Woody Allen agreed May 18 to a $5 million settlement in his lawsuit accusing American Apparel Inc. of using a frame from his film Annie Hall in ads depicting the 72-year-old director as a Hasidic Jew without his permission.

Both sides announced the settlement, to be paid by American Apparel's insurance company, on the morning a trial was to start in federal court in Manhattan.

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.

Allen sued the trendy clothing company last year for $10 million after the advertisements turned up on billboards in Hollywood and New York, and on a Web site.