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Judge Rules JCP Interfered with Macy’s-Martha Stewart Deal

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After an extended battle over a contract between Macy’s Inc. and Martha Stewart Living Omnimedia Inc., a New York judge ruled Monday that J.C. Penney (JCP) did in fact interfere with the contract when it inked a deal to sell the homemaker’s goods in its own stores.

New York State Supreme Court Justice Jeffrey K. Oing said Macy’s would be entitled to receive monetary damages and legal fees from JCP for the interference, but that Macy’s did not do enough to prove it deserved punitive damages. A special hearing officer will assess the damages and fees, Oing said.

Oing’s 63-page decision slammed JCP for its “improper” conduct in attempting to secure a deal with Martha Stewart, and said the behavior exhibited by the retailer’s top executives was “less than admirable.”

JCP acquired a 17 percent stake in Martha Stewart Living for $38.5 million in 2011, as JCP’s former chief executive officer Ron Johnson attempted to revive sluggish sales at the retailer with branded shop-in-shops like the one that housed Stewart’s home goods.

Macy’s sued Martha Stewart Living in 2012 citing that a deal made in 2006 gave the retailer exclusive rights to sell Martha Stewart-branded bedding, bath products and cookware. Macy’s also sued J.C. Penney later that year over the same alleged contract breach, pitting the three in a legal triangle.

JCP’s Johnson was fired in April 2013 after his shake-ups at the department store led to a 25 percent plunge in 2012 sales.

“Their grand strategy was a colossal and abject retail failure,” Oing said. “The termination of JCP’s ‘strategic alliance’ with MSLO and Ms. Stewart underscored how ill-conceived it was, to the point where it placed JCP on the verge of financial collapse. I find that these significant facts are a sufficient deterrent to JCP and other companies from acting in a similar way in the future.”

Last October, JCP and Martha Stewart Living revealed a revised agreement that eliminated Stewart’s products in categories exclusive to Macy’s. This year, Macy’s and Martha Stewart Living reached a separate settlement.

JCP has said it does not believe the damages were warranted and may appeal Monday’s ruling.

Macy’s said, though pleased with the decision, that it was not surprised by it.

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