According to The Times, the two parties' legal teams have held discussions this week to avoid the matter going to the High Court, which "might be undesirable for all concerned", says the report.
A separate report by The Telegraph says that City are seeking £300,000 from Duffen, as well as a repayment for his salary for days not spent at work.
Duffen's role as chairman was terminated in October, and the club has since begun this legal action "to protect the commercial interests of the football club against actions undertaken by Paul Duffen", whom it believes acted in breach of his employment contract.