The 27-year-old singer - who had an on/off relationship with Justin Bieber in the past - was spotted at the same restaurant as the pair as they enjoyed a night out with friends in West Hollywood over the weekend, and now she has spoken out after her longtime friend received online abuse over the coincidental run-in.
She wrote on Instagram: "This is disgusting reading all of this. This wasn't intentional whatsoever. I'm so disappointed that people would speak to someone like that.
"I have known Madison since she was a baby and watched her continue to become the woman she is... There is no issue."
Madison herself had to hit out at the critics as she argued the backlash was "unnecessary".
Responding in a comment on her own Instagram post, she said: "I just had dinner with my friend hailey of 10 years... and that's it. How is that a crime?
"i love selena.. always have ... and i would literally never in a million years try to upset her??? this is just mean and unnecessary and nothin happened. (sic)"
The drama comes after Hailey, 23, was caught up in a "fake feud" with her husband's former flame surrounding Selena's song 'Lose You To Love Me', which was said to be about the Canadian pop star.
Hours after the track was released, Hailey posted on her Instagram page that she was listening to Summer Walker's 'I'll Kill You', which set her followers tongues wagging.
However, she later clarified in since-deleted post that her song choice was nothing to do with Selena.
She wrote: "Please stop with this nonsense. There is no 'response.' This is complete BS."
Selena then issued her own statement, calling for her fans not to be "rude" and insisted she will not stand for "women tearing women down".
She said: "It doesn't matter what the situation is. If you're my fans, don't be rude to anybody, please.
"Don't go off and say things that you just feel in the moment. And just please, from me, know that that's not my heart."