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The city of Seattle has reached a tentative agreement to pay $500,000 to settle its losing fight against publishers of yellow-pages phone books, according to two sources familiar with the lawsuit.

The city has decided not to appeal to the U.S. Supreme Court an October ruling by a panel of the 9th U.S. Circuit Court of Appeals that a city ordinance violated the companies’ free-speech rights.

The panel ruled unconstitutional a city law that created an opt-out registry for unwanted phone books and charged the publishers a disposal fee for recycling costs.

City Councilmember Mike O’Brien, who championed the measure as a way to reduce waste and the disposal costs to the city, said he couldn’t comment on negotiations to settle the lawsuit because they were still ongoing. He said the settlement agreement could also decide “the future of Seattle’s yellow-pages opt-out system.”

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“I believe Seattle residents have a right to say ‘no thanks’ to yellow- page deliveries,” O’Brien said. “Ensuring that Seattle’s residents and businesses continue to have their choices honored in the future will be key to our ongoing negotiations.”

The 9th Circuit panel rejected Seattle’s argument that the yellow pages are commercial speech and not subject to First Amendment protections. The city also argued that governments have an interest in regulating abusive business practices and have enacted numerous laws protecting consumers from unwanted solicitation.

The City Council voted in 2010 to crack down on unwanted delivery of the phone books. In addition to the opt-out registry, the city charged the companies that distribute the phone books $100 each for a business license plus a per-book charge for every one delivered (plus fines of up to $125 for deliveries to households that had opted out). It had included a disposal fee for unwanted directories that ended up at the recycling center, but that was repealed before it went into effect. There also was a per-book fee to pay for running the opt-out system.

Local Search Association, an industry group representing three yellow-pages publishers, sued, arguing that the city unconstitutionally restricted its right to publish its materials. A U.S. District Court judge in Seattle sided with the city, saying government had a legitimate interest in wanting to reduce waste and prevent unwanted books from being deposited on private property.

But a three-judge panel of the 9th Circuit, generally a left-leaning court, sided with the yellow-pages publishers, ruling that the phone books are protected, like other publications, by the First Amendment. The Local Search Association said at the time that the city opt-out registry wasn’t necessary because the companies had their own opt-out systems. O’Brien countered that the company service wasn’t well-advertised or enforced. The city law required the companies to advertise the city’s opt-out service on the cover of the yellow pages.

Since the city adopted the registry, more than 75,000 residents and businesses have opted out of receiving up to six phone books, including the white pages, according to Seattle Public Utilities.

O’Brien said that “this powerful expression of Seattle consumers’ choices” also led the industry to scale back some deliveries and streamline multiple directories into one. “All told, we have seen a two-thirds reduction in yellow-pages directories delivered each year in Seattle — a savings of 1,000 tons of paper annually,” he said.

A spokesman for the Local Search Association declined to comment Wednesday.

Lynn Thompson: or 206-464-8305. On Twitter:@lthompsontimes

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