The city of Sebastopol and the people behind stalled plans for a new downtown CVS drugstore and adjacent JPMorgan Chase Bank have entered into legal negotiations in hopes of resolving a pending federal lawsuit, attorneys involved in the case said Thursday.

The talks were initiated in recent weeks after U.S. District Court Judge Edward M. Chen issued an order in mid-February indicating he might dismiss the case for lack of jurisdiction unless persuaded otherwise.

On Thursday, at the request of the opposing parties, Chen rescheduled a hearing that had been set for April 24 so the two sides could have time to see if they can reach a settlement. The hearing has been reset for June 5.

Sebastopol City Manager Larry McLaughlin, who also is the city attorney, said he could not comment on the likelihood of a deal being reached.

"What I would say," he said, "is, obviously, we wouldn't be all of us agreeing to postpone these hearings and seriously sit down in talks about all this — using high-priced legal counsel — if we didn't think there was a real good reason to sit and talk."

CVS, through its California subsidiary Longs Drug Stores, and Armstrong Development Properties Inc. — a developer of CVS Pharmacy and Chase banks — filed suit against the city in federal court 14 months ago.

It claimed the City Council had approved a moratorium on drive-up windows the previous year for the sole purpose of preventing Armstrong from following through with controversial plans to build a drugstore and bank branch at a high-profile crossroads downtown. Drive-thru windows were planned for both buildings.

City officials say the vote had no connection to CVS's plan. Rather, they said, the city was contemplating a change in policy on drive-thrus and approved the moratorium to buy time until it decided what to do.

Chen ordered the parties last year to try mediation to resolve their differences, but it was unsuccessful.

Lawyers for Sebastopol later asked the judge for a summary judgment that would have validated the city's position and undermined the CVS case.

That discussion was to be had April 24, along with any arguments CVS had produced as to why the case belonged in federal court. It had earlier filed suit in state court, but had that case dismissed so it could be refiled in U.S. District Court, McLaughlin said.

The attorney who represented CVS and its partners in seeking postponement of the case for settlement talks did not return a phone call seeking comment Thursday.

Neither McLaughlin nor Edward Grutzmacher, an outside attorney handling the litigation for the city, would discuss the substance of the settlement talks.

"I don't think anybody's backing down yet," Grutzmacher said. "We're just in settlement negotiations."

You can reach Staff Writer Mary Callahan at 521-5249 or