Judge rules against JCPenney in dispute with Macy's

A New York judge on Monday ruled that JCPenney (NYSE:JCP) unlawfully interfered with an existing merchandising agreement between Macy's (NYSE:M) and Martha Stewart Living Omnimedia and ordered the two warring parties to a mediator to resolve this long-running dispute.

State Supreme Court Jusitice Jeffrey Oing concluded that JCPenney was wrong in inking an agreement to sell MSLO home products including bed, bath and kitchen items. MSLO already had a similar agreement with Macy's, which sued both parties in response.

The partnership with Stewart was the centerpiece of former CEO Ron Johnson's plan to transform the department store chain. He eliminated sales and attempted to implement every-day low pricing, discontinued several store brands, and forged partnerships with brands and designers in an attempt to make JCPenney home to a series of small shops carrying exclusive items.

But MSLO had a long-standing agreement to supply exclusive product in several overlapping product categories, and Macy's sued both companies. JCPenney subsequently amended its agreement with MSLO to sell only items non-exclusive to Macy's.

Macy's settled its dispute with MSLO earlier this year in a confidential agreement. Johnson has since been famously fired from JCPenney and replaced by former CEO Myron Ullman. Ullman has dismantled many of Johnson's programs, reinstated sales and store brands, and restored shaky relationships with vendors and financial backers.

JCPenney posted its first quarterly profit in more than two years in February as Ullman declared, "The most challenging parts of the turnaround are behind us." Last month, the retailer posted comparable store sales of 6.2 percent, while store traffic and gross margin also improved.

Not so with JCPenney's dispute with Macy's.

Judge Oing called JCPenney's actions "adolescent behavior in the worst form," reports The New York Times. He did not award Macy's punitive damages or reimbursement for legal fees, but instead ordered the issue to be decided by a special judicial officer, or referee.

For more:
-See this New York Times story

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