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Macy’s, Stewart Return to Trial if no Settlement Reached

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April 8 (Bloomberg) -- Macy’s Inc. accused J.C. Penney Co. of selling Martha Stewart-branded goods in categories exclusive to Macy’s as a trial resumed over the right to sell some of the merchandise.

Macy’s, J.C. Penney and Martha Stewart Living Omnimedia Inc. returned to court today in Manhattan to pick up a trial that began Feb. 20. New York State Supreme Court Justice Jeffrey K. Oing ordered the two retailers and home merchandise company into mediation on March 7 after about two weeks of proceedings. The trial resumed without any comments by lawyers or the judge on the mediation process.

Ted Grossman, a lawyer for Macy’s, told the judge that J.C. Penney sells products on its website that are in categories exclusive to Macy’s under “Martha Stewart Celebrations,” including champagne flutes, wine glasses and pitchers.

Eric Seiler, an attorney for Martha Stewart Living, said the items are plastic and disposable and don’t violate a preliminary injunction issued by Oing last year blocking Martha Stewart Living from selling items exclusive to Macy’s.

Bedding, Cookware

J.C. Penney in December 2011 acquired a 17 percent stake in New York-based Martha Stewart Living for $38.5 million as the department-store chain seeks to revive sales with new mini-stores dedicated to Martha Stewart and other brands.

Macy’s, which has sold Martha Stewart-branded home goods since 2007, sued her company in January 2012, saying it had the exclusive right to sell items in certain categories including bedding and cookware. Macy’s sued Plano, Texas-based J.C. Penney about three months later.

Mark Epstein, an attorney for J.C. Penney, said he believes the items are allowed under Oing’s injunction. Attorneys for the company are looking into the items and will stop selling them if they are determined to violate the injunction, Epstein said.

Macy’s Grossman said the “basic shapes and designs” of the items are the same as some being sold at Macy’s.

“These are identical for all intents and purposes,” Grossman told the judge.

Oing said he will allow attorneys for J.C. Penney and Martha Stewart Living to look into the matter and will listen to oral arguments on any motion Macy’s may make on the issue.

‘Reap Rewards’

Lawyers for Macy’s, the second-biggest U.S. department store chain, have argued that J.C. Penney is trying to “reap the rewards” of its work with the Martha Stewart brand, which the chain says it rebuilt after Stewart’s release from prison in 2005, when her products were 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 Cincinnati-based Macy’s couldn’t have exercised a five-year renewal option in January 2012 because of the breach.

The cases are Macy’s Inc. v. Martha Stewart Living Omnimedia Inc., 650197/2012; 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 at 8969 or cdolmetsch@bloomberg.net

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

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