(Refiles to fix day of week in first paragraph)
By Bernard Vaughan
NEW YORK, April 15 (Reuters) - A lawsuit claiming Martha Stewart Living Omnimedia Inc tried to undercut a business partner's relationship with pet products retailer PetSmart Inc can proceed, a New York state judge ruled on Monday.
Age Group Ltd in July 2009 entered into a four-year licensing agreement with Martha Stewart Living to market and sell Stewart-branded pet products. Four months later, Age Group and PetSmart struck a deal under which PetSmart would buy Stewart-branded pet products from Age Group.
New York-based Age Group, which manufactures and licenses products for distribution, sued Martha Stewart Living last year in state court in Manhattan for breach of contract and other claims.
The lawsuit said that after Age Group contracted with PetSmart, Martha Stewart Living realized that it had undervalued Stewart-branded pet products. Martha Stewart Living disparaged Age Group to PetSmart and withheld approval of pet products to try to get PetSmart to contract directly with Martha Stewart Living, according to the complaint.
On Monday, Manhattan Supreme Court Justice Shirley Kornreich denied a bid by Martha Stewart Living to dismiss the lawsuit, saying a question remained as to whether Martha Stewart Living had acted in bad faith, in violation of its contract with Age Group.
The lawsuit seeks compensatory and punitive damages.
Marc Kasowitz, a lawyer for Age Group, said Tuesday that he was pleased with the decision and confident that evidence will "overwhelmingly support" his client's claims at trial.
Lawyers for Martha Stewart Living Omnimedia did not immediately respond to requests for comment on Tuesday.
The case is Age Group Ltd v. Martha Stewart Living Omnimedia Inc, New York Supreme Court, No. 653408/2014. (Reporting by Bernard Vaughan; Editing by Cynthia Osterman and Lisa Shumaker)