Lord mayor Nuatali Nelmes is seeking $100,000 in damages over electoral flyers she claims contain defamatory information about her.
Cr Nelmes believes the flyer, which lists a number of decisions or acts she has allegedly made or been involved in during her time on council, is "demonstrably false and defamatory" and part of a "smear campaign".
The flyer has appeared in letterboxes in at least Ward 1.
One side of it is headlined "Nuatali and Labor's record: WASTING YOUR MONEY".
It features four bullet-point style bits of information, presented as Labor's record, on rates, fees, parking revenue and consultant spending.
The other side features 13 pieces of information specifically targeting the lord mayor and a headline "NUATALI, Who is paying for all of this?".
It is this information which Cr Nelmes considers most defamatory.
The flyer says written and authorised by Paul Murphy, the managing director of Churchill's Carpet Court and former chairman of an advocacy group which mounted a political campaign against Labor MP Jodi McKay in the 2011 state election.
When approached about the flyer, Mr Murphy told the Herald to "contact [councillor] John Church about that". He later, after receiving a letter from the lord mayor's lawyer, said "no comment".
Cr Church, the Newcastle Independents lord mayoral candidate, said he would not be commenting "as legal action has commenced".
Cr Nelmes alleges the flyer has been distributed with a how-to-vote John Church pamphlet.
She is believed to be seeking $100,000 in damages from Mr Murphy and her lawyer has issued cease-and-desist instructions and requested a public apology.
"This is not a new tactic from Paul Murphy," she said.
"The flyer is demonstrably false and defamatory and, I have been forced to engage a lawyer to defend myself against Paul Murphy's untrue smear campaign.
"The question needs to be asked, who paid for these ... flyers ... that are being delivered with John Church flyers?"
It is not known how many flyers were distributed.
Records on the NSW Electoral Commission website for third-party campaigners, who must register if they spend more than $2000 attempting to influence voting, did on Tuesday not list Mr Murphy's name.
Cr Nelmes threatened to sue Nathan Errington, a former Hamilton business chamber president, in October over a now removed Facebook post.
