The deal calls for AOL to make up to $35 million in payments, a "substantial portion" of which it expects to be covered by insurance.
AOL said the suit focused on its capitalization of certain marketing costs and on related public disclosures. This accounting practice was discontinued in October 1996, when the company switched to unlimited pricing, prior to the filing of the lawsuit.
"We're pleased to put behind us this suit regarding events in 1995 and 1996," George Vrandenburg, senior vice president and general counsel of AOL, said in a statement. "We believe a lengthy and distracting litigation process is not in the best interests of AOL's members, the company, and its shareholders."
AOL's stock fell 2.25, to 87, in trading today.