| NEW YORK, April 8
NEW YORK, April 8 Macy's Inc and rival
J.C. Penney Co Inc are due back in court Monday in their
battle over Martha Stewart home goods after a month-long
mediation effort appeared to have failed.
The trial is set to resume in New York state court over
whether Macy's has an exclusive right to sell certain Martha
The legal battle has hampered a key part of turnaround plans
for J.C. Penney, which opened the first of its in-store
boutiques on Friday with only some of the Martha Stewart goods
it had originally planned..
Justice Jeffrey Oing last month ordered Macy's, J.C. Penney
and Martha Stewart Living Omnimedia Inc into mediation
in the hopes of resolving the dispute while the non-jury trial
was in recess because of scheduling conflicts.
But, as of Friday, no deal had been struck and witnesses
were scheduled to testify on Monday and Tuesday, according to a
person familiar with the case.
Among the witnesses are J.C. Penney marketing executives,
according to the person, who wasn't authorized to speak publicly
and did not want to be identified.
"We're all reconvening Monday morning," said Jim Sluzewski,
a spokesman for Macy's. "The trial is scheduled to resume at ten
A spokeswoman for J.C. Penney declined to comment, as did a
spokesman for Martha Stewart Living Omnimedia.
Macy's sued Martha Stewart Living Omnimedia last year after
it signed an agreement to sell Martha Stewart-branded products
at J.C. Penney. Macy's claims the agreement breaches its
contract to sell certain products exclusively at Macy's.
Macy's also sued J.C. Penney over the deal, which includes
plans to create Martha Stewart boutiques in J.C. Penney stores.
Martha Stewart is the No. 1 home brand at Macy's, while J.C.
Penney views the brand as vital to its turnaround strategy.
The lingering battle has been a blow to Penney, which agreed
to hold off on its plan to sell Martha Stewart bedding, cookware
and bath items, which are covered in the Macy's deal, until at
least the April 8 court date.
Steven Gursky, a New York attorney who specializes in
branded products, said he did not have high hopes the dispute
could be resolved through mediation.
"If I was sitting in Macy's shoes, I'm not sure I'd be
willing to compromise," said Gursky. "Unless Martha Stewart and
J.C. Penney realized they couldn't take what Martha had already
given away to Macy's, and fold their tents, I don't know what
they have to offer."
Martha Stewart, 71, Macy's Chief Executive Terry Lundgren
and J.C. Penney chief Ron Johnson all have testified in the
Lundgren testified that Stewart did not tell him she was
doing a deal with J.C. Penney until the night before it was
announced publicly. He said the news made him sick to his
stomach, and he hung up the phone on Stewart.
Stewart, 71, said she was "flabbergasted" that Lundgren
reacted so strongly. "It didn't occur to me that there weren't
enough customers to go around," she said.
Johnson, who built up Apple Inc's retail business
before moving to Penney in 2011, testified that Martha Stewart
was part of his plan to re-invent the retailer. He said the
brand would help to drive sales and increase market share.
The company's turnaround plan, criticised for missteps on
pricing policies, has been "very close to a disaster," hedge
fund manager William Ackman, the J.C. Penney board member who
handpicked Johnson, said on Friday. Ackman, whose Pershing
Square Capital Management is Penney's largest shareholder, spoke
at an investment conference sponsored by Thomson Reuters.
J.C. Penney opened the first of its new home goods boutiques
in some locations last week. It can still sell Martha
Stewart-branded window coverings and other product categories
not claimed by Macy's.
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.