CHICAGO (Reuters) - The Kroger Co, the biggest U.S. supermarket operator, said on Monday it will remove the "humanely raised" claims from a store brand of chicken to settle a federal lawsuit claiming the retailer deceived consumers because the animals were raised under standard commercial farming conditions.

Kroger and the lawyers for a California consumer filed a statement in U.S. District Court for the Central District of California on Friday agreeing to dismiss the case with prejudice. On Monday, animal activist group Compassion Over Killing, whose lawyers were involved in the litigation, sent a statement to Reuters saying the case had been settled.

The complaint, originally filed in February, was seeking class-action status against Kroger for allegedly misleading California consumers with claims about the grocer's "Simple Truth" premium-priced store brand of chicken.

The "Simple Truth" chicken products were packaged with labeling that stated the animals were "raised in a humane environment" and "cage free," according to the lawsuit. However, standard industry practice for broiler chickens is to house them inside large buildings, not cages, according to industry experts.

Kroger and its chicken supplier, Perdue Farms, opposed the lawsuit, but last week the retailer and the consumer's lawyers agreed to dismiss the case. As part of that agreement, Kroger said it would remove the "humane environment" claim from the packaging of Simple Truth products by October 2015.

Other terms of the dismissal were not disclosed.

"We stand by our assertion that the 'raised in a humane environment' claim on our Simple Truth chicken label is accurate," Gil Phipps, Kroger's vice president of corporate brands, said in a statement to Reuters.

"We are pleased to put this lawsuit behind us and will continue to work with our suppliers to ensure the humane treatment and welfare of animals."

The case is Ortega v. The Kroger Co, U.S. District Court for the Central District of California, No. 14-1949.

(Reporting By P.J. Huffstutter. Editing by Andre Grenon)