Woody Allen on Monday agreed to a $5 million settlement in his lawsuit accusing American Apparel of using his image in a billboard advertising campaign without his permission.

Both sides announced the settlement to be paid by the Los Angeles apparel company’s insurance firm on the morning a trial was to start in federal court in Manhattan. Allen, who maintains strict control over use of his image, sued the company for $10 million after the advertisements turned up on billboards in Hollywood and New York, and on a Web site in May 2007.

Reading from a statement outside court, Allen said he hoped the outcome “would discourage American Apparel or anyone else from ever trying such a thing again.” The billboards used a frame from the film “Annie Hall,” that depicted Allen as a Hasidic Jew long beard, side curls, black hat and featured Yiddish text meaning “the holy rebbe.”

American Apparel president Dov Charney told reporters it wasn’t his decision to settle. The company’s insurance company “controlled the defense” in the case, he said, according to the Associated Press.

“I’m not sorry of expressing myself,” he said.

The pending trial attracted intense tabloid media interest after American Apparel lawyers reportedly threatened to call Allen’s former longtime companion, actress Mia Farrow, and his current wife, Soon-Yi Previn, as witnesses to show that his image had been devalued by scandal. Previn is Farrow’s adopted daughter.