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Macy’s Loses Appeals Court Bid for J.C. Penney Injunction

Macy’s Inc. failed to persuade an appeals court to temporarily bar J.C. Penney Co. from selling some goods designed by Martha Stewart Living Omnimedia Inc. that don’t bear the Stewart brand name.

The New York State Supreme Court’s Appellate Division in Manhattan today upheld Justice Jeffrey K. Oing’s April 12 ruling denying a request for a preliminary injunction blocking J.C. Penney from selling goods in certain categories exclusive to Cincinnati-based Macy’s that are designed by Martha Stewart Living and labeled “JCP Everyday.”

J.C. Penney in December 2011 acquired a 17 percent stake in Martha Stewart Living for $38.5 million. Macy’s, which has sold Martha Stewart-branded home goods since 2007, sued her company the following month, saying it had the exclusive right to sell items in categories including bedding and cookware. Macy’s sued J.C. Penney about three months later.

The two suits were combined for a nonjury trial before Oing that began Feb. 20 and featured testimony from Martha Stewart, Macy’s Chairman Terry Lundgren and J.C. Penney’s then-Chief Executive Officer Ron Johnson, who was ousted April 8.

During a monthlong break in the trial, mediation efforts ordered by Oing failed to produce a settlement. Macy’s rested its case on April 10. New York-based Martha Stewart Living and Plano, Texas-based J.C. Penney rested on April 26.

Closing Arguments

The parties have until May 31 to submit post-trial documents, after which closing arguments will be scheduled.

Macy’s had asked Oing to broaden a preliminary injunction he issued in July that blocked Martha Stewart Living from selling goods with the Stewart name at J.C. Penney in categories exclusive to Macy’s, including soft home goods and cookware.

Oing said Macy’s hadn’t shown that it would suffer irreparable harm if J.C. Penney was allowed to sell the unbranded goods. The judge said the July injunction applied only to goods with Stewart’s name.

“We are very pleased that our original preliminary injunction, which bars the sale of Martha Stewart-labeled kitchen, bath, and bed goods at JC Penney, and the trial court’s further order prohibiting Martha Stewart from promoting JCP Everyday goods, remain very much in place,” Jim Sluzewski, a spokesman for Macy’s, said in a statement. “We look forward to our final and full relief at the conclusion of these proceedings.”

‘Reap’ Rewards

Joey Thomas, a spokesman for J.C. Penney, declined to comment on the ruling. Katherine Nash, a spokeswoman for Martha Stewart Living, didn’t immediately respond to e-mails seeking comment on today’s ruling.

Macy’s has argued that J.C. Penney is trying to “reap the rewards” of its work with the Martha Stewart brand, which the chain said 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 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, and Macy’s Inc. v. J.C. Penney Corp., 652861/2012, New York State Supreme Court (Manhattan).

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