Mega Brands has made the first steps to settle the Magnetix case out of court "to avoid the expense and resouces that would be needed for further litigation," the firm has said.
In an official statement, Mega Brands said: "This lawsuit does not allege personal injury claims. Rather, plaintiffs in the lawsuit claimed that certain Magnet Toys contained defective magnets, and they asked for their money back."
The defendants, which includes the American retailer Target, have also agreed to donate $100,000 in 'cash and product' to a children's health foundation.
One child died and 27 were seriously injured as a result of swallowing loose magnets from Magnetix toys.