HILO, Hawai'i — State and federal lawsuits that sought hundreds of millions of dollars in damages from Big Island county government for delays in the Hokuli'a development are being dropped after a settlement allowed construction to resume on the long-stalled Kona luxury home project.

Owners of Hokuli'a lots last year demanded $264 million in damages from the county, alleging county officials were negligent and guilty of breach of contract for refusing to issue building permits to the lot owners.

County officials denied they were legally responsible for halting the project, pointing out that Kona Circuit Court Judge Ronald Ibarra specifically prohibited the county from issuing any more building permits to Hokuli'a lot owners.

Ibarra ordered a halt to almost all work at Hokuli'a in 2003, ruling the project was an illegal use of agricultural lands. Ibarra lifted his injunction earlier this year and allowed work on Hokuli'a to resume as part of a settlement of the lawsuit that stopped the project.

Paul Alston, who represents owners of about 170 Hokuli'a lots, said Ibarra's injunction prevented lot owners from building even though the lot owners were not involved in the original lawsuit that stopped the project. That deprived lot owners of their property rights, and prompted the lot owners' state and federal lawsuits against the county, he said.

With the settlement that allowed Hokuli'a to advance, "it just made no sense not to move on with the development," Alston said. "The lawsuit really lost its force when the project was freed up again and people were able to move forward."

Alston said each side will pay their own legal fees and costs in the case. Hearings to ask the judges to dismiss the suits have been scheduled for July 31 in Kona Circuit Court, and Sept. 5 in federal court in Honolulu.

Deputy Corporation Counsel Joseph Kamelamela said the county allocated $70,000 to defend against the lot owners' state and federal lawsuits.

Kamelamela said it is still possible individual lot owners will file new individual suits in connection with the delays in the Hokuli'a project, but the county has argued it is too late to file most or all of those claims.

Reach Kevin Dayton at kdayton@honoluluadvertiser.com.