Martha Stewart dismissed the idea of giving Macy’s CEO Terry Lundgren a chance to counter the secret licensing offer rival JCPenney had made to her in December 2011, the former chairman of her company testified.
Charles Koppelman — a career music mogul and corporate fix-it man whose past clients have included Steve Madden and Michael Jackson — told the court he advised Stewart and her company’s board it was a mistake to not go to Lundgren before announcing a tie-up to distribute home goods at Penney.
Macy’s sued last year to block the deal shortly after it was announced, arguing it violated the terms of its preexisting contract for an exclusive line of Martha Stewart-branded home goods.
In addition to a 10-year, $200 million distribution deal for home goods, Penney agreed to buy a 17-percent stake in Stewart’s namesake company.
“I wanted to offer Mr. Lundgren at Macy’s the opportunity to do the same deal that JCPenney was proposing to the company,” said Koppelman, who joined the board of Martha Stewart Living Omnimedia in 2004 after getting a phone call from the homemaking maven the day she was convicted of lying about a stock sale.
“Their view was that this was something I should not do,” Koppelman said, noting he had made his recommendation not only to Stewart but also to the board and a committee that had hired Blackstone to explore strategic alternatives for the cash-strapped company.
Koppelman, who has since stepped down as chairman, initially approached Lundgren to cut the existing licensing agreement with Macy’s in 2006.
Under questioning by Macy’s lawyer Ted Grossman, Koppelman said he wasn’t consulted before MSLO made its controversial move to disclose the details of its licensing deal with Macy’s amid negotiations with Penney.
“If asked as chairman, I would not” have condoned sharing the details, Koppelman said.
In her testimony, Stewart claimed she was “flabbergasted” when Lundgren hung up on her after she called to tell him about the Penney deal the day before it was announced.
Last week, Lundgren had testified that before hanging up on Stewart, he repeatedly asked her why she hadn’t told him sooner and given him a chance to counter his rival’s deal.
With the trial in its third week, Macy’s lawyers didn’t grill Koppelman about allegations that when negotiating MSLO’s Macy’s contract in 2006, he had asked Lundgren to give Stewart permission to build flagship specialty stores in high-profile locations like Times Square and Madison Avenue.
The charge counters Penney and MSLO’s contention that their deal is legitimate because of contractual language that permits the MSLO to open its own stores, this time in the form of “stores within stores” inside Penney locations.
The veteran dealmaker’s testimony comes as New York state Judge Jeffrey Oing is slated to rule tomorrow on whether to extend an injunction that has barred MSLO from selling Martha Stewart home goods at Penney’s.