Court documents released Thursday say Daniels, born Stephanie Clifford, her former lawyer, Keith Davidson, and Michael Cohen reached an agreement in principle. The details of the settlement were not revealed.
The suit, filed in June, accused Davidson of violating lawyer-client privilege by colluding with Cohen while working for Daniels. She said Davidson withheld relevant communications from her then-current lawyer, Michael Avenatti.
"Mr. Davidson abdicated his role as an advocate and fiduciary of his client Ms. Clifford, and instead elected to be a 'puppet' for Mr. Cohen and Mr. Trump in order to advance their interests at the expense of Ms. Clifford," the complaint said.
The suit said Cohen and Davidson colluded to encourage Daniels to appear on Fox News in January and make a false claim denying she had a sexual encounter with Trump in 2006. The White House and Cohen have denied the affair ever occurred, though Cohen arranged to pay $130,000 to Daniels on Trump's behalf as part of a hush arrangement.
Alleged text messages between Cohen and Davidson from Jan. 17 included in the suit feature the two men planning to set up the television appearance after In Touch magazine published excerpts of a 2011 interview with Daniels about the affair.
"I have her tentatively scheduled for Hannity tonight," Cohen wrote in one text.
Davidson responded that Daniels would be unable to make the appearance due to a flight to Los Angeles. Cohen then repeatedly messaged Davidson and said it would be necessary to conduct the interview that day to put an end to the news cycle surrounding the story.
After about 2 hours, Cohen texted Davidson to inform him a group of "wise men" -- which the suit alleges included Trump -- decided not to have Daniels appear on the program.
"The wise men all believe the story is dying and don't think it's smart for her to do any interviews," Cohen wrote.
Davidson then affirmed the decision to which Cohen replied, "Thanks pal."
Dave Wedge, a spokesman for Davidson, had called the suit "outrageously frivolous"
Daniel Uria contributed to this report.