How Blake Lively and ‘Hurt’ Taylor Swift Were ‘Able to Recover’ Friendship amid Justin Baldoni Lawsuit

• Taylor Swift “was really hurt” by her friend Blake Lively’s legal difficulties with It Ends with Us director-costar Justin Baldoni, a source tells PEOPLE exclusively
• Swift is now “relieved they were able to recover from this,” the insider says
• The singer-songwriter was named in a complaint Baldoni filed alleging that Lively had referred to Swift as one of her “dragons”

Taylor Swift and Blake Lively’s friendship is weathering the storm.

Swift “was really hurt,” a source tells PEOPLE, after being implicated in Lively’s ongoing legal battle with Justin Baldoni over behind-the-scenes conflict on their movie It Ends with Us.

Lively, 37, referred to the pop star, 35, as one of her “dragons” in an alleged text exchange, according to a complaint Baldoni filed in January, which claimed that Swift had pressured him to accept rewrites on the movie. The latest development in Lively v. Wayfarer Studios et al. is the reported possibility that Swift could be among those served with subpoenas.

“Blake knew she and Taylor would come back from this at some point and that their friendship wasn’t done for good,” the insider says of the legal difficulties.

“Taylor was really hurt by this situation, so she’s relieved they were able to recover from this and put it all behind them because it wasn’t something she took lightly,” they add.

Swift, whose song “my tears ricochet” was used in It Ends With Us and its trailer, has yet to publicly comment on Lively and Baldoni’s legal back and forth.

The Gossip Girl alum first sued her director-costar in December, accusing him of sexual harassment, “disturbing” and “unprofessional” behavior on set and a retaliatory smear campaign. Baldoni has denied the allegations and, in January, filed a countersuit for defamation and extortion against Lively, her husband Ryan Reynolds and their publicity team.

Among Baldoni’s claims are that Swift and Reynolds, 48, pressured him into accepting one of Lively’s rewrites for screenwriter Christy Hall’s adaptation of Colleen Hoover‘s hit novel. In the complaint, the Jane the Virgin alum described an alleged meeting at Lively and Reynolds’ penthouse where Swift “began praising Lively’s script. Baldoni understood the subtext: he needed to comply with Lively’s direction.”

In an alleged text exchange following that interaction, Baldoni told Lively that her script changes were “so much more fun and interesting” and that he “would have felt that way without Ryan and Taylor,” adding a playful emoji. She allegedly responded by comparing herself to Khaleesi from Game of Thrones, calling her husband and Swift her “dragons” and later her “Dance Moms level stage moms.”

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Swift is both a longtime friend of Lively and Reynolds and godmother to the couple’s four children: James, 10, Inez, 8, Betty, 5, and Olin, 2. Along with Reynolds’ Deadpool & Wolverine costar Hugh Jackman, the friends have been spotted together on numerous occasions, including at NFL games in support of Swift’s boyfriend, Kansas City Chiefs tight end Travis Kelce.