ROANOKE, Va. ( TheStreet) -- Luna Innovations ( LUNA) was trading sharply higher on above-average volume, buoyed by optimism that the company would settle a damaging lawsuit and avoid a collapse. The Roanoke Times last week reported that Luna Innovations and Hansen Medical ( HNSN) "have developed a framework for settlement" that would reduce a $36.3 million jury verdict against Luna to a more manageable sum, according to a letter written to bankruptcy court Judge William Stone by attorneys on both sides of the case. In 2006, Luna was set to apply its nanotechnology instruments to assist Hansen in developing catheters used for heart surgery, but the deal fell apart after Hansen accused Luna of sharing trade secrets with another company. A jury eventually ruled against Luna, and the company filed for Chapter 11 bankruptcy protection in July. News of a possible settlement had Luna shares rallying sharply higher on big volume. Luna was lately rising 39 cents, or 17.9%, to $2.57. Earlier, the stock touched an intraday high of $3.25. On Friday, Luna shares jumped 94.6% on volume greater than 11.3 million. More than 6.3 million changed hands Monday, compared to the stock's three-month average daily volume of 261,000, according to Yahoo! Finance. Luna has a 7.7 million-share float. Investor posts on Internet message boards were split on whether Luna's surge higher was sustainable. Some argued for taking profits late in the afternoon, much like what happened Friday when the stock hit an intraday high of $3.29 before finishing at $2.18. -- Written by Robert Holmes in New York.