A Houston-based law firm has agreed to pay Enron $2.8 million to settle a lawsuit to recover fees the energy company paid it before becoming bankrupt in December 2001.

Enron's committee of un-secured creditors sued law firm Andrews & Kurth in 2003 on behalf of the company to recover $5.4 million in legal fees. The firm advised on transactions that allowed the company to shift debt off its books, according to the papers filed with the US Bankruptcy Court in New York.

The $2.8 million settlement, if approved by US Bankruptcy Judge Arthur Gonzalez, will enable Enron pay back its creditors. Enron has already won approval to sell all its properties and begin paying back creditors about 20 cents on the dollar.

"The settlement agreement will result in a substantial return to creditors," the committee said in court papers. "If the settlement is not approved, the creditors will face prolonged and expensive litigation, the outcome of which is uncertain."

Gonzalez will consider the settlement on October 14.