delete Section 28 entirely.”  Likewise, the IAFF made a new proposal in place of Section 28, “which implies that they, too, intended to delete the language of Section 28.”  (The documents provided by the City in response to our public records request confirm Ms. Goldman’s description of their contents).  For these reasons, she concluded that “the presence of only a portion of Section 28 (Section 28.1 but not Section 28.2) in the MOU was indeed the result of a clerical error.”

Finally, Ms. Goldman turned to the firefighters’ union’s arguments, which she found “are neither persuasive, nor are they supported by the record of these negotiations.”  None of the other public safety union MOUs contains a “me, too” clause, she said, and it was “unlikely that the City intended to keep this language in place for only one public safety bargaining unit.”  Accordingly, based on her analysis of the evidence presented at the hearing, she recommended that the grievance be denied.

Relying on Ms. Goldman’s findings and conclusions, Ms. Gallant again denied the grievance.  The union then sought review by an Adjustment Board.  On June 18, 2010, the Board, which consisted of three union representatives (current Planning Board member Mike Henneberry and a current and retired IAFF member) and three City representatives, reported that they were “unable to reach agreement.”  The union took steps to initiate arbitration, but the parties apparently could not agree on an arbitrator and the matter remained in limbo after August 2010.

We do not know whether, or to what extent, the parties discussed the grievance during the negotiations for the four-year public safety contracts presented to Council last December.  We do know that the staff report recommending approval of the contracts did not cite resolution of the grievance as a reason for approving them.  Indeed, it did not mention the grievance at all.  In fact, the first the public heard anything about a grievance was when City staff released a memorandum by assistant city attorney Stephanie Garrabrant-Sierra on December 9, the Friday before the Tuesday meeting at which the contracts were to be presented to Council.

The memo recited the procedural history of the grievance.  It then reported that “[i]t is our understanding” that former Fire Chief Kapler, former Interim City Manager Gallant, and former Human Resources Director Willis were prepared to testify that the parties intended to remove the “me, too” clause from the 2008-10 IAFF MOU and that its inclusion was a clerical error.  (By this time, both Chief Kapler and ICM Gallant had been fired and had sued the City for wrongful termination; Ms. Willis also was no longer employed by the City).  But it did not disclose that Ms. Goldman had reached the same conclusion after conducting a hearing in January 2010.  Indeed, it did not mention Ms. Goldman’s analysis at all.

The memo went on to discuss the legal issues in a way that wouldn’t have passed muster in a first-year law school contracts class.  According to the memo, the issue was one of contract interpretation – i.e., what did the language in the contract mean?  In fact, the issue was one of contract formation – i.e., what did the parties agree to?

In any event, the memo declared that “our assessment” is that testimony by Chief Kapler, Ms. Gallant, and Ms. Willis “would not be persuasive.”  Moreover, “contemporaneous notes” supported the union’s position.  (After we asked Mr. Russo to identify these notes, City Attorney Janet Kern sent us a three-page typewritten document with handwritten marginal annotations [Notes cited by Kern].  According to Ms. Kern, the “contemporaneous notes” supporting the union’s position consist of the word “No” in the margin next to numbered paragraph 16.)  Finally, the memo pointed out that section 28.1 was also included in the 2010-13 IAFF MOU. (Actually, the language contained in section 28.1 is now found in section 27.1, but this fact at least provides fodder for an estoppel argument).

The bottom line was that “the City has significant exposure on this grievance,” which staff “valued . . . at approximately $4.5 Million.” (Inexplicably, the worksheet attached to the memo – at least in the form in which it was made public – set forth the $7.1 million figure later used by Mr. Russo).

When it came time to seek Council approval of the new public safety contracts, the grievance issue was the focus of the staff presentation and Council discussion.  After throwing out the numbers — $3.686 million owed through June 30, 2013 and $7.149 million through June 30, 2017 — Mr. Russo declared that, “Our attorneys – and I share their opinion – believe that we are likely to lose” if the union pursued the grievance.  He gave no hint that the deputy city manager at the time had held a hearing and come to a different conclusion.

Then, demonstrating once again his considerable skills as a salesman, Mr. Russo argued that, by approving the new contracts. the City actually would be saving money – and not just nickels and dimes but a total of $5,564,183 over the term of the contracts.  He got this number by subtracting the net costs of the contracts from the staff-projected “exposure” created by the grievance.  To him, the additional net costs imposed by the new contracts were a small price to pay in order to “limit” and “amortize” the liability resulting from the grievance and thereby to “prevent” a “cash flow crisis” that would require dipping into reserves.

