Suit by Heidi’s Frogen Yozurt Founder Settled : Courts: Health promoter sought damages from buyer of her firm, which was in bankruptcy.

Avid health promoter Heidi Miller, who co-founded Heidi’s Frogen Yozurt, settled her breach-of-contract lawsuit Tuesday against the New York company that acquired her yogurt operation six years ago.

Details of the settlement that Miller and former business partner Brian Pallas reached with Steve’s Homemade Ice Cream, however, are being withheld under court order until the parties work out minor details over the next week.

Lawyers for both sides will return to court next Tuesday to go over the final agreement, said Kimberly Jensen, an Orange County Superior Court clerk.

Negotiations are delicate, sources in the case said, because Heidi’s Frogen Yozurt has been in bankruptcy in New York for the past year. Details released before the agreement is final could jeopardize the ongoing bankruptcy reorganization, the sources said.

Ken Stern, president of Heidi’s Frogen Yozurt in Laguna Beach, referred all inquiries to the newly renamed parent company, Integrated Brands, in Ronkonkoma, N.Y., but no executives there were available for comment. Miller and Pallas could not be reached for comment.

Miller, a colorful and charismatic Laguna Beach bodybuilding champion, and Pallas had built Heidi’s quickly from an Irvine outlet in 1982 to more than 90 stores by 1989.

Miller espoused physical fitness and refused franchisee attempts to add candy and other toppings to her frozen yogurt offerings. Pictures of her sculpted physique hung from store walls, and her books and exercise videos were available for sale. She appeared on talk shows and in magazine stories, and gave talks to business groups and college classes.

But her chain’s fast growth led it into financial troubles, squabbles with franchisees and, eventually, into the arms of Steve’s Homemade Ice Cream.

The 1989 deal with Steve’s, then the owner of 400 ice cream parlors, including the Swensen’s chain, was supposed to give the money-losing Heidi’s a needed financial boost as well as a chance to be marketed in nearly 4,000 shops and supermarkets across the country.

The deal was also supposed to give Miller and Pallas 50,000 shares of Steve’s stock, the opportunity to receive an additional 150,000 shares over a five-year period, 5% of Heidi’s pretax profits, and consulting contracts that paid Miller $40,000 a year for five years and Pallas $25,000 a year for three years.

Instead, they say, they have received little.

Creditors forced Heidi’s into bankruptcy a month before the deal closed. It was the first of two bankruptcy actions for the company. Though Steve’s soon settled the claims and ended the first bankruptcy, the parent company turned over only 25,000 shares and stopped paying on the consulting contracts within months after taking over Heidi’s.

Miller and Pallas eventually filed suit, seeking $2.5 million plus unspecified punitive damages.

“Steve’s was a company that had the financial ability to take Heidi’s to the next level,” Miller said in an interview three years ago after the lawsuit was filed. “It was a pretty good sales pitch. . . . We got sold so well by powerful, powerful people. They had avenues that we didn’t have.”

The lawsuit accuses the parent company of manipulating its financial records to show that its Heidi’s subsidiary was losing money and of making it difficult--if not impossible--to determine how much Miller and Pallas are owed.

Steve’s has asserted that Heidi’s was bankrupt and troubled and that much of the money promised the co-founders was tied to profits that never materialized. Indeed, Steve’s put Heidi’s in bankruptcy voluntarily last year. Heidi’s has been hurt by the overall decline in frozen yogurt sales nationally.

Miller, meantime, has been operating women’s fitness clothing stores, called Tight Assets, in Costa Mesa and Santa Ana.