I don't know; I read an article at Townhall (I think) where the columnist got a chance to interview the guy...it sounds to me like he made a mistake by threatening to sue, and admitted as much. Said he made the comment he was just trying to get leverage...almost like spitting it out in the heat of a moment, and once it was out, the lawyers all the way up freaked out.
I live in the area. When this story broke it was reported as "a religious leader". Everyone I came into contact with around my small town was disgusted, and assumed this leader to be some Islamic blowhard. I know I was shocked to hear it was a Rabbi.
The line has been drawn over this Christmas business. Once the trees came down
he began to see who else he was being lumped with. No wonder he started to change his story.
He knew perfectly well. The group he is part of, the Lubavitchers, goes around suing different places to put up menorahs every year, and they usually win. I doubt he paid for that lawyer himself.