Three co-plaintiffs suing the city of Ann Arbor over an underground parking structure project on South Fifth Avenue have agreed to settle the case out of court.

City Attorney Stephen Postema confirmed today the plaintiffs have decided to dismiss their case with prejudice without any cost to the city. He said a settlement agreement is expected to be finalized and signed this afternoon.

Jerusalem Garden was one of the co-plaintiffs in the lawsuit.

Details of the settlement have not yet been released.

Two downtown businesses and a nonprofit agency brought suit against the city last August in Washtenaw County Circuit Court.

The Herb David Guitar Studio and Jerusalem Garden claimed the construction of the parking structure would have a devastating impact on their businesses and the surrounding environment.

The Detroit-based Great Lakes Environmental Law Center also alleged the city violated the state's Open Meetings Act when Ann Arbor City Council members, at a meeting on Feb. 17, 2009, traded e-mails with each other pertaining to the project.

“It was determined through this private e-mail discussion which City Council members opposed postponement and which members supported postponement and what would be the likely result of a vote on the matter,” the lawsuit stated. “Having made these determinations in private, a motion for postponement was never brought or publicly discussed and voted on by the full City Council in open as required by the Open Meetings Act.”

The Law Center also claimed the city violated the Freedom of Information Act when, in response to a FOIA request filed in March 2009, the city didn't provide the e-mails between council members. The city since has turned over those documents.

The plaintiffs had sought a declaratory ruling from the court saying the project was approved in violation of the Open Meetings Act and the Freedom of Information Act. They asked for an invalidation of the site plan and an injunction to stop the construction of the parking garage until further studies could take place.

Postema said the city has worked cooperatively with the plaintiffs to resolve all of their concerns. He noted that the city never was formally served with the complaint.

"Once the plaintiffs and the city fully discussed the underlying facts, the plaintiffs worked to resolve this matter cooperatively with the city," he said in a written statement. "The parking structure construction was never in any danger from this lawsuit. There was no violation of any environmental laws. There were no violations of any other laws."

Postema said he doesn't believe council members violated the Open Meetings Act, nor did they intend to keep their communications secret by e-mailing each other. He pointed out there never was a quorum of council members involved in any of the so-called electronic deliberations.

The City Council in September approved changes to council rules that now prohibit council members from sending electronic communications during meetings to anyone other than city staff. Council members still may send draft motions, resolutions, and amendments to each other.

Postema said details of the settlement will be released this afternoon. He said the city is agreeing to conduct an in-house environmental study that will estimate additional vehicle miles traveled because of the parking structure.

Postema said the lawsuit was handled mainly in-house, though the city did hire the Bodman Longley law firm to act as environmental counsel. He said he didn't have an estimate of the cost to the city for defending the case.

Noah Hall, an attorney for the Great Lakes Environmental Law Center, could not be reached for comment, nor could Bill Stapleton, lead attorney for the plaintiffs.

Hall criticized the city in a post on his blog last August, saying the parking structure was "expensive" and "not even needed."

"At a minimum, the city must reconsider its decision in light of the avoidable environmental impacts and public process abuses and ensure that neighboring independent landmark businesses are protected," Hall wrote.

The 677-space parking structure project is now under way. Construction is likely to take nearly two years, and the project cost is about $50 million for the structure and $9 million in associated improvements.

Ryan J. Stanton covers government for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529.