August 1, 2013 / 10:31 PM / in 5 years

Macy's, JC Penney, Martha Stewart wrap up lawsuit arguments

NEW YORK (Reuters) - Macy’s Inc (M.N) told a judge on Thursday that J.C. Penney Co (JCP.N) should be barred from selling certain home goods designed by celebrity trendsetter Martha Stewart, and Penney and Martha Stewart Living Omnimedia MSO.N also delivered closing arguments in a long-running lawsuit.

Customers stand outside Macy's store in New York, April 11, 2013. REUTERS/Brendan McDermid

New York State Supreme Court Justice Jeffrey Oing listened to the arguments in a packed courtroom, often interjecting with questions. Oing said he would make a decision soon, “but it won’t be coming out tomorrow.”

Macy’s claims exclusive rights to Martha Stewart cookware, bedding and bath products under a partnership first signed in 2006. Last year, it sued Martha Stewart Living and rival department store chain Penney over a deal announced in 2011 to open shops within Penney stores carrying Stewart-designed goods.

Ted Grossman, an attorney for Macy’s, said Martha Stewart Living breached its contract by agreeing to design for Penney, which courted Stewart even though it knew she had an exclusive contract with Macy’s.

“They were the pursuer, and Martha Stewart was the prey,” he said.

When Oing said this case dealt with “highly sophisticated” competition, Grossman shot back: “No, Your Honor, we’re dealing with cut-throat competitors.”

Mark Epstein, Penney’s lawyer, said Macy’s contract did not clearly prohibit Martha Stewart Living from designing for others.

“The fact is, it’s not in there,” he said. “Macy’s wishes it was there, they really wish it was there, and they’re trying now to rewrite the contract ... to get a right that they did not bargain.”

Eric Seiler, a lawyer for Martha Stewart Living, agreed. He told Oing Macy’s should have written a better contract and the court can’t “fill the gap.”

Oing will rule if Penney can sell Stewart-designed goods that fall under Macy’s listed exclusive product categories. He also must consider the issue of whether mini-Stewart stores inside J.C. Penneys violate the exclusivity contract.

Lawyers for Penney and Martha Stewart Living argued that a Stewart shop within a J.C. Penney store was not a breach of the contract with Macy’s. The contract said Martha Stewart Living was allowed to have a retail store owned or operated by Martha Stewart Living or an affiliate and prominently featured Stewart goods.

Epstein said the mini-stores, part of ex-CEO Ron Johnson’s plan to revamp Penney, were designed to have the “look and feel of a retail store.”

Grossman countered that it was an “absurdity” to build walls around the Stewart section inside a J.C. Penney and call it a store.

Macy’s has stopped asking for the court to prohibit Penny from selling Stewart-designed goods that do not bear her name, which have currently been selling under the “JCP Everyday” label, the lawyers said.

But Seiler told the judge that Macy’s is intending to seek damages from Martha Stewart Living at a later trial, and should not be allowed to pursue the case twice.

“We didn’t sign on for a never-ending litigation with them,” he said.

Reporting By Madeline Will; Editing by David Gregorio

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