J.C. Penney wanted Martha Stewart to break Macy's contract

, Bloomberg

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Martha Stewart
Martha Stewart

J.C. Penney Co. tried to persuade Martha Stewart Living Omnimedia Inc. to break its contract with Macy's Inc., an attorney for the second-largest U.S. department-store chain told a judge.

J.C. Penney chief executive officer Ron Johnson wanted to replace Macy's as an exclusive seller of Martha Stewart-branded products in categories such as bedding and cookware, Theodore M. Grossman, an attorney with Jones Day representing Macy's, told New York state Supreme Court Justice Jeffrey K. Oing in Manhattan at the start of a trial Wednesday.

"We weren't coerced," Grossman said. "We're here to protect our rights. Rights that we paid for, rights that we worked for, rights that we took tremendous risks for."

Macy's sued New York-based Martha Stewart Living in January 2012 to stop it from proceeding with an agreement announced with J.C. Penney the previous month. Macy's sued J.C. Penney in the same court eight months later, seeking to block it from proceeding with the Martha Stewart pact.

The cases have been combined and opening arguments began yesterday in a non-jury trial before Oing that is scheduled to last through March 8. Stewart, Johnson and Macy's Chairman Terry Lundgren are expected to testify next week.

Macy's, based in Cincinnati, said in court filings that it contracted with Martha Stewart Living at a time when the brand was associated with the "significantly downscale" Kmart and she was just being released from prison, and took losses before moving the brand "upscale."

Macy's has argued that J.C. Penney and Martha Stewart Living "made a conscious business decision" not to disclose their talks to Macy's until the contract was signed to avoid the risk of a court order that would bar the agreement.

"Macy's was kept completely in the dark," Grossman said. Stewart's "agenda was to market to both stores. Mr. Johnson had a different agenda. He wanted to supplant Macy's."

Martha Stewart Living has defended its agreement with Plano, Texas-based 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 on the agreement because of the breach.

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