LINCOLN — The town has agreed to pay former finance director Douglas Stewart $250,000 to settle his wrongful-firing lawsuit against the town, town officials and Stewart’s lawyer said yesterday.

“The check has been cut and delivered to Mr. Stewart’s attorney,” Finance Director John Ward said yesterday.

The award is not covered under the town’s insurance policies. Ward said the town had estimated that the case would cost the town about $250,000, and had been earmarking surplus money to cover it. Ward said the amount was the product of negotiations between the town’s and Stewart’s lawyers and represented lost wages and interest.

Town Administrator T. Joseph Almond said the town had expected to have to settle with Stewart after the state Supreme Court had ruled against the town in 2005. In that decision, the high court overruled a lower court decision and found that then-Town Administrator Sue P. Sheppard violated the Town Charter when she dismissed Stewart from his job on Jan. 24, 2003.

The court ruled Sheppard fired Stewart without asking for his resignation, without giving him a reason for the firing and without allowing him to appeal the decision to the Town Council, as set forth in the charter. Sheppard had argued that finance director was a job outside the protections of the charter and that the charter had made her finance director upon her swearing in January 2003.

Stewart could not be reached for comment, but his lawyer, Monica Horan, said the settlement was a mutually acceptable end to the case.

Though the settlement ends the town’s exposure in the matter, Stewart still has an outstanding suit against Sheppard and former Town Council President Elizabeth Robinson in connection with his departure from town service.

In part because of that outstanding suit, Sheppard said she had no comment on the settlement.

The Stewart case was not the first time the courts ruled Sheppard exceeded her authority in removing an inherited official. When she took office on Jan. 3, 2003, she moved to dismiss prominent members of the administration of her predecessor, Jonathan Oster. The day after her inauguration, she announced the dismissal of Police Chief Robert T. Kells. Kells went to court and won a restraining order to prevent his immediate dismissal while he fought the case in court. The case went on for almost two years, until early 2005, when the state Supreme Court ruled in Kells’ favor

The state Supreme Court upheld a lower court ruling that said, under the Town Charter, Kells was not a conventional political appointee who could be dismissed with a change of administrations. He could be fired only for cause, and Sheppard had not specified any instances of Kells not doing his job to justify her decision, the court said.

Stewart had been hired on July 31, 2001, by Jonathan Oster. Sheppard dismissed him on Jan. 24, 2003. He, too, sued, and though he did not win a restraining order at the time, he eventually won the settlement.

The Kells and Stewart cases had some broad similarities, but there were differences in the facts. One argument Sheppard had used to justify Stewart’s firing was that he was not a resident of the town when Oster hired him. Stewart’s lawyers argued that by the time Sheppard fired him, the charter had been amended so that the finance director didn’t have to be a resident.

jhill@projo.com