Business

JCPