This bug has been fixed in Release 2006a (R2006a). For previous product releases, read below for any possible workarounds:
We have verified that there is a bug in MATLAB 7.0.1 (R14SP1) when using the CLABEL function. To work around this issue, use the 'v6' option with the CONTOUR command, as in the following example:
Z = peaks;
[C,h] = contour('v6',interp2(Z,4));
text_handle = clabel(C,h);
set(text_handle,'BackgroundColor',[1 1 .6],'Edgecolor',[.7 .7 .7])
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