NAPA VALLEY -- Five Napa families and the Napa Valley Unified School District announced a settlement Friday of the lawsuit over the Redwood Middle School's "appropriate attire policy."

The dispute received national attention when seventh-grade student Toni Kay Scott was removed from class in 2006 for wearing a denim skirt and socks with the Winnie the Pooh character Tigger. Her sister was reprimanded for wearing a T-shirt with the words "Jesus Freak."

The American Civil Liberties Union, representing the five families, said the settlement acknowledges the students' constitutional rights to freedom of expression and also allows the school district and Redwood Middle School to focus on teaching and learning.

"I think it's great my daughter Sydni and all the kids at Redwood can wear clothes that express their individuality. We're all happy that the case is resolved and we can focus on our kids' educations," said Scott's mother Donnell in an ACLU news release.

School district Superintendent John Glaser also said the district is pleased a settlement was reached.

"We are glad we were able to settle the lawsuit, which diverted economic resources from our primary mission," Glaser said. "We also appreciate the parents' recognition of ongoing school climate and safety concerns in our schools and look forward to working with all of the parents and students in our community to create a safe and positive learning environment."

The school's 9-year-old appropriate attire policy allowed only certain colors and banned logos, patterns, pictures and jeans. Napa County Superior Court Judge Raymond Gaudagni issued a preliminary injunction in July against enforcement of the attire policy at the school, ruling it was broad and restrictive.

The school district appealed and the Court of Appeal referred the case back to mediation. The parties attended a mediation session Wednesday and the Napa district approved the agreement Thursday night.

Under the settlement agreement, any future dress codes that limit colors, fabrics or patterns will only be implemented as part of a school uniform that allows parents to opt out, the ACLU said. The Napa families also complained the policy had no opt-out provisions.

The district will not prohibit lettering or pictures unless allowed by the state Education Code 48907 which protects free speech rights of California school students, according to the ACLU.

The district will remove any reference to dress code violations from the students records and allow all other students who attend Redwood Middle School during the last six years to request such references to be removed from their records, according to the settlement.

"It's important for school districts to know that any school uniform policy must provide an opportunity for families to opt-out and that other dress code restrictions must further the safety and health of the school environment," said Julia Harumi Mass, an ACLU staff attorney.

Glaser said in the news release the district recognizes state law protects students' free speech. He said the difference of opinion with the families was on whether the law limited schools' ability to restrict clothing in order to establish an educational environment conducive to learning and teaching for all students.

"We made an economic decision not to continue spending District resources defending a lawsuit, but to use those resources where they belong, to continue providing quality instruction to the students of Redwood Middle School and the District," Glaser said.

He said the school district appreciates the spirit of mutual cooperation that allowed the lawsuit to be resolved.