The lawsuit asserts that NeuLevel, Inc. (neulevel.biz), in conjunction with other registrars, became unjustly enriched and violated certain unfair competition and consumer protection laws by distributing Internet domain names in the .biz registry by a means that constituted an illegal lottery.

Most of the settlement will go to cover attorneys' fees, as NeuLevel has already sent millions of refunds to customers who paid an average of $5 for a chance to win control of desirable names such as "computer.biz" when the new domain was opened to the public.

The scheme was devised to assist NeuLevel handling the large number of registration requests. Instead, it prompted a class-action suit disgruntled by applicants who said the system amounted to an illegal lottery.

A California judge agreed with the applicants last autumn, and blocked NeuLevel from issuing an estimated 58,000 disputed names.

NeuLevel subsequently paid $1.7 million in refunds to the majority of applicants who were vying for the disputed names and made those domains available again without an up-front fee.

The class-action settlement covers the roughly 25,000 applicants who have not yet received refunds. The company will refund a wholesale fee of $2 per application to those who applied for names but did not receive them.

NeuLevel will also pay almost $2 million to cover plaintiffs' attorney fees. NeuLevel, ICANN and the registrar defendants have all denied the allegations of wrongdoing and have denied all liability to the plaintiffs and the class action litigants.

NeuLevel is a joint venture between NeuStar, Inc. and Melbourne IT, Ltd.