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Macy’s May Seek Expansion of Sales Ban of Stewart Goods

Macy’s Inc. may ask a judge later this week to expand a preliminary ban against Martha Stewart Living Omnimedia Inc. (MSO) that would prevent J.C. Penney Co. (JCP) from selling Stewart-designed goods in certain exclusive categories even if they aren’t marked with her name.

Justice Jeffrey K. Oing, presiding over a nonjury trial in New York State Supreme Court in Manhattan, said he will hear lawyers’ arguments on the issue on March 8, when a trial over the sales agreement had been scheduled to end. Oing and lawyers for the two sides discussed the possibility that the trial may go past that date.

Macy’s, the second-largest U.S. department-store chain, sued New York-based Martha Stewart Living in January 2012 to stop it from going ahead with a sales agreement with J.C. Penney, claiming it had the exclusive right to sell Stewart- branded items in categories including bedding and cookware. Macy’s sued Plano, Texas-based J.C. Penney about three months later.

Macy’s is trying to persuade Oing to permanently block J.C. Penney’s agreement on goods in the exclusive categories. The judge in July granted Macy’s request for an initial injunction blocking Martha Stewart Living from taking any steps under the deal on making, marketing, distributing or selling Martha Stewart-branded products in the exclusive categories.

Window Treatments

J.C. Penney is allowed to sell items that aren’t in the exclusive category, including window treatments designed by Stewart. Oing declined to issue a similar injunction against J.C. Penney after the retailer agreed to abide by the earlier order against Martha Stewart.

Penney plans to sell products this spring in the exclusive categories designed by Stewart’s company that are branded “JCP Everyday” but don’t carry her name.

Mark Epstein, an attorney for J.C. Penney, told the judge that those products are “on the ocean or in port” and that there would be a “big problem” if those products aren’t on the shelves.

“It would be a tremendous hardship to turn that boat around,” Epstein said.

Additional Damages

Oing warned Epstein that J.C. Penney could face additional damages if they sell unbranded, Stewart-designed products in the exclusive categories and he determines that Stewart’s contract with Macy’s forbids Penney from selling any goods designed by Martha Stewart Living in those categories, whether adorned with her name or not.

“It’s going to open a Pandora’s box if I find that Macy’s prevails,” Oing said.

J.C. Penney Chief Executive Officer Ron Johnson finished testifying today at the trial, which began Feb. 20. Macy’s Chairman Terry Lundgren testified last week. Stewart is slated to take the stand tomorrow.

Lawyers for Cincinnati-based Macy’s have argued that J.C. Penney is trying to “reap the rewards” of its work with the Martha Stewart Living brand, which it says it rebuilt after Stewart’s release from prison in 2005, when her products were being sold at Kmart.

Martha Stewart Living has defended its agreement with J.C. Penney, accusing Macy’s of breach of contract and saying the retailer stocked and priced Martha Stewart products in a manner that favors private-label brands. Martha Stewart Living also said Macy’s couldn’t have exercised a five-year renewal option in January 2012 because of the breach.

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

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

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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