South Lake Tahoe City Council on Tuesday opted not to approve and pay a contract with the firm that reviewed city leadership prior to the resignation of the former city manager.

There was clear frustration on the part of councilmembers as they attempted to discuss an agreement that was initiated in closed session without violating the confidentiality of what was said in closed session.

Mary Egan of Municipal Resource Group was hired following council direction last fall "to assist with the pending assessment of the City leadership effectiveness, the culture of the senior management team, succession planning status and related issues," according to an Oct. 9 letter.

Egan presented her findings in an oral report to council on Jan. 23, former City Manager Nancy Kerry was placed on indefinite paid leave on Feb. 6, and on March 6, council accepted Kerry's conditional letter of resignation.

At Tuesday's meeting, an amended version of the agreement with MRG came before council for the first time in open session. The original agreement never came before council in open session either, but was made public by the Tribune through a records request.

The amended agreement, dated Nov. 16, included an increased fee from $11,500 to $14,000 for an additional 10 hours of work beyond what was originally agreed to.

"My concerns are that we entered into the contract inappropriately," said Councilmember Brooke Laine. "However, it was a majority decision that this firm would be hired."

In April, Laine released an open letter to the community alleging that council had violated the Brown Act multiple times, including in its handling of this contract. The letter prompted Mayor Wendy David to ask for an investigation by the District Attorney.

"I've been told by legal counsel that the remedy of fixing a potential violation of the Brown Act is to fix it, and fixing it is bringing it out into public and having that discussion," said Laine. "You're putting us in a box. You're saying fix it and talk about it publicly, but we can't talk about it. How do we fix this publicly without talking about it?"

This discussion came a day after City Council underwent Brown Act training in which members were advised that frequent closed-door conversations erode the public's trust.

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Interim City Attorney Nira Doherty said she did have some concerns with "how the contract was authorized."

"It was originally brought forward in closed session with your prior city attorney [Tom Watson]," said Doherty. "It's not the manner in which I would have brought it forward, however, the council wanted to further this contract…we are bound to the direction that was provided in closed session to retain this firm, and I don't know that there is much more we can speak about without risking confidentiality surrounding the contract itself."

A motion to pay MRG for the originally agreed upon price of $11,500 failed with councilmembers Austin Sass and David voting in favor of paying and Tom Davis and Laine against. Councilmember Jason Collin was not present due to a work obligation.

Laine put forward a second motion, which was seconded by Davis, that council decline payment to MRG due to "breach of contract."

"The contract is not complete. There is no 'summary written report,'" said Davis, referencing the agreement letter with MRG.

The reason for a lack of a written report is unclear. Both Sass and Doherty alluded to conversations in closed session that would explain why no report was produced.

"My recollection is that the discussion about the written report happened in closed session, and we probably can't have that discussion in open session. And everyone sitting here was part of that conversation," said Sass.

"I think it's a legitimate position that some of the representations of materials that were going to be provided were not provided," noted Doherty. "But I also think that there might be additional circumstances, as councilmember Sass suggested, explaining why those additional materials are not being provided."

In order to prevent a lawsuit from MRG for failure to pay the contract, Doherty advised council to authorize the contract subject to the completion of the original terms.

Ultimately Laine withdrew her motion to not pay at all, but did not want to put forth another.

Council decided that a subcommittee of Davis and David would meet with MRG to decide if they wanted to commission a written report.

"My firm can provide advice on what the implications of a written report might be," said Doherty.

Should the written report become public, it could trigger a lawsuit from former City Manager Kerry with whom the council agreed to a non-disparagement clause.

In an April 18 cease and desist letter, Kerry's attorney Jacqueline Mittelstadt accused Sass of disparaging Kerry in a quote from a Tribune article. The quote did specifically reference the city manager or Kerry by name.

In that same letter, Mittelstadt warned that if Egan's summary is made public and includes anything "negative, defamatory or critical" of Kerry, it would breach the settlement agreement and potentially the Brown Act.

"Further, any report or summary either oral or written describing Ms. Kerry's performance in any way is constitutionally protected under Ms. Kerry's right to privacy regarding personnel matters and the contents of such would not be a public document or for public dissemination," wrote Mittelstadt.

Once Davis and David meet with MRG and determine how to proceed with the written report, the contract will be agendized again for discussion and possible action.