LITTLE ROCK — A federal judge on Thursday dismissed a lawsuit that alleged the city of Sherwood funds a substantial portion of its budget with a hot-check court that essentially serves as a modern-day debtors’ prison.


U.S. District Judge James M. Moody Jr. said in a written order he was dismissing the suit on the recommendation of U.S. Magistrate Joe Volpe. In findings filed in January, Volpe recommended dismissing the suit because all but one of the plaintiffs have related cases pending in the Hot Check Division of Sherwood District Court.


Moody dismissed the suit without prejudice, meaning the plaintiffs could refile it when they no longer have related cases pending in another court.


The American Civil Liberties Union of Arkansas, the Washington-based Lawyers’ Committee for Civil Rights Under the Law and the New York law firm Morrison and Foerster filed the suit in August against the city of Sherwood, Pulaski County and Sherwood District Court Judge Milas Hale.


Named as plaintiffs in the suit were four people with charges against them in the court and one person who accused the defendants of illegal exaction, or the taking of money in a way not authorized by law.


The suit alleged that Sherwood’s hot-check court uses real or threatened arrests and incarceration to coerce payments from people who cannot afford to pay, in violation of laws prohibiting jailing people for failure to pay debts.


In a news release issued Thursday by the ACLU of Arkansas, Executive Director Rita Sklar said the organization was “disappointed that the victims of Sherwood’s unconstitutional debtors’ prison are being denied their day in court on procedural grounds, and not on the substance of our clients’ complaints.”


Sklar said the ACLU is analyzing the ruling and will visit with its clients about its next steps.