The owners of Cossetta's, a popular St. Paul restaurant, are suing the city, saying it is improperly blocking their expansion plans.

The restaurant owners filed a lawsuit Friday in an attempt to move forward with an event center they had long ago planned on Exchange Street, where a city-owned parking lot sits.

The city and Cossetta's negotiated a development agreement for the site more than a decade ago, saying St. Paul would sell it to the company. But the two sides never met the contingencies to close the deal, including getting various approvals, permits and financing. The project stalled until last year, when Cossetta's once again began preparing to build the event center.

In October, the city sent a letter to Cossetta's Inc. President David Cossetta saying it was terminating its agreement to sell the parking lot.

They were surprised by the termination attempt, Cossetta said in a news release. City staff had encouraged them to invest tens of thousands of dollars and hundreds of hours in preparing for the center, he stated.

"Moreover, the city's unilateral termination, which denies us any opportunity to question its grounds, violates the legal protections given to all buyers of real estate," Cossetta said.

The old contract between Cossetta's and the city says that if they don't meet the contingencies by the closing date, which was in 2006, the parties can terminate the contract. So that's what the city decided to do, City Attorney Sammy Clark said.

"I think the facts and the law will support our position on this," Clark said.

The two sides recently disagreed over parts of the contract related to labor and property costs, Clark said. The contract said Cossetta's would buy the land for $500,000.

"We're willing to talk about a new contract," Clark said. "I think the value of the land is significantly greater than the figure that was part of the 2005 agreement."

Cossetta's is asking the court to deem the city's decision to end the agreement invalid and issue an injunction that would help clear the way for the project to move forward. The company also asked for a jury trial and more than $50,000 in damages.