The attorneys for Macy’s Inc. and J.C. Penney Co. made their final arguments recently in their contract dispute over rights to Martha Stewart Living merchandise. The parties reconvened after the last of many breaks in the trial that opened in February. While scheduling issues caused most of the delays, the court halted the proceedings at one point — in March — so that the retailers could attempt to mediate the matter.
From the tone of the testimony and the behind-the-scenes drama at Penney, though, mediation looked like a long shot to analysts tracking the suit. The interference with contract claim has not only drained Penney’s coffers but it has kept the retailer from moving forward with a major in-store merchandising shift, specifically, opening Martha Stewart Living boutiques within the department stores.
The idea seems to have sprung from Penney’s former CEO, who was also a personal friend of Stewart. He contacted Stewart in December 2011, long after her company, Martha Stewart Living Omnimedia, had entered into a contract with Macy’s to sell MSL-branded home goods. They struck a deal. When it became public, Macy’s sued.
In their closing arguments, attorneys for the retailers (neither Stewart nor her company were part of the lawsuit) reviewed their key points. For Macy’s, the deal was a deliberate attempt to undermine Macy’s market share. Penney strong-armed Stewart into accepting a deal that clearly ran contrary to her contract with Macy’s.
For its part, Penney — and Stewart, who was a key witness but not a party to the litigation — has maintained that the contract allowed Martha Stewart Living Omnimedia to establish Martha Stewart Living stores that marketed the same items sold by Macy’s. The contract did not, however, specify that the stores had to be free-standing shops; by selling the goods in Martha Stewart Living boutiques within their stores, Penney was not violating the Macy’s contract.
Penney has been selling Martha Stewart Living goods since May, but the merchandise do not carry the MSL brand. One of the decisions before the court now is whether those merchandise, now sold under the “JCP Everyday” banner, also violate the Macy’s contract.
The court told the parties to expect a decision soon — but not too soon.
Washington Post, “Attorneys for Penney, Macy’s present final arguments on Martha Stewart case,” Associated Press, Aug. 1, 2013