Bloomberg News

Macy’s Judge Says He Will Deny Bid on Martha Stewart Pact

August 30, 2012

A bid by Macy’s Inc. to stop J.C. Penney Co. (JCP:US) from selling products designed by Martha Stewart Living Omnimedia Inc. (MSO:US) will be denied, a New York judge said after a hearing.

Justice Jeffrey K. Oing in Manhattan today said he will rule against Macy’s request for a preliminary injunction blocking Plano, Texas-based J.C. Penney from taking any steps under an agreement reached with New York-based Martha Stewart Living last year.

Macy’s, the second-biggest U.S. department-store chain, sued Martha Stewart Living in January to stop it from executing a sales agreement with J.C. Penney announced in December. Macy’s claimed an exclusive right to sell Martha Stewart products in categories including bedding and cookware.

Oing last month granted Cincinnati-based Macy’s a preliminary injunction blocking Martha Stewart Living from taking any steps under its agreement with the Texas retailer on branded products in the exclusive product categories. Macy’s this month filed a separate suit against J.C. Penney, seeking to block it from taking any steps under the pact.

Oing today said he was going to deny the request for a preliminary injunction against J.C. Penney, asserting that Macy’s hadn’t proved it was likely to succeed on its claims of tortious interference and unfair competition.

‘Competitive Business’

“It’s one thing to enjoin” Martha Stewart Living, Oing said. “That company is at the centerpiece of these actions. It’s another for me to enjoin a retailer from doing business. The retail business is a very competitive business.”

J.C. Penney in December acquired a 17 percent stake in Martha Stewart Living for $38.5 million as the U.S. department- store chain seeks to revive sales with new mini-stores dedicated to the home goods brand.

Martha Stewart Living last month said J.C. Penney agreed to pay at least $282.9 million in sales commission over a 10-year period under an amended agreement, a $110.5 million increase from the terms disclosed in December. The amended pact also adds new products.

“Because J.C. Penney committed to be bound by the preliminary injunction issued by the court against Martha Stewart Living Omnimedia on July 31, the court today declined to issue an additional preliminary injunction against J.C. Penney,” Macy’s said in a statement. “J.C. Penney has agreed that it won’t sell Martha Stewart-branded merchandise in our exclusive categories as long as the MSLO injunction is in effect.”

J.C. Penney didn’t respond to multiple telephone inquiries seeking comment on Oing’s decision.

Irreparable Harm

Theodore Grossman, an attorney with Jones Day in Cleveland who is representing Macy’s, argued that the retailer will suffer irreparable harm if J.C. Penney is allowed to continue working under the contract with Martha Stewart Living.

“Macy’s made a huge investment and took a huge risk in investing in Martha Stewart when it did,” Grossman said.

“Think of the Genius Bar at Apple stores,” Grossman said. “That’s what they’re trying to create, a Martha Stewart bar at J.C. Penney.”

J.C. Penney will abide by the preliminary injunction issued last month and won’t sell Martha Stewart-branded products in the exclusive product categories, said Mark Epstein, a lawyer for the Texas retailer with Munger Tolles & Olson LLP.

‘Little Frustrating’

“We’re not going to take a design from Macy’s, sand off the mark and knock it off,” Epstein said.

The judge said it was a “little frustrating” that the three companies, which he called “part of the fabric of this country” can’t sit down and work out their issues.

“To have them go into this nasty fight right now is not a good thing for the economy,” Oing said.

The case is Macy’s Inc. (M:US) v. J.C. Penney Corp., 652861/2012, New York State Supreme Court (Manhattan). The old case is Macy’s Inc. v. Martha Stewart Living Omnimedia Inc., 650197/2012, New York state Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • JCP
    (JC Penney Co Inc)
    • $6.5 USD
    • -0.24
    • -3.69%
  • MSO
    (Martha Stewart Living Omnimedia Inc)
    • $4.31 USD
    • -0.02
    • -0.46%
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