Tempe, Arizona- Tempe is slated to get its first strip club, Elite Cabaret, but the battle might not be over.

The lengthily lawsuit between the city and the business group that wants to open the adult club has been settled; the case was dismissed from U.S. District Court in Phoenix on Wednesday.

The settlement will allow Elite to open in the originally proposed location, off McClintock Drive and Loop 202, in north Tempe near the new Tempe Marketplace retail center. But Tempe’s mayor says he will fight to get the settlement tossed out and have the club shut down.

Community outcry came from neighbors and city officials when Idaho Business Holdings announced in March 2005 plans to open Elite Cabaret. Tempe has strip clubs near its borders – in county islands, in Guadalupe and Scottsdale – but none actually inside the city.

Complex city and state zoning laws almost made it impossible for Elite Cabaret to open. Tempe and the state have rules that keep adult businesses from opening within a quarter mile of a park, school and many other public amenities. But Elite Cabaret backers filed a federal lawsuit in September 2006, challenging the laws. City attorneys have been defending the city in and out of court since then. Mediation was successfully closed on Aug. 9 when Jeff Minor, from the Cabaret, and Tempe City Attorney Andrew Ching penned an agreement that allows the club to open. Each party will pay their own attorney’s fees, according to the document.

“Throughout this process we have been trying to protect our community from the potential degradation of having a strip club, and from the threat that we would be liable for at least $5 million in damages and probably more,” said Mayor Hugh Hallman.

The agreement stated Tempe likely would have lost the lawsuit. Elite Cabaret backers have said they were losing $500,000 every month the club was kept from opening, according to Hallman.

Neither Elite Cabaret attorneys nor Jeff Minor returned calls for comment.

After the agreement was signed, city officials and Elite Cabaret asked the judged to toss out the court case. They also asked the judge to seal the settlement so it would be kept private.

U.S. District Judge Frederick J. Martone responded to the seal request on Wednesday, in the process of allowing the case to be dropped.

His issued a stinging response, announcing grave disapproval of the settlement agreement and calling it “utterly unacceptable.”

Martone’s three page document states that in signing the settlement agreement, Tempe was “choosing to ignore state law” by agreeing to let the club open despite being in violation of the distance regulations.

“If the City of Tempe elects to ignore state and local zoning laws, it will do so at its own peril, without the sanction of this court,” Martone wrote.

Martone also questioned the motives behind keeping the settlement agreement private.

“This is directly contrary to the public interest in knowing what its publicly elected officials are doing . . . ” he wrote.

Despite the city having signed the agreement, Hallman says he will now push for Tempe to try and have the settlement agreement thrown out.

“I am never going to be party to a settlement agreement that violates state law,” Hallman said. “If the judge is right, we should be able to get the settlement thrown out as void because we can’t violate state law nor should we.”

The council will consider that proposition in the near future.

In the meantime, the club now can move forward with plans to open.