Like The Herald Business Journal on Facebook!
The Herald of Everett, Washington
Heraldnet.com

The top local business stories in your email

Contact Us:

Josh O'Connor
Publisher
Phone: 425-339-3007
joconnor@heraldnet.com

Jody Knoblich
General Sales Manager
Phone: 425-339-3445
Fax: 425-339-3049
jknoblich@heraldnet.com

Jim Davis
Editor
Phone: 425-339-3097
jdavis@heraldnet.com

Site address:
1800 41st Street, S-300,
Everett, WA 98203

Mailing address:
P.O. Box 930
Everett, WA 98206

HBJ RSS feeds

Judge: JC Penney interfered with Macy’s pact

SHARE: facebook Twitter icon Linkedin icon Google+ icon Email icon |  PRINTER-FRIENDLY  |  COMMENTS
Published:
By Anne D’innocenzio
Associated Press
NEW YORK — A New York State Supreme Court judge ruled in favor of Macy’s claim that J.C. Penney interfered with a contract with Martha Stewart Living Omnimedia Inc. when it cut a deal to create a collection of home goods in 2011.
But the judge, Jeffrey Oing, said Macy’s failed to prove that Penney was liable for punitive damages since he says the actions weren’t “malicious” or “immoral.”
Macy’s is still entitled to attorney’s fees and other monetary damages from Penney related to the selling of a line of bath towels, pots and other products that were designed by Martha Stewart but were sold under the J.C. Penney Every Day name last year.
The products were covered by a long-standing exclusive contract between Macy’s and Martha Stewart.
The 63-page decision, issued Monday, came six months after Macy’s and Martha Stewart resolved a legal battle to sell home furnishings at Penney. The terms of that deal were not disclosed.
The decision also followed a move last fall by Penney to scale back its merchandising partnership with Martha Stewart. As part of that deal, Penney said that it will no longer sell a broad range of home and bath products designed by Martha Stewart Living Omnimedia Inc. But the company will continue to sell a smaller batch of Martha Stewart items, including window treatments, rugs and party supplies.
“The preponderance of the evidence compels me to find that (Penney’s) ‘inducement exceeded the minimum level of ethical behavior in the marketplace,’ and , as such, was improper,” Oing wrote.
But Oing said that Macy’s should not be awarded punitive damages since such damages are only proper if Penney’s conduct in “perpetrating the tortious interference of contract was wanton, reckless, malicious and evinced a high degree of immorality.”
Oing noted the preponderance of evidence demonstrates that Penney’s top executives were “less than admirable.” “At best, one can only describe such conduct as adolescent hijinks in the worst form,” he added. But he said the actions were to gain “an edge in the ever-increasing competitive retail market and to revolutionize the way consumers shop for merchandise.”
Penney said last fall that it will be returning to the media and merchandising company the 11 million shares it bought as part of the 2011 licensing deal and giving up two seats on Martha Stewart’s board.
The revised agreement was the latest way Penney’s returning CEO Mike Ullman is unraveling the botched bid by former CEO Ron Johnson to transform the retailer, which led to disastrous results. Johnson, who became Penney’s CEO in November 2011, was ousted in April 2013.
Johnson had signed the 10 year-merchandising deal with Martha Stewart in December 2011 and touted it as a key part of his plan to reinvent the chain. He envisioned small Martha Stewart shops filled with branded products. Penney then invested $38.5 million in Martha Stewart Living Omnimedia. But a month later, Macy’s sued both companies.
“We are delighted, but certainly surprised that the court has found tortious interference by (Penney),” said Macy’s in a statement. “It is a great shame that Macy’s had to expend time, money and the diversion of its resources in order to protect its rights. We look forward to the damages phase of the case.”
Penney officials said that they “respectfully disagree with and are disappointed with this outcome.”
“The company does not believe that money damages are warranted and will defend against any damages awarded,” said Penney in a statement.
Penney said it was also considering options for appeal.

MORE HBJ HEADLINES

CALENDAR

Share your comments: Log in using your HeraldNet account or your Facebook, Twitter or Disqus profile. Comments that violate the rules are subject to removal. Please see our terms of use. Please note that you must verify your email address for your comments to appear.

You are logged in using your HeraldNet ID. Click here to update your profile. | Log out.

Our new comment system is not supported in IE 7. Please upgrade your browser here.

comments powered by Disqus

Market roundup