The hearing was initially set down to be heard in Dunedin over nine days, starting on Monday. Prof Ka'ai was dean of Te Tumu, the School of Maori, Pacific and Indigenous Studies, and Prof Moorfield was another leading academic at the school.
Prof Ka'ai was the first Maori woman appointed to a university as a professor in Maori studies and has built an international reputation for her writings about Maori education, leadership and sovereignty issues.
Last April, Prof Ka'ai was stood down by Otago University as an investigation began into employment issues involving her. University officials have previously declined to say what the issues were.
Both academics now hold professorial posts at the Auckland University of Technology. It is understood a settlement was not reached.
Otago University director of human resources Kevin Seales said in a statement yesterday Prof Ka'ai, Prof Moorfield and Tania Smith, an administrator in the same department, had resigned last year during a university investigation into their conduct as employees.
They claimed to have been constructively dismissed and unjustifiably disadvantaged by the manner in which that investigation was conducted.
"The University of Otago has always been confident that its actions were entirely appropriate throughout and that the claims by its former employees had little chance of being upheld by the Employment Relations Authority.
"Because the three ex-employees withdrew their claims at the 11th hour, the authority hearing, which would have been held in public, will now not proceed and the university is not able to make the details of the case public.''
The lawyer representing the two professors, Mary-Jane Thomas, of Invercargill, confirmed yesterday the case had been withdrawn. She declined to comment on the reasons why.