It was indeed a masterful performance.  Left unasked and unanswered were a couple of basic questions:  Why would Ms. Gallant, an inveterate penny-pincher, agree to leave in a provision that would immediately trigger a liability running into the millions of dollars?  And why would the firefighters’ union, now firmly ensconced in the driver’s seat, settle a slam-dunk claim worth $7.1 million in damages for only a net $1.6 million in additional compensation?

None of the union supporters who spoke at the meeting touched these issues.  Three of the four sitting Council members bought into Mr. Russo’s arguments whole hog.  So, too, did newly elected Council members Stewart Chen, D.C. and Marilyn Ezzy Ashcraft, both of whom had been endorsed by the firefighters’ union and both of whom came to read statements in support of the contracts.

Even former Councilman Rob Bonta, who had resigned his seat when he was sworn into the State Assembly, showed up to offer his blessing for the contracts.  And IAFF Local 689 political director Jeff DelBono, who negotiated the 2008-10 MOU for the firefighters, delivered the coup de gras.  “I was in the room” when the contract was negotiated, DelBono said.  “It’s their word against ours, I guess.  But I can tell you right now somebody’s either lying or they’re very incompetent.”

Poor Mr. Kennedy was left to fend off Councilwoman Lena Tam’s suggestion that he preferred to spend $7.1 million rather than $1.6 million to resolve the grievance.  Councilman Doug DeHaan voiced his objections in vain.  And the two public speakers who urged Council to take a more deliberate course – such as giving the public the facts about the previously undisclosed grievance and more than two business days notice of its existence – wasted their breath.

The fire truck driven by the union had left the station.  And no one was willing to slow it down to reveal that Ms. Goldman and her report had been run over in the rush to get the contracts approved.  (This urgency is itself hard to understand, since the contracts did not expire for another six months).  All the public could do is wave when it passed by.

In his email responses to the Merry-Go-Round, Mr. Russo saw nothing to apologize for.

Not making the Goldman report public?  He didn’t even know it existed, Mr. Russo says.  In any event, “Ms. Goldman is very bright and an excellent civil servant, but she is not an attorney.”

True enough.  But Ms. Goldman was analyzing a question of fact, not a question of law:  Did the parties agree to keep section 28.1 in the MOU?  As Mr. Russo – who is an attorney – should know, a jury made up of laypeople decides issues of contract formation.  So Mr. Goldman’s report represents the verdict of the “very bright” juror who heard the evidence.  It deserves no less attention from the public than a memo recently put together by an assistant city attorney.

Not disclosing that Ms. Goldman previously held a hearing and made findings contrary to the position taken by Mr. Russo and his staff?  It was “widely known,” Mr. Russo says, that “former City executive staff contended that the IAFF grievance posed no financial threat to the City.”  Or, as he later put it, “I have assumed that everyone here at City Hall was aware of the conflict between IAFF and Ms. Gallant.  Perhaps I should be more careful and therefore I would say I don’t know, but rather I surmise the Council knew [of her position on the grievance].”

Frankly, we’re getting a little tired of hearing those in the Inner Ring assert that “everyone knows” something that, in fact, they never told the public (even though they may have “known”—and even exchanged emails about — it themselves).  Mr. Russo is hardly the only one who employs this tactic.  But here’s a plea to him and Mr. Knox White:  If a fact doesn’t appear in a public document or it isn’t stated at a public meeting, don’t assume that “everyone knows” it.  In fact, assume the public doesn’t know it unless and until you tell us.

And we’re compelled to point out that the Goldman report was not the biased diatribe of a deposed city official.  We do not doubt that the Mayor and her allies made Mr. Russo well aware of their contempt for Ms. Gallant.  After all, they fired her!  So maybe it was natural for him to decide there was no point in elaborating upon her conclusions about the grievance for this Council.

But Ms. Goldman’s reputation for integrity was impeccable.  Indeed, Mr. Russo had kept her on board when he took over.  Even if she was reporting to Ms. Gallant rather than to Mr. Russo when she conducted the hearing and wrote her report, there is no reason to suspect her findings were other than objective.  Didn’t the public deserve at least to know what she had found? And if Mr. Russo disagreed with her, wasn’t the public at least entitled to know why?


March 5, 2010 analysis by Lisa Goldman: Lisa Goldman analysis

December 4, 2012 memo by Janet Kern attaching memo by Stephanie Garrabrant-Sierra: Legal Memo Re_ Grievance Dispute

December 11, 2012 staff report: 2012-12-11 staff memo re IAFF MOU

E-mail correspondence with John Russo: RTS-Russo emails

Document provided by Janet Kern: Notes cited by Kern

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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