I had an odd occurrence during a Multiplayer 1vsAI game.  I took over the AI's only city early in the game without kill their Sovereign.  At this point my only city is the one I captured.  I then tried to create a new city with a different name(made sure the name was different).  When the new city was created it had the exact same name as the first city, couldn't expand and because it also couldn't be clicked on it would gobble up any units you sent into it.  The bug was reproducible by reloading an earlier save.

Later,
LAR