ParfumGigi@aol.com

Shannon P. Duffy
The Legal Intelligencer
06-08-2007

More drama is unfolding in the high-stakes court battle between the makers of Equal and Splenda with a court filing Thursday that suggests their recent settlement may be dissolving.

In the motion, Equal's maker, Merisant, claims that Splenda's maker, McNeil Nutritionals, is breaching the confidential settlement agreement the two companies struck last month when it became clear that a jury was poised to return a verdict in Merisant's favor.

Although both sides said at the time of their settlement that they would not publicly disclose the terms, a recent filing by Merisant with the Securities and Exchange Commission strongly suggests that McNeil agreed to pay more than $22 million and possibly as much as $31 million.

In the SEC filing, Merisant said: "We had $22.3 million of cash and cash equivalents as of March 31, 2007. We anticipate that our cash balance at June 30, 2007, will be 100 percent to 140 percent greater than the cash balance at March 31, 2007, as a result of a one-time cash payment to be received pursuant to an agreement with a third party."

The settlement was struck soon after the jury asked for a calculator -- a clear indication that the group had decided the case in Merisant's favor and was busy calculating its monetary award.

In the verdict, it seems likely the jury would have found that Splenda was misleading consumers with its slogan "made from sugar so it tastes like sugar." But due to the last-minute settlement, neither the jury's findings on that issue nor the amount of damages it was poised to award was ever revealed.

The terms of that settlement have never been made public, but Merisant now claims that McNeil has reneged on the deal by refusing to take certain actions by June 10.

The motion doesn't specify what those actions are, but says all of the terms of the settlement were recorded by a court reporter at the time -- and that McNeil is refusing to honor the terms of the deal.

Now Merisant is asking U.S. District Judge Gene E.K. Pratter to order "specific performance" of the settlement, or, in the alternative, to lift the order that dismissed the case and enter the jury's verdict.

After the settlement was announced in court, several members of the jury spoke with the lawyers and news reporters and revealed that they had reached a verdict in Merisant's favor.

Juror Barbara Helms said the jury declined to disclose the amount they were poised to award. "It was a substantial figure," she said, "but it wasn't as much as they were asking for."

Merisant was seeking more than $205 million in damages, according to court papers.

In the motion filed Thursday, Merisant's lawyers -- Abraham C. Reich and Beth L. Domenick of Fox Rothschild in Philadelphia and Gregg F. LoCascio, Eugene F. Assaf, Jonathan D. Brightbill and Jeffrey G. Landis of Kirkland & Ellis in Washington, D.C. -- contend that McNeil "has repudiated the terms of the settlement."

The motion says McNeil has also "denied the existence of a binding agreement between the parties."

But in a statement released Thursday, McNeil made its own accusations, saying Merisant "has breached the confidentiality provisions of the agreement," and that McNeil was the first to ask the court to enforce the terms of the settlement.

"Merisant's motion is a response to McNeil Nutritionals' request that the terms of the settlement agreement -- including those related to confidentiality -- be enforced," the statement from McNeil spokeswoman Julie Keenan said. Although the statement offered no details about Merisant's alleged breach of the confidentiality clause, the motion from Merisant shows that it stems from a recent Equal ad campaign.

The ad, headlined "Now Taste the Truth," tells consumers that the Commercial Court of Paris has ruled that Splenda's slogans "violate consumer protection laws in France," and that Splenda, therefore, "can no longer make claims in that country that imply that Splenda is more natural than other sweeteners."

The ad also says Equal had filed a "similar lawsuit" in the United States, "which the parties settled."

The ad includes a $2 coupon for Equal and says "now that you have a taste of the truth, please enjoy some Equal on us."

In the motion, Merisant's lawyers argue that the ad disclosed only the fact that a settlement occurred -- but none of the terms of the settlement -- and therefore cannot be considered a breach of the confidentiality clause.

"McNeil's attempt to manufacture a 'breach' by Merisant ... is a transparent pretense to attempt to create leverage for their renegotiation effort," the motion says.

According to the motion, McNeil recently "sought to horse-trade" in its obligations under the settlement agreement by demanding three extra months to comply with a provision that it was obligated to complete by June 10.

The motion offers no details about what McNeil's obligations were, but suggests that the timing of its proposed renegotiation is suspicious.

"That three-month extension would coincidentally place McNeil's satisfaction of that obligation after the currently-scheduled trial date of the next of the Splenda false advertising suits, the suit brought by the Sugar Association," the motion says.

In the motion, Merisant's lawyers urged Pratter to convene a hearing, order specific performance of the settlement, and issue an order that publicly reveals the terms of the settlement.

"While McNeil may have had a change of heart over the terms it agreed to, that does not change the terms themselves," the motion says.

In the alternative, Merisant argues that in lieu of enforcing the settlement, Pratter should simply enter the jury's verdict, the details of which are known only to the court.