"We're just going to stay in business," Takui Aivazian, who owns the restaurant with her husband Armen Aivazian, said Friday.
Their attorney, Derek Tabone, said city officials did not provide sufficient evidence to force the restaurant's closure during ongoing litigation.
"The judge correctly questioned whether there is any real showing of nuisance," he said. "The place has been there for so long. It's been doing what it's always done."
But Chief Assistant City Atty. Michael Garcia said city attorneys — who have filed for a dismissal of the Aivazians' appeal — are hopeful an injunction will eventually be granted.
"It is still disappointing for us and the community because they are clearly operating [as a banquet hall], which is a flagrant violation of our laws," he said.
Friday's development is the latest in a longstanding dispute between the city and the Aivazians, who have repeatedly appealed negative city zoning decisions and filed a slander lawsuit against neighbors who complained publicly about the impacts of the banquet hall. That lawsuit was eventually dismissed.
The current legal battle began when the City Council revoked the restaurant's parking permit in March 2009 and the zoning certificate a few months later, saying there was insufficient parking for use as a banquet hall, which city officials said was not allowed at the restaurant.
City officials said the restaurant would have to return to its size before a 2006 expansion and apply for new operating permits.
The Aivazians have repeatedly countered that they should be grandfathered in under less-demanding parking requirements.