Howard K. Stern Settles Case Against Woman Who Made Gay Claims

11/30/2011 10:29 AM PST

Howard K. Stern
has settled his lawsuit with a woman who claimed ... she and Anna Nicole Smith walked in on Howard and Larry Birkhead in the middle of a romantic liaison.

Stern -- who said the claim was a bold-faced lie -- sued Jackie Hatten for defamation, and now we've learned the case has settled.  The terms of the settlement are confidential.

Hatten's account was published in Rita Cosby's book, "Blonde Ambition: The Untold Story Behind Anna Nicole Smith's Death."  Stern also sued Cosby, and that case settled several years ago.