A lawsuit over a fraud-plagued trust fund intended to help Navajos living in southeastern Utah is headed back to court two months after the state pledged to settle the complaint.

Attorney General Jan Graham has filed a motion to dismiss the 5-year-old lawsuit that alleges the state has neglected its duties as trustee over millions of dollars in oil royalty funds set aside for Navajos living in San Juan County.In February, Graham dropped plans for an appeal to the U.S. Supreme Court after Gov. Mike Leavitt said he had met with Indian leaders and decided it would be more effective to settle the case and re-examine the trust fund's operation.

"I'm really disappointed the state didn't mean what it said about negotiating a settlement and keeping the court out of it," John Pace, an attorney representing the Navajos, said Monday.

But a spokesman for Graham said the state hasn't abandoned the idea of settling the suit.

Todd Utzinger said a motion to dismiss was necessary to have the court determine which claims are valid and which are not before settlement negotiations begin.

"Sometimes it's unfortunate that the caption on a motion doesn't always fit what you are trying to accomplish," Utzinger said. "Ev-ery-one needs to know that this is not a hostile attempt to get the case thrown out of court."

The Navajos sued the state in federal court in 1992 to force restoration of millions of dollars embezzled from the tribal trust fund created by Congress in 1933. The Navajos said the money should go directly to improving impoverished living conditions on the Utah portion of the Navajo Nation.

The alleged damages have ranged from $52 million to $200 million.

In December, a three-judge panel of the 10th U.S. Circuit Court of Appeals ruled unanimously that Utah was obligated to oversee the fund.

The circuit court's ruling reversed U.S. District Judge David Sam in Salt Lake City, who ruled in 1995 that the state couldn't have civil liability for a program that originated under federal law.

Utzinger said Leavitt is continuing to negotiate with the Navajos on what the state can do to provide needed services.

But Pace questions the state's sincerity in resolving the lawsuit and the longstanding mismanagement of the fund.

He said the state has tried to get the lawsuit dismissed twice before and has yet to file an answer to the complaint.

"It's ironic that the (Utah) attorney general and state representatives will sit down with tobacco companies and won't do the same with citizens of the state," Pace said, referring to Graham's high-profile legal battle to recover alleged health costs related to tobacco use.