Six days before a high-profile defamation lawsuit against Netflix and an Academy Award-nominated director, Ava DuVernay, was set to go to trial — involving the third-rail issues of race in the criminal justice system and the “Central Park Five” — the parties announced a settlement Tuesday.

This caught many who were following the case by surprise. Who won? And how will this settlement affect the streaming giant, which is facing a slew of lawsuits for allegedly defamatory portrayals in docudrama series?

One suit was just filed Thursday in California. A Scottish woman who allegedly inspired the stalker character in a recent Netflix hit, “Baby Reindeer,” is suing the streamer for $170 million for defamation, negligence, and privacy violations.

The woman, Fiona Harvey, was not named in the series, nor is she a public figure. Yet she says amateur sleuths identified her and started harassing her based on the “brutal lies” the show broadcast about her to more than 50 million viewers. The series starts with a title card that says, “This is a true story.” Ms. Harvey says she came forward to try to correct the record.

The “Central Park Five” series settlement this week may serve as a harbinger of Netflix’s strategy with the “Baby Reindeer” suit and others. Brought by a former top New York City sex crimes prosecutor turned novelist, Linda Fairstein, the case threatened to upend production of the increasingly popular true crime and docudrama TV genres — that is, until she walked away without a dime.

Ms. Fairstein in 2020 sued Netflix, Ms. DuVernay, and another writer and producer of the docudrama series “When They See Us” over the show’s allegedly “false and defamatory” portrayal of her in the arrest and prosecution of the “Central Park Five.” Ms. Fairstein contends that the creators of the series distorted facts to portray her — using her real name and played by Felicity Huffman — as “the face” of a racist, white criminal justice system.

The four-part miniseries, which had its debut on Netflix in 2019, claims to tell the true story — in dramatized form — of the five Black and Hispanic teenagers who were convicted of the 1989 rape and assault of a white, female jogger in Central Park. The case has become a national symbol of racial inequities in the criminal justice system. All five men’s convictions were vacated in 2002 after a serial rapist, Matias Reyes, who was already in prison, confessed to the crime and his DNA matched that found at the scene. The City of New York awarded the men a $41 million settlement in 2014.

There is a high bar to prove defamation for public figures, but Ms. Fairstein cleared a major hurdle in September, when a district court judge, Kevin Castel, ruled that the case should proceed to trial because “a reasonable trier of fact could find by clear and convincing evidence that defendants acted with reckless disregard to the truth or falsity of Fairstein’s portrayal.” In his decision, Judge Castel cited a message Ms. DuVernay sent to her producer about Ms. Fairstein before the series aired. She “bout to feel it all,” the message said.

This would have been the first defamation case to go to trial against the streamer for a show’s fictionalized portrayal of a real person that is framed as a “true story.” Netflix is facing several of these lawsuits, including for “Baby Reindeer” and the popular biopic of a German con-woman, “Inventing Anna.”

“This case was precedent setting,” Ms. Fairstein’s attorney, Andrew Miltenberg, said in a statement. “It represented the first time that a defamation case concerning a dramatic streaming series has advanced through summary judgment and stood at the brink of trial. We are confident that we would have won.”

Yet after spending what is likely a hefty sum in legal fees, Ms. Fairstein walked away Tuesday without even getting reimbursed for these fees.

“The parties announce that they have resolved this lawsuit,” a joint statement from Ms. Fairstein, Netflix, and the other parties said. “Netflix will donate $1 million to the Innocence Project. Ms. Fairstein will not receive any money as part of the settlement.”

Ms. Fairstein did win one important concession: There will now be a disclaimer at the top of each episode of “When They See Us” that says, “While the motion picture is inspired by actual events and persons, certain characters, incidents, locations, dialogue, and names are fictionalized for the purposes of dramatization.”

Both sides are trying to frame the settlement as a win. “The fact that they conceded the disclaimer and the payment to the Innocence Project, really says it all,” Mr. Miltenberg tells the Sun. “We were absolutely positively ready to go to trial and to suggest anything else is inaccurate and just a cheap attempt to put a positive spin on what was a bad result for [DuVernay] and Netflix.”

Ms. Fairstein also painted the settlement in rosy terms. “This is what the case was all about — not ‘winning’ or about financial restitution, but about my reputation and that of my colleagues. It was about setting the historical record straight,” she said in a statement.

The defense’s attorneys, Bart Williams and Natalie Spears, disagreed. In a statement to the Sun, the called the settlement “a total victory for Netflix,” adding that “any suggestion by Linda Fairstein that she was vindicated by bringing this lawsuit is ludicrous.”

Both sides celebrated Netflix’s $1 million donation to the Innocence Project. For the streamer, the money is a drop in the bucket. For Ms. DuVurney, who earns millions of dollars — she recently had a five-year, $100 million contract with Warner Brothers —  telling purportedly true stories of racial oppression, this is an obvious win.

For Ms. Fairstein, support for the donation feels in part like a troll. She is unrepentant in questioning the innocence of the “Central Park Five,” though she says she supported vacating their sentences. She is not alone in arguing that these five teenagers played some role in the rape and assault of the jogger in 1989, though in polite company, that view is verboten. By supporting the Innocence Project, Ms. Fairstein seems to be saying, “I support truly innocent men.”

It’s hard not to see this as a victory for Netflix. The lines between documentary and docudrama continue to blur, but the audience for both is only growing. Netflix is facing a potential trial in the “Inventing Anna” defamation case. In March, a district court judge ruled that a defamation case against the streamer and the “Inventing Anna” director, Shonda Rhimes, for its depiction of a former Vanity Fair photo editor, Rachel Williams, could move forward.

A jury might have given Ms. Fairstein a large payout. Netflix likely didn’t want to set a precedent with the Fairstein case that would encourage others to sue and make executives hesitant to greenlight future docudrama productions. They got away without conceding fault, aside from the disclaimer.

It’s unclear why Ms. Fairstein would settle on the eve of the trial, but the third-rail nature of the series’ subject matter may be partly to blame. Judge Castel warned that the Fairstein trial would not be a place to relitigate the “Central Park Five” case, but the defense made it clear it was going to do just that and to paint Ms. Fairstein as an overzealous, racist prosecutor.

The defendants’ attorneys said that “evidence regarding her reputation and character” — including Ms. Fairstein’s support of Harvey Weinstein — would come into play at trial. One of the “Central Park Five,” Yusef Salaam, who is now a New York City council member, was scheduled to testify on Netflix’s behalf. 

To Ms. Williams, Ms. Harvey, and other defendants squaring off against Netflix in defamation cases, the Fairstein settlement offers little hope. It shows that Netflix, with its deep pockets, is willing to go to bat for its star directors, impugn the character of its adversaries, and defend artistic license in lucrative docudramas as a First Amendment right.