The City Council voted Wednesday to settle a free-speech lawsuit by Michael Hunt, the Los Angeles Times reported Thursday.
The Venice-area resident, who is black, wore the hood and a T-shirt emblazoned with a profanity and a racial slur against African-Americans during a 2011 meeting of the Board of Recreation and Parks Commissioners.
Hunt has worn the outfit at other city meetings to confront what he believes is government discrimination, said his lawyer, Stephen Rohde.
"He has co-opted these images and uses them to protest back against the city," Rohde said.
At the parks commission meeting, then-President Barry Sanders told Hunt that his garb violated city rules of decorum and told him to remove the hood and "offensive signage" or be ejected.
Hunt was escorted out and cited for disturbing a public assembly but wasn't prosecuted.
The settlement "means that the city is held accountable when it violates civil rights and First Amendment rights," Rohde said.
City Councilman Bernard Parks, who also is black, says the council decided to settle because it might have been forced to pay much more in legal fees if the case had gone to trial.
"This is one of those things where you hold your nose and vote," Parks said.
The city recently lost another federal case that Rohde had brought on behalf of two men who were repeatedly ejected from council meetings and alleged violation of their rights.
A jury awarded the men $1 each but it cost the city around $600,000 in legal fees, Parks said.
It's not the first lawsuit filed against the city by Hunt, who is a vendor on the Venice Boardwalk. He also sued in 2009 to challenge vending restrictions at the tourist attraction.
A jury awarded him $264,286 and the city paid his lawyer $340,000 in fees.