A federal lawsuit by Union Gap's former city manager was dismissed Tuesday, but her attorney said he expects to proceed with a separate case in Yakima County Superior Court.

Kathleen Holscher, a 28-year city employee, lost her job in 2005 when the City Council voted to cut funding for her position.

Holscher said she suspected she was let go in retaliation for reporting that former Mayor Dan Olson had illegally purchased water meters. Olson was forced to resign, but was re-elected in 2001.

Other council members earlier denied any retaliation, saying that employees and residents were unhappy with Holscher's performance.

She filed the lawsuit in April 2007 in U.S. District Court, alleging that the termination violated her constitutional rights.

Holscher contends that then-Mayor Aubrey Reeves was the only one with the authority to fire her. Reeves had rejected the council's budget proposal, but later put Holscher on leave in a move intended to ease tension at City Hall.

Her attorney, Paul Burns of Spokane, said Judge Edward Shea ruled that the dispute about the mayor's authority fell solely under state law.

Burns said he has already filed a legal claim with the city that would allow him to pursue a lawsuit in Yakima County Superior Court on those grounds. The city has until next month to act on the claim; if it's denied, the lawsuit could proceed.

Because another lawsuit is pending, Councilman Dan Olson said he had no comment about the dismissal of the federal case.

Burns said he expected the state lawsuit to focus on the council's authority, rather than the alleged retaliation.

Holscher spent four years as city manager and had previously served in several positions. The council has since restored funding for the city manager's job.