If I recall the details correctly, Reynolds was an applicant for the job Gissiner got, then she stayed on in her former position, subsequently being fired by Gissiner.
Now, is it any surprise that the person who got the job would find some reason to fire his main potential rival? No, not at all, nor is it a surprise that she'd sue.
The sensible procedure for the City would have been to recognize the all too common political and personal dynamics in Reynolds's firing, and compensate her, without throwing away even more money in fighting what was almost a slam dunk on Reynolds part.