The city has agreed to pay $25,312.50 as its part of an out-of-court settlement of a lawsuit by six women fired from the police department three years ago after an investigation into alleged lesbian activities.

But Mayor Dick Eardley maintains the city was right in the way it handled the 1977 firings. "I would have liked to see the case through," he said.

Attorney Michael Donnelly said the settlement "vindicated" the women's position.

Donnelly and Eardley said the suit was settled because of "prohibitive" legal costs for both sides in continuing.

Police Chief John Church ordered an investigation in 1977 after citizens complained that members of the police department were carrying on in public as lesbians. The chief said this hurt department morale and efficiency.

The inquiry included tapping of a telephone line in the dispatch office. Police manuals say that line is for private conversations and not to be recorded. The women asked for $20 million damages for what they maintained was illegal wiretapping. a

The suit also named Mountail Bell Telephone Co., Chief Church and other police officers, but the agreement specified that the complete settlement would not be made public. The city's part was disclosed because it involves public funds.

The women at first wanted to regain their jobs as dispatchers, dog catchers and patrolwomen, but a federal judge ruled that would be disruptive to a small police department.