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Macy’s Sues J.C. Penney Over Martha Stewart Agreement

Macy’s Inc. sued J.C. Penney Co. in New York state court over the rights to sell products branded by Martha Stewart Living Omnimedia Inc. in their respective department stores.

Macy’s, the second-biggest U.S. department-store chain, sued Martha Stewart Living (MSO) in January to stop it from executing a sales agreement that was announced in December with J.C. Penney. Cincinnati-based Macy’s claimed an exclusive right to sell Martha Stewart products in certain categories.

Justice Jeffrey K. Oing in Manhattan last month granted Macy’s a preliminary injunction blocking Martha Stewart Living from taking any steps under the agreement with J.C. Penney. Martha Stewart Living filed a notice of appeal of that decision last week.

In a suit filed today in the same court, Macy’s said Plano, Texas-based J.C. Penney, the No. 4 U.S. department-store chain, caused it to “incur substantial damages and threatens to inflict incalculable further harm” and that the Martha Stewart pact is “transparently designed to eliminate the competitive advantage that Macy’s enjoys in the area of home products.”

J.C. Penney (JCP) has tortiously interfered, and continues to tortiously interfere, with a contract that Macy’s validly entered into with Martha Stewart Living Omnimedia Inc.,” Macy’s said in the complaint. “J.C. Penney knew that such a contract existed, and nonetheless induced MSLO to materially breach that contract.”

‘Status Quo’

The lawsuit seeks a preliminary injunction “preserving the status quo” and a permanent injunction stopping J.C. Penney from using Martha Stewart’s name or likeness in connection with the “manufacture, marketing, sale or distribution” of products in certain categories, including cookware, housewares and home decorations, as well as unspecified damages.

“This requested injunction would cover, but is not limited to, any current designs in Macy’s exclusive product categories that were developed by MSLO for J.C. Penney at any time in the past or that may be in the future,” Macy’s said in a statement. “Macy’s plans to continue to fully support its exclusive Martha Stewart-branded product sold in its stores and online under its contract with MSLO, which currently extends through January 2018.”

Home Goods

J.C. Penney, seeking to revive sales with new mini-stores dedicated to the Martha Stewart home-goods brand, acquired a 17 percent stake in Martha Stewart Living for $38.5 million.

Martha Stewart Living said last month that J.C. Penney agreed to pay at least $282.9 million in sales commission over 10 years under an amended agreement, a $110.5 million increase from the terms disclosed in December. The amended pact also added new products.

“J.C. Penney doesn’t provide comment on pending litigation,” Daphne Avila, a spokeswoman, said in a telephone interview.

Jeanne Meyer, a spokeswoman for New York-based Martha Stewart Living, which isn’t a defendant in the suit, didn’t respond to voice-mail and an e-mail seeking comment.

The case is Macy’s Inc. (M) v. J.C. Penney Corp., 652861/2012, New York State Supreme Court (Manhattan). The old case is Macy’s Inc. v. Martha Stewart Living Omnimedia Inc., 650197/2012, New York state Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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