Kentucky- City of Knoxville officials have agreed to pay $1.5 million to settle a longstanding lawsuit filed by a now-defunct adult video store that became a target of former Mayor Victor Ashe’s administration.

The payout, which includes damages and attorneys’ fees, should be the last chapter in a legal fight that began in 1998 between the city and Fantasy Video over an adult business ordinance later deemed “unconstitutionally vague” by the state Supreme Court.

The 1979-era ordinance has since been scrapped in favor of a more narrowly defined law approved by City Council in May 2005.

The former rule outlawed stores with “significant” and “substantial” portions of sexually explicit inventory from locating within 1,000 feet of neighborhoods, recreational facilities and businesses selling alcohol.

The new standard specifies a 35 percent benchmark regarding the amount of merchandise, its monetary value, the interior floor space used for its display or the revenues gained by its sale.

An accompanying ordinance also imposes licensing requirements for employees of adult-oriented businesses in the city.

The Knoxville Police Department issued dozens of citations on an almost daily basis against Fantasy Video on Papermill Drive, which stocked some 3,500 sexually explicit videos for rent in a back room while offering general-interest flicks up front.

The store attempted to comply with the ordinance by reducing its amount of adult material. Knox County Chancellor Daryl Fansler called the efforts a sham and granted the city an injunction against the store’s owners, Nashville-based Entertainment Resources LLC.

The owners eventually lost their lease, and the store shut its doors in 2001.

The state Court of Appeals later reversed Fansler’s ruling in 2004 and sent it back to Chancery Court for a determination of any damages due. The state Supreme Court affirmed the ruling the next year, and the U.S. Supreme Court declined to hear the city’s final appeal in December 2005.

City Law Director Morris Kizer and attorneys for Entertainment Resources reached an agreement July 25, just ahead of a scheduled hearing to decide the damages.

The store’s attorneys were prepared to ask for about $3.5 million in damages and fees, according to city officials.

The city will pay the final negotiated price of $1.5 million from a “risk fund” that exists for such instances, said city spokeswoman Margie Nichols.

“We’re pleased that what remained of the case is resolved and we can finally close the books on this thing,” said Philip N. Elbert, a Nashville attorney who represents Entertainment Resources along with David Bridgers and Knoxville lawyer Richard Gaines.

Meanwhile, the city’s new ordinance requiring employee licenses has garnered three separate lawsuits, filed on behalf of seven adult businesses and two individual performers. Kizer said the city is delaying enforcement of the law until the lawsuits are settled.