The city of Ashland and the Mt. Ashland Association have reached a partial settlement that will limit both sides' potential financial losses in a lawsuit brought by the association against the city.

The city of Ashland and the Mt. Ashland Association have reached a partial settlement that will limit both sides' potential financial losses in a lawsuit brought by the association against the city.

In October 2006, the City Council voted to instruct the U.S. Forest Service to deal only with the city regarding a timber sale related to a proposed Mt. Ashland Ski & Snowboard Resort expansion. The ski area is on Forest Service land high in the Ashland watershed, source of the city's drinking water.

The Mt. Ashland Association, which manages the nonprofit ski area, sued the city in July 2007 in Jackson County Circuit Court, alleging the city had interfered with the expansion.

The expansion was later blocked by a September 2007 9th U.S. Circuit Court of Appeals ruling that the Forest Service had not adequately analyzed environmental impacts of the expansion. Environmental groups had sued to stop the expansion in a separate lawsuit. The Forest Service is conducting more studies.

The Mt. Ashland Association had continued forward with its lawsuit.

But the association recently made a partial settlement offer to the city.

On Tuesday night, the Ashland City Council unanimously voted to accept the partial settlement terms.

Both sides have agreed that whichever party wins the lawsuit, that party will be able to recover only 50 percent of attorneys' fees from the losing party that are charged up to the signing of the settlement agreement. The winning party can still recover all of its attorneys' fees from the loser for legal work done after the agreement.

The association also agreed to drop any claims of monetary damages against the city because of the city's alleged interference with the expansion.

Kim Clark, general manager of the ski area, said on Wednesday that he was not at liberty to say how much the association has spent so far on attorney fees. He estimated the association's attorney has completed about half of the legal work for the lawsuit so far.

He said he also could not disclose how much the Mt. Ashland Association would have sought in monetary damages.

In March, Clark said the ski area budgeted $120,000 this year for legal fees covering legal advice for day-to-day needs such as liability releases, litigation against the city and expenses related to the lawsuit heard by the 9th Circuit Court.

The City Council previously authorized spending up to $160,000 to defend the city from the association's lawsuit. The city has contracted with the law firm Harrang Long Gary Rudnick, which has offices in Eugene, Salem and Portland.

City Administrator Martha Bennett said information on the amount the city has spent so far is protected by attorney-client privilege.

Under the partial settlement, the Mt. Ashland Association will dismiss its breach of contract claim against the city. The association had said the city, which holds the special use permit for the ski area and leases the resort to the association, had violated the terms of the lease by interfering with expansion activities.

Both sides will ask the judge on the case to define the terms of the lease.

The association claims the lease grants it the sole right to operate the ski area — including expanding the area — without involvement from the city.

Bennett said the city has a right under the special use permit to take part in communications between the association and the Forest Service.

The lawsuit was scheduled to go before a jury in late July for a weeklong trial. Now the lawsuit will be heard by a judge in a trial that should take about two days. That could also save on attorneys' fees.

The trial has been postponed because of a full court calendar and probably won't be rescheduled until this fall, Clark said.

He said the Mt. Ashland Association is still hopeful the lawsuit can be settled out of court.

Vickie Aldous is a reporter for the Ashland Daily Tidings. She can be reached at 479-8199 or vlaldous@yahoo.com.