The Deuce actor and his partners at Playhouse West Studio 4 - which opened in 2014 but closed three years later - were sued by Sarah Tither-Kaplan and Toni Gaal, who claimed the defendants "engaged in widespread inappropriate and sexually charged behaviour towards female students by sexualising their power as a teacher and an employer by dangling the opportunity for roles in their projects", but documents filed to the court revealed a settlement has been made.
Both sides filed a joint status report in Los Angeles Superior Court, which revealed that both women have dropped their individual claims.
It comes after James filed an objection to the "salacious" lawsuit.
According to court documents, the demurrer - a written objection - stated: "While the salacious allegations in the complaint have made great tabloid fodder, they are also false and inflammatory, legally baseless and brought improperly in the form of a class action largely to gain as much publicity as possible. This lawsuit is a travesty of justice and the culmination of a meritless campaign that has unfairly tarnished a decent man's hard-earned reputation."
In January 2018, Sarah claimed in an article for the Los Angeles Times that she had been exploited by James and said he'd removed safety guards while filming an oral sex scene for The Long Home and accused him of an "abuse of power".
In response, the demurrer stated: "Ms. Tither-Kaplan had always expressed gratitude for having been given the opportunity to work in Emmy-nominated productions with Franco, one of her teachers.
"Tither-Kaplan was so effusive in her praise of Franco that she had posted unsolicited tweets and texts extolling Franco's virtues, how much she admired him and how much she got out of her time at Studio 4."