Macy's continues to feature the home-goods guru in its
advertising and has renewed its contract through January 2018.
Meanwhile, JC Penney, which is already struggling amid falling
sales and a lukewarm reception to its reinvention efforts, has
positioned Martha Stewart as the anchor for a 20,000-square-foot
neighborhood dedicated to home items.
The witness list in the dispute reads like a who's who of the
retail and media world -- from JC Penney CEO Ron Johnson and Former JCP
President Michael Francis to Macy's Chairman-CEO Terry Lundgren,
Ms. Stewart and Former Martha Stewart Living Omnimedia CEO Lisa
Gersh. Many of those execs will be called to testify during what is
expected to be at least a three-week trial.
In the course of nearly three hours, lawyers for each company
presented their version of the facts. At issue: whether Martha
Stewart may partner with JC Penney to produce a line of products to
be showcased within shop-in-shop concepts.
Lawyers for Macy's provided a timeline dating to the late 1980s
and highlighted Ms. Stewart's association with "downscale" retailer
Kmart, as well as her prison sentence for conspiracy. Theodore
Grossman, Macy's lawyer, painted a picture of a hesitant partner in
Macy's, given Ms. Stewart's baggage, saying that when Macy's did
eventually decide to work with the home-goods guru, it required
absolute exclusivity as it sought to take the brand "upmarket."
Lawyers for Macy's argued that the retailer then successfully
built the Martha Stewart brand, noting same-store sales increases
for Martha Stewart products exceeded same-store sales at Macy's and
its competitors by a wide margin. Mr. Grossman said Martine
Reardon, Macy's chief marketer, would testify that more money was
spent on advertising as a percentage of sales on Martha Stewart
products than any other brand in the store. Martha Stewart products
were also given prime real estate in stores.
Mr. Grossman showed clips of depositions from Ms. Stewart and
Mr. Francis, now an exec at DreamWorks Animation, in addition to a
number of internal emails. The emails, several of them from JC
Penney CEO Mr. Johnson, were anything but flattering. In one email,
JC Penney execs joked that Macy's CEO Mr. Lundgren likely had a
headache that was destined to become a full-blown migraine.
"The court will assess their candor, truthfulness, concern for
employees, competitive ethics, respect for the law and whether
their testimony in public matches statements and conduct in
private," Mr. Grossman said of Mr. Johnson, Mr. Lundgren and Ms.
Stewart, the three executives at the center of the lawsuit.
JC Penney's lawyer, Mark Epstein, sought to focus the court on
the contract between Macy's and MSLO and discussed at length
various aspects of the contract that allowed MSLO to work with JC
Penney. "It's unfortunate, but perhaps not unexpected, that Macy's
has taken a contract dispute and made it a personal vendetta," he
Mr. Epstein, along with MSLO's lawyers, are seeking to portray
Ms. Stewart as simply trying to grow her business -- a small
company that is trying to increase revenues and avoid layoffs. Mr.
Epstein also insisted that if Macy's wins the court cases, the
consumer will lose on choice and competitive pricing.
JC Penney's lawyers focused on the fact that the contract limits
use of Ms. Stewart's name, likeness and marks, but does not
restrict her ability to design products for other companies or
retailers. Macy's is taking issue with products that will bear the
brand name JCP Everyday, as well as products featuring a double
house logo, which resembles the letter M.
Products are already en route to the U.S. from overseas
manufacturing facilities, Mr. Epstein said. He said that asking the
court to order those boats to turn around, so there will be no
products on shelves in the coming months, is a "harsh litigation
Both lawyers for JC Penney and MSLO are also seeking to prove
that plans for JC Penney shop-in-shops should be allowed to open as
planned. The contract, they argued, simply isn't what Macy's hoped
or believed it was, but the retailer "must live with it."
"This is no more than fair competition," Mr. Epstein said.
"Macy's should compete in the marketplace, not the courtroom. JC
Penney acted honorably and appropriately in all instances."
Over the summer, Justice Oing
granted a preliminary injunction to Macy's, noting "the scales
tilt in favor of Macy's.