East Lyme — Residents approved by majority vote on Tuesday a $650,000 settlement with New England National in which the development company will withdraw its litigation against the town and refrain from developing real estate in East Lyme for the next 20 years.

Under the settlement, New England National also will release all of the easements it controls on the town’s 301-acre Darrow Pond property and convey eight acres of the pond to the town, said Attorney Mark Block.

In addition, New England National, and its affiliates — the developers of land near the town’s Darrow Pond property — may not develop any remaining properties for the next 20 years under covenant enforceable in U.S. District Court. However, the developer can sell the properties to independent third-parties. The exception is a 3-acre property in town, owned by Anne Torrance.

The terms were reached at a mediation session last month before a court-appointed mediator in Bridgeport for the litigation in U.S. District Court.

First Selectman Paul Formica said the suit, including the $650,000 settlement, has cost the town more than $1.2 million in its more than a decade-long history.

“It is difficult to ask the town to make this kind of settlement, but I’ve come to believe it’s a necessary settlement that will end the litigation,” Formica told about 35 residents at the town meeting.

The majority vote to approve the $650,000 settlement was reached at the town meeting that lasted about two and a half half hours and was, at times, contentious — with several in attendance calling for the vote to be postponed to allow residents more time to review both the litigation and information presented at Tuesday’s meeting. Members of the boards of finance and selectmen sat at the front of the meeting room together as a sign of solidarity for the settlement.

New England National’s long-standing litigation against East Lyme began more than a decade ago, when the company had claimed in bankruptcy court that the town overvalued the assessment of its land.

While the town and the developer reached a compromise agreement in 2008, under which the developer received $250,000 from the town, the developer later claimed that the town did not uphold the terms of the agreement. The developer’s claims included that the town did not promptly obtain a permit from the Army Corps of Engineers for Mostowy Road and settled with its insurance company without the developer’s participation, Amanda Sisley, a lawyer representing the town, said at Tuesday’s meeting.

While the federal bankruptcy court dismissed several claims, the court allowed the developer to continue its proceedings, with additional claims against the town, in U.S. District Court, according to court documents. While some claims in the court case were recently dismissed, others continued. The allegations continue claims that the town breached the compromise agreement and that former town employees acted improperly and were not adequately supervised by the town. The litigation names former planning director Meg Parulis and former town sanitarian George Calkins, as well as attorney Edward O’Connell.

At Tuesday’s meeting, several residents asked questions about the complex litigation and the town’s actions.

Residents John Drabik and Karen Rak asked for the matter to go to town referendum and for residents to have time to consider information presented at the meeting.

Drabik asked for more information on the town’s decision in 2011 to settle with its own insurance company, an affiliate of AIG. In 2011, the town received $275,000 from the insurance company. The town paid $100,000 from that settlement to the developer, a term of the compromise agreement. New England National claimed in court that the town’s action violated the compromise agreement, since the town was supposed to work with the company to establish insurance coverage for claims by the developer against the employees.

Sisley said that the town acted in its best interest to settle with its insurance company and that New England National never formally filed complaints against former town employees. She said the applicable statute of limitations had passed, so New England National could no longer pursue the claims. She said the town has general liability insurance, but the terms of the settlement limited AIG’s exposure under insurance policies made to the town from 2005 to 2008.

Joe Mingo said he would vote in favor of the settlement, but added that there should have been more transparency over the last 14 years.

“No one has told the taxpayers in this town what is going on,” he said. “We’ve hid it under litigation and executive sessions.”

He said the issue began in 2002, when there was an “illegal filling” of the wetlands by Mostowy Road, which he said should have never happened. He said he called the Army Corps of Engineers about the issue, which he said he had every right to do as a member of the Inland Wetlands Agency.

Another resident, William Sawicky, called for the litigation to go back to the “bargaining table” because he said he had a claim to property on Mostowy Road, which he said would call into question the developer’s previous claim to certain rights.

k.drelich@theday.com

Twitter: @KimberlyDrelich