Morrison & Foerster offices in New York.

Morrison & Foerster has settled a $35 million legal malpractice lawsuit brought by a unit of the Australian investment bank Macquarie that claimed the law firm failed to spot red flags in its work on a Chinese coal company's stock offering, according to court papers.

The apparent settlement, in a four-year-old high-profile case against the Am Law 100 firm, comes less than two years after the malpractice suit was revived by a New York appellate court.

In a Monday filing, the parties told Manhattan Supreme Court Justice Saliann Scarpulla that they wanted to put off a conference set for Wednesday because “the parties have reached a settlement.” A letter filed a month before mentioned a settlement in principle. The settlement has not previously been reported.

The deal, whose terms haven't been made public, could put a long-simmering legal risk to bed for Morrison & Foerster that emerged after it was revealed that Puda Coal Inc., whose offering on the New York Stock Exchange was being underwritten by Macquarie, was essentially an empty shell.

Puda Coal claimed that it operated through its 90% stake in Shanxi Puda Coal Group Co. Ltd., but the Shanxi stake was actually transferred to Puda's chairman before the U.S. offering. Kroll Associates, the investigative firm, noted the discrepancy in a report, but a banker at Macquarie sent the report to his colleagues and to Morrison & Foerster saying “no red flags were identified.”

The lawsuit was initially dismissed in 2016, with Scarpulla saying that Macquarie can't blame its lawyers for failing to alert it to information that was already in its possession. But the Appellate Division, First Department reversed that ruling in early 2018.

Recent court filings indicate that discovery was underway when the case was settled. In a May letter regarding depositions, one of Morrison & Foerster's lawyers, Williams & Connolly partner John Williams, pegged potential damages at $35 million.

Macquarie may have sought damages including amounts related to a $15 million settlement with the Securities and Exchange Commission. It was also sued by investors in Puda Coal who were wiped out when the company's fraud was revealed. The bank agreed to pay $7 million in that case.

Another bank that blamed Morrison & Foerster for Puda Coal-related losses didn't make it to discovery. An appellate court upheld the dismissal of Brean Murray, Carret & Co LLC's malpractice suit against Morrison & Foerster.

A spokesperson for Morrison & Foerster said the firm ”values its relationship with Macquarie and is pleased to have this matter behind us.”

John Tortorella of Marino, Tortorella & Boyle, who represents Macquarie, didn't immediately return a message seeking comment. Neither did Jonathan Lupkin, a lawyer who runs his own firm and who represents Morrison & Foerster.