Franco, who taught an acting class at Studio 4 -- the film school he founded -- was accused by students of putting them in gratuitous and exploitive sexual situations.

Students filed a class-action lawsuit, saying Franco pushed the class into performing intimate and explicit sex scenes in an "orgy type setting" ... something that went way beyond the pale of shooting such scenes.

The class in question was called a master class on sex scenes.

Both sides announced the settlement to the trial judge, although the terms of the agreement were not disclosed. Specifically, there's no mention of money.