The District government has agreed to pay at least $1 million to settle a lawsuit filed by the family of Thomas F. Hamlette Jr., an off-duty D.C. police officer who was killed outside a nightclub in July 1998 by another off-duty officer.

The agreement was reached Monday, just before a trial was to begin in U.S. District Court that would have painstakingly reviewed the controversial episode. D.C. officials admitted no wrongdoing but said they wanted to avoid further division.

Hamlette, 24, had just left The Club, a K Street NW nightspot co-owned by his father, when he got into a fight with a patron and took out his department-issued pistol, according to a police investigation. In a struggle, the gun fired, and another off-duty officer, William F. Hyatt, intervened. Hyatt shot and killed Hamlette without realizing he was a fellow officer, the investigation showed.

The killing, which took place early July 18, 1998, had an especially powerful impact in police circles because both officers came from police families. Hamlette's father is a retired D.C. police officer, and his sister is on the force. Hyatt's father is a crime scene officer. The case also marked the third time in three years that a white D.C. police officer had mistakenly shot a black officer.

Police Chief Charles H. Ramsey ruled Hyatt's actions were justified, but he also found that Hamlette had died in the line of duty because he appeared to be taking police action in the scuffle with the patron. Ramsey called the matter a "lose-lose situation."

But the family's $14 million lawsuit says D.C. police did not have adequate procedures in place to show officers how to identify themselves to other others and accuses Hyatt of using excessive force and of failing to identify himself or to show his badge.

Attorneys with the D.C. corporation counsel's office defended Hyatt's conduct in court papers, quoting a club security guard who said Hyatt repeatedly told Hamlette to "drop it, please," and to "freeze." That witness said Hyatt had no choice but to use his gun because Hamlette was coming toward him. The District's attorneys argued that Hamlette's actions contributed to his death and alleged that he was under the influence of alcohol.

But Gregory L. Lattimer, an attorney for the Hamlette family, said he had witnesses who would testify that Hamlette was on the ground when he was shot and had no opportunity to resist. Lattimer said Hyatt fired seven times, hitting Hamlette four times in the torso and wounding two other people on the street.

Hyatt, 30, has been on paid leave since the incident. He has insisted that he identified himself as an officer and that events unfolded so quickly that he had no opportunity to show a badge. The U.S. attorney's office cleared Hyatt of any criminal misconduct.

Lawyers did not reveal the amount when they informed Senior U.S. District Judge June L. Green of the settlement and put no details in the court record. Sources later confirmed that the District will pay about $1 million to the family.

D.C. Corporation Counsel Robert R. Rigsby said the agreement was "a resolution to a very difficult set of issues involving the police department."

William R. Martin, Hyatt's attorney and a former federal prosecutor whose duties once included reviewing police shootings, said that the killing was "one of the most tragic situations I've ever seen" but that Hyatt took "appropriate action, based on the facts as he knew them."

Lattimer said Hamlette's parents, Thomas and Pauline Hamlette, "didn't want to go through the trauma of a trial. They got something they could live with, and so they took it. They felt it was fair under the circumstances. They've been through a lot."

CAPTION: Thomas F. Hamlette Jr. with his parents, Pauline and Thomas Hamlette.