David Bar Katz

David Bar Katz, center, attends the funeral of Philip Seymour Hoffman in New York. (Emmanuel Dunand / AFP / Getty Images / February 6, 2014)

One of the two friends who discovered Philip Seymour Hoffman's body in his apartment has withdrawn a lawsuit against the National Enquirer after reaching a settlement with the tabloid.

David Bar Katz has come to an agreement with the Enquirer over a story that falsely claimed he and Hoffman were gay lovers who had free-based cocaine the night before the actor died.

Katz, a playwright, told the New York Times he will use the settlement to set up the American Playwriting Foundation, which will give out an annual prize of $45,000 for an unproduced play. It will be called the Relentless Award, in Hoffman's honor.

PHOTOS: Philip Seymour Hoffman | 1967 - 2014

Katz said he first heard of the Enquirer story from one of his sons. "My 14-year-old said, 'Dad, there's something online about you and Phil being lovers," Katz said. "I said, 'Phil would get a kick out of that.' "

The Enquirer quoted Katz as saying that he and Hoffman were lovers and had done drugs together and that he had seen Hoffman use heroin many times. None of those things were true, and Katz had never spoken to the Enquirer.

Katz quickly filed a libel suit, and the Enquirer subsequently withdrew the article and apologized. As part of the settlement, the Enquirer also bought a full-page ad in the New York Times, which says the publication was duped by a someone claiming to be Katz.

Katz said what offended him most about the erroneous story wasn't the assertion that he was gay. "We're theater guys. Who cares?" he said. "The issue was lying about the drugs, that I would betray my friend by telling confidences."

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