Feb 20 A lawyer for Macy's Inc told a
judge on Wednesday that rival J.C. Penney Co Inc schemed
to steal Martha Stewart's fans with products similar to those
Macy's offers under the home goods doyenne's brand.
J.C. Penney looked for loopholes in Macy's contract with
Martha Stewart Living Omnimedia and tried to push Macy's
to walk away from the contract, Macy's lawyer said at the start
of the trial over whether Stewart's contract with Macy's stops
her from partnering with Penney.
"We're here to protect our rights. Rights that we paid for.
Rights that we worked on. Rights that we took tremendous risks
for," attorney Theodore Grossman told Justice Jeffrey Oing of
New York state Supreme Court in Manhattan, who is presiding over
the non-jury trial.
Last year, Macy's sued Martha Stewart Living Omnimedia for
breach of contract, and J.C. Penney for interference and unfair
competition. The cases were brought together for trial.
Macy's argues that it alone has the right to
sell Martha Stewart products in certain categories,
including cookware, home decor, bedding and bath textiles, under
a 2006 agreement that runs until 2018 after being renewed last
year. Martha Stewart is the biggest manufacturer of home goods
The stakes are high for Penney. The struggling retailer in
December 2011 announced plans to open Martha Stewart boutiques
in about 700 of its department stores in 2013. The shops are set
to open in May and will anchor the overhaul of its home goods
section that Penney Chief Executive Ron Johnson recently said
was crucial to returning Penney to growth in 2013.
Macy's contract allows Martha Stewart to open its own stores
and sell the product categories that are exclusive to Macy's.
But Macy's argues the boutiques at J.C. Penney do not qualify
for that exception. Macy's has asked the court to stop the
Martha Stewart boutiques at Penney from going forward.
Martha Stewart Living and Penney have since argued that
Penney can sell items designed by Stewart, even if they fall
under categories that are exclusive under the Macy's contract,
as long as they do not bear Stewart's name.
Speaking to the court, Grossman said the Macy's had taken a
risk on Stewart, helping her resurrect her image after she left
prison in 2005. Martha Stewart was found guilty in 2004 of lying
about a stock sale.
Grossman also told the judge how Macy's took the Martha
Stewart brand upscale after its association with Kmart. And he
showed a news clip in which Martha Stewart spoke of her
"amazing, amazing relationship with Macy's" in January 2012, a
month after the deal with J.C. Penney was announced.
"This is a contractual dispute. But in 70 minutes of talking
they never showed the judge any term in the contract that was
breached," a Martha Stewart Living representative said.
Grossman said Stewart had left Macy's in the dark about her
Penney partnership until the eve of the announcement when she
informed Macy's Chief Executive Terry Lundgren of the deal and
said it would be a positive for Macy's, too, reading from a
script that also said "even though you might not agree."
In making Macy's case, Grossman quoted from an email
Penney's Johnson sent when the Martha Stewart deal was
announced, "We put Terry in a corner."
Grossman quoted from another Johnson email, "Ultimately they
think the best way to stop Macy's from renewing is to make our
offensive so strong they simply pick up their toys and go home."
At the time Macy's deal with Stewart was coming up for renewal.
Penney's lawyer, Mark Epstein, said in his opening
statement, "J.C. Penney acted honorably and appropriately in all
He said the emails Macy's lawyer cited were an attempt to
paint a "sinister picture" of the J.C. Penney's deal with Martha
Stewart, but that was not the case. He said the stores within
stores were "Johnson's vision for JCP and it's a vision about to
Epstein said the case shouldn't be a vendetta against Martha
Stewart and Ron Johnson. "It's a breach of contract dispute at
its heart," he said. "This is no more than fair competition."
The trial is likely to rivet the retail industry, with
Stewart, Lundgren and Johnson all potential witnesses.
Penney, which operates 1,100 department stores, about a year
ago announced plans for a radical transformation of its business
including a four-year transformation of its 700 largest stores
into a collection of 100 chic yet affordable shops in each.
The cases are Macy's Inc. v. Martha Stewart Living Omnimedia
Inc., 650197/2012, and Macy's Inc. v. J.C. Penney Corp.,
652861/2012, New York State Supreme Court, New York County.