Macy's Sues J.C. Penney Over Martha Stewart Deal

Macy's sues JCPenney
Macy's sues JCPenney

Macy's Inc (M) took its legal battle over its agreement to exclusively sell certain Martha Stewart items directly to J.C. Penney Co Inc (JCP) on Thursday, accusing the rival department store chain of interfering with its contract with the home goods designer.

Macy's already successfully persuaded a New York state judge to temporarily block plans for Martha Stewart Living Omnimedia Inc to sell its products at J.C. Penney stores in a lawsuit against Martha Stewart.

The lawsuit filed on Thursday against J.C. Penney seeks to stop Penney from taking any actions that violate Macy's agreement with Martha Stewart and to stop J.C. Penney from using product designs that Macy's argued were illegally obtained from Martha Stewart.

J.C. Penney did not immediately respond to a request for a comment on the lawsuit.

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J.C. Penney in December announced plans to open shops within its stores to sell Martha Stewart-branded goods, starting in 2013. Macy's sued Martha Stewart Living, accusing it of breach of contract by entering into the agreement with J.C. Penney.

The Martha Stewart deal is a centerpiece of J.C. Penney's plan to carve its 1,100 department stores into separate boutiques, each housing a distinct brand, by 2015. The concept is a key component of Chief Executive Ron Johnson's strategy for J.C. Penney, which has lost market share in recent years. Earlier this week, Penney and Martha Stewart agreed to broaden the array of merchandise the stores would sell.

Macy's claims Martha Stewart Living granted it the exclusive right to manufacture and sell the Martha Stewart-branded goods in Macy's lines under a 2006 agreement that, with a renewal, runs until 2018.

In the lawsuit, Macy's contends that the agreement with Martha Stewart includes language that says that monetary damages would not be able to remedy any breach of the contract.

"The fact that J.C. Penney is a less upscale retailer compared to Macy's compounds the injury," the lawsuit said.

%Gallery-162291%Macy's contends that J.C. Penney intentionally caused Martha Stewart to breach its agreement with Macy's, offering to make a $38.5 million investment in the designer conditioned on the merchandising deal.

Martha Stewart has countered that the items to be sold at J.C. Penney do not fall under the exclusive categories granted to Macy's. It has also said Macy's used the Martha Stewart brand to lure customers into its stores, then made little effort to actually sell Martha Stewart products

Macy's also said that J.C. Penney offered terms to Martha Stewart that were more lucrative than Macy's had agreed to.

In July, J.C. Penney and Martha Stewart expanded the agreement to more categories, which Macy's says fall into its exclusive agreement with Martha Stewart.

The case is Macy's Inc v. J.C Penney Corp Inc. 652861/2012, New York state Supreme Court, New York County.