The deli also failed to properly hire, train, and supervise its employees, the suit said. Burke confessed to police on the day of the incident that he put his chest and pubic hair in the egg, turkey, and cheese sandwich in retaliation for a 2009 arrest by Merck. He was immediately fired.
A New Jersey State Police lab found the hairs contained Burke's DNA.
Three weeks ago, the parties agreed to settle and dismiss the lawsuit, according to Bruce Zamost, a Mount Laurel lawyer representing Merck. The $13,750 settlement included attorney fees and other costs.
The suit, filed in Superior Court in Burlington County, sought unspecified damages.
"This case serves as a warning to persons who seek to harm police officers for merely doing what the public asks them to do, which is to risk their lives at work on a daily basis," Zamost said.
Merck, through his attorney, declined to comment.
The tale of the lawsuit over the hairy bagel made the rounds on the Internet. Zamost said strangers even asked Merck about the incident.
"He's known as the police officer who ingested the human hair," Zamost said. "He's still stigmatized and probably will be for a long time."
As part of the settlement, the defendants disputed the claim, and neither explicitly admitted nor denied wrongdoing.
Zamost had argued that customers are protected by a state law that makes restaurants liable for serving contaminated food, regardless of the restaurant's cleanliness or negligence.
Marlton lawyer Mark Sander, who represented Mulligan's at Little Mill Inc., the corporate entity, could not be reached.
Sander previously said that Burke, 28, "acted outside the scope of his employment."
Merck and other Evesham officers continued to patronize Good Foods, which was on Merchants Way but since moved, Sander said last year.
The Evesham department, where Merck has worked since July 2005, declined to comment.
In October 2010, Burke pleaded guilty to aggravated assault on an officer and retaliation for a past official action, records show. He received two years' probation, fines, and 15 days in jail to be served on weekends.
Burke could not be reached Thursday.
Contact Darran Simon 856-779-3829 or at firstname.lastname@example.org, or reach on Twitter @darransimon.