I recently started a new huge Earth map only to find that the computer had decided to place the city-state of Sidon right next to my settler. Or, to be precise, to generate a settler for Sidon right next to my settler. If I found a city there (which bumps their settler a hex away) this completely breaks the AI and renders the city-state a complete dud who does not start a city or do anything at all. The lone settler stands there motionless for the remainder of the game and does not operate at all. I got a notification for meeting Sidon as soon as the game started but it would not bring up the panel for them (the interface can be brought up under the diplomacy menu, however). Declaring war then moving my warrior over the settler delivers a notification that Sidon has been eliminated but no trace remains other than the now captured worker. Admittedly a very rare occurrence, especially on a huge map. Failing to found a city on the first turn lets the city-state found their town and operate normally though.