If by "lawsuit" you mean the false accusations of sexual assault stemming from 2007, then no, that had nothing to do with the demise of Magic Underground (MU). MU went under way back around 1998, for financing reasons.
The information that you'll be pointed to regarding this topic will either come from the general news community, or from interviews with DC himself, typically limited to trade publications (periodicals distributed among the magician community) that are missing from most general news media.
Here's what's available on Wiki, and a video clip that illustrates how long ago this was:
"Magic Underground" restaurant (from Wiki):
David Copperfield's Magic Underground was planned to be a restaurant based on Copperfield's magic. There was a sign on Hollywood Boulevard during the late 90s indicating the restaurant was coming soon. Signs were also located around Pleasure Island and signs outside Disney-MGM Studios. A Magic Underground restaurant was also going to open in New York's Times Square. Plans also included eventual expansion into Disneyland in Anaheim, California, as well as Paris and Tokyo. The restaurants were to have magic props and other items on the walls of the restaurants while magicians would go around to tables doing sleight of hand tricks. There was also to be a larger stage for larger stunts.
The restaurant in Times Square was 85 percent completed, but, amid disputes between the creative team and the financial team, and enormous cost overruns, finances dried up from the investors, so the project was cancelled, and Disney cancelled the lease. Copperfield was not an investor in the project; the investors reportedly lost $34 million on the project, and subcontractors placed $15 million in liens.
(end Wiki)
http://www.youtube.com/watch?v=4Qn8GIqxKHc
There used to be MU announcements blacking out the windows to the gift shop closest to the AMC Dine-In theater entrance (across from Planet Hollywood) while it appeared that construction was commencing within the shop location. The images were just black and white text. That never turned into anything. I think that location was to serve as a pre-opening teaser, and/or gift shop and/or reservations location, because it seemed much too small to be a restaurant itself.
The restaurant was to be built near (or in) the MGM Studios, as illustrated by the promotional billboard below, posted at MGM:
Timekeeper
