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JCPenney is getting away with its risky bet to manufacture a slew of Martha Stewart home goods despite a lawsuit from Macy’s — for the moment, at least.
A New York judge ruled yesterday that Penney can begin selling a new line of bedding, bath products and kitchenware designed by Stewart under a December 2011 licensing agreement, as long as the goods don’t bear her name.
Macy’s — which claims Penney’s tie-up with Stewart violates its own pre-existing licensing deal with the domestic diva — asked New York state Supreme Court Justice Jeffrey Oing to block Penney’s rollout of the merchandise, arguing that it owns the rights to all of Stewart’s designs across a range of categories in linens and housewares.
Penney, which hedged its legal risk by keeping Stewart’s name off the goods and instead branding them “JCP Everyday,” has been storing the inventory in warehouses pending the outcome of its legal battle with Macy’s.
The ruling — which denied a Macy’s request to expand a preliminary injunction last summer to cover all Stewart-designed goods, in addition to branded goods — paves the way for Penney to sell the wares in its stores.
Oing, however, had some choice words for controversial ex-Penney CEO Ron Johnson, who was ousted this week following a botched turnaround effort at the retailer.
In February, Johnson admitted on the stand that he had pursued a deal with Martha despite knowing there was a chance Macy’s would sue.
“The conduct perpetrated by Ron Johnson may have been less than admirable,” Oing said.
The judge likewise took a swipe at Blackstone Group, the investment bank that advised Martha Stewart Living Omnimedia to pursue the troubled tie-up with Johnson.
“They’re the architect of this whole dispute and should be fired,” Oing said.
Nevertheless, Penney “did not violate my order,” Oing said, noting that a preliminary injunction he issued last summer had only barred Penney from selling goods that bore Stewart’s name.
“The bottom line is JCPenney will not be selling a Martha Stewart-branded product,” the judge said.
Lawyers for Macy’s said they plan to appeal the ruling Monday.
Penney shares initially rose on the ruling yesterday afternoon, but ended the session down 24 cents at $14.62.
In their effort to block Penney’s new line, Macy’s lawyers argued that its rollout would cause “irreparable harm” to Macy’s own home business — an argument Oing rejected.
Meanwhile, the judge repeatedly expressed concern about the potential financial damage to Penney if he barred the new merchandise from stores.
“They’d lose the money they’ve spent,” Oing said. “Employees may be terminated.”
Oing said he believed any harm that Macy’s business might suffer could be offset with monetary damages later on in lieu of an injunction against Penney and MSLO.
“We believe the court was in error and we expect a reversal,” said Macy’s lawyer Ted Grossman.