(Adds details of allegations, comments, closing prices)
By Karen Freifeld
NEW YORK, June 16 JC Penney Co
interfered with a contract between Macy's Inc and Martha
Stewart Living Omnimedia Inc when it cut a deal to sell
a line of the celebrity's home goods, a New York judge ruled on
Macy's is entitled to monetary damages and attorneys' fees
from Penney, said Justice Jeffrey Oing of New York state court
in Manhattan, but it failed to prove by "clear, unequivocal and
convincing evidence" that it deserved punitive damages.
"The behavior exhibited by JCP's top executives, with JCP
board ratification, has been less than admirable," Oing wrote in
a 63-page decision. A referee or special hearing officer will
assess damages and fees, the judge said.
Macy's sued Penney in 2012 over a partnership that Penney
and Martha Stewart announced the preceding December.
It accused Penney of breaching its own contract with Martha
Stewart Living, which included exclusive rights to sell
cookware, bedding and bath products from the company named for
the homemaking doyenne.
Oing said Penney might be liable for profit from the sale of
900 designs that Martha Stewart Living prepared, some of which
Penney had sold under the "JCP Everyday" label while the case
was pending. Macy's had objected to the sales.
The judge also said Martha Stewart Living violated its
agreement with Macy's by contracting with Penney, and that
Penney encouraged it to do so.
JCPenney, in a statement, said it did not believe damages
were warranted, and may appeal. The Plano, Texas-based company
has said any payout would not be material to its results.
Macy's said it was "delighted" but "not surprised" by the
In October, Penney and Martha Stewart Living announced a
revised agreement that eliminated Stewart's products in Macy's
exclusive categories. Macy's this year separately reached its
own settlement with Martha Stewart Living.
Penney's partnership with Martha Stewart Living was part of
the effort by then-Chief Executive Ron Johnson, to take the
Johnson was fired in April 2013 after his changes led to a
25 percent drop in sales the prior year.
In his decision, Oing said Johnson's strategy was a
"colossal" failure that placed Penney on the verge of financial
collapse, leaving the retailer, its board and top executives
"publicly ridiculed and humiliated.
"These significant facts are a sufficient deterrent to JCP
and other companies from acting in a similar way in the future,"
Since Johnson's department, JC Penney has begun turning
sales trends around, with comparable store sales rising 6.2
percent in the quarter ended May 3.
On the New York Stock Exchange, Macy's closed down 17 cents
at $57.23 and Penney rose 3 cents to $8.64. Martha Stewart
Living rose 35 cents, or 8.5 percent, to $4.47 on thin volume.
The case is Macy's Inc v Martha Stewart Living Omnimedia
Inc, 650197/2012, New York State Supreme Court, New York County.
(Reporting by Karen Freifeld; Additional reporting by Jonathan
Stempel and Jeffrey Dastin in New York; Editing by Richard