Bloomberg News

Macy’s Seeks to Broaden Bar on Penney’s Stewart Sales

April 11, 2013

Macy’s Inc. (M:US) will ask a judge to expand an injunction blocking J.C. Penney Co. from selling goods designed by Martha Stewart’s company in certain categories even if they don’t carry her name or trademark.

Supreme Court Justice Jeffrey K. Oing in New York is scheduled to hear arguments tomorrow to broaden a preliminary injunction he issued in July blocking Martha Stewart Living Omnimedia Inc. from selling goods with Stewart’s name at J.C. Penney in categories exclusive to Macy’s, including soft home goods and cookware.

Macy’s wants Oing to extend the injunction to cover goods designed by Stewart’s company that don’t carry her name, which J.C. Penney plans to sell under the name “JCP Everyday.” Macy’s also wants Oing to declare that plastic partyware sold at J.C. Penney under the name “MarthaCelebrations” violates his injunction and should be pulled from the shelves.

Oing yesterday dismissed one of the two claims in Macy’s suit against Martha Stewart Living, saying that Macy’s hadn’t proved that the company violated a confidentiality provision of their contract.

The judge today denied a motion by New York-based Martha Stewart Living to dismiss the second breach-of-contract claim as it relates to whether the company can design products for other retailers in the exclusive categories.

No Disgorgement

The judge granted Martha Stewart Living’s motion to dismiss a claim for damages related to disgorgement, saying that Cincinnati-based Macy’s isn’t entitled to part of a design fee paid to the company by J.C. Penney, which is based in Plano, Texas.

Oing also granted a motion to dismiss one of three claims in the Macy’s suit against J.C. Penney. (JCP:US) The judge threw out a claim for intentional contract interference, citing yesterday’s confidentiality ruling. Oing said he will rule tomorrow morning on a motion by J.C. Penney to dismiss a second claim of unfair competition.

“MSLO’s lawyers will show that at our core MSLO is a design house committed to designing beautiful, high-quality products and that our contract with Macy’s permits us to license our designs to all retailers so that consumers can buy them wherever they shop,” Katherine Nash, a company spokeswoman, said in a statement.

The three sides returned to court this week to resume a trial of Macy’s lawsuits following a monthlong break, during which mediation efforts ordered by Oing were unsuccessful. The trial, which began Feb. 20, has featured testimony from Martha Stewart, Macy’s Chairman Terry Lundgren and former J.C. Penney Chief Executive Ron Johnson, who was ousted the same day the trial resumed.

J.C. Penney in December 2011 acquired a 17 percent stake in Martha Stewart Living for $38.5 million.

Home Goods

Macy’s, which has sold Martha Stewart-branded home goods since 2007, sued her company in January 2012, saying it had the exclusive right to sell items in certain categories including bedding and cookware. Macy’s sued J.C. Penney about three months later.

Lawyers for Macy’s have argued that J.C. Penney is trying to “reap the rewards” of its work with the Martha Stewart brand, which the chain said it rebuilt after Stewart’s release from prison in 2005, when her products were sold at Kmart. (SHLD:US)

Martha Stewart Living has defended its agreement with J.C. Penney, accusing Macy’s of breach of contract and saying the retailer stocked and priced Martha Stewart products in a manner that favors private-label brands.

Martha Stewart Living also said Macy’s couldn’t have exercised a five-year renewal option in January 2012 because of the breach.

Johnson’s plan for the retailer was focused on a series of shops-in-shops centered on brands including Martha Stewart and designer Michael Graves.

Internet Sales

Martha Stewart Living had argued that its original contract with Macy’s allowed the company to design and sell products within the exclusive categories as long as they were sold through the Internet, television or any retail store branded with the Stewart name.

During his arguments today, Eric Seiler, a lawyer for Martha Stewart Living, told the judge “there’s not going to be a Martha Stewart store at J.C. Penney anymore.”

Seiler was referring to the injunction that’s currently in place, Daphne Avila, a spokeswoman for J.C. Penney, said in an e-mail.

“We are moving forward with shops for MarthaCelebrations and other non-exclusive categories,” Avila said.

The cases are Macy’s Inc. v. Martha Stewart Living Omnimedia Inc. (MSO:US), 650197/2012; Macy’s Inc. v. J.C. Penney Corp., 652861/2012, New York State Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court at 8969 or cdolmetsch@bloomberg.net

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


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Companies Mentioned

  • M
    (Macy's Inc)
    • $61.77 USD
    • 1.07
    • 1.73%
  • JCP
    (JC Penney Co Inc)
    • $10.19 USD
    • 0.02
    • 0.2%
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