Macy's (NYSE:M), JCPenney (NYSE:JCP) and Martha Stewart have almost reached the end of the line in a dispute that for Penney's represents one more miserable legacy from its ex-CEO, Ron Johnson, Bloomberg reported on Thursday (Aug. 1).
Closing arguments were scheduled for Thursday and today in the trial over how exclusive Martha Stewart Living Omnimedia's 2006 "exclusive" contract with Macy's really is. In December 2011, JCPenney signed a 10-year, $200 million deal with Stewart's company to carry Martha Stewart-branded merchandise for its revamped home department. Macy's sued, saying it had an exclusive deal and had exercised a clause to renew its Stewart contract for five years. Stewart sued Macy's for breach of contract because of the way it has merchandised the Stewart goods.
More than a year after the first of the lawsuits was filed, Johnson has been fired as JCPenney CEO, his expensive new home departments have opened in 500 stores (without Stewart-branded merchandise) but aren't expected to survive the winter, and Penney's has been selling Stewart goods without Stewart branding in order to clear out an estimated $100 million pile of otherwise useless merchandise in its warehouses.
One interesting angle that cropped up in the trial was the claim by Stewart's lawyers that the original deal with Macy's allowed Stewart to sell her goods in her own stores—and because the planned JCPenney shop-within-the-store concept would have created such stores, they weren't really being sold at Penney's. That's not likely to be a key point now that Johnson's concept is gone, and New York state court Justice Jeffrey Oing may simply call it moot and move on.
But considering the number of other brands beginning to take advantage of the same concept—including the new Samsung shops inside Best Buy (NYSE:BBY) stores—a little legal precedent for how they should be viewed might be the most useful thing that comes out of the trial.
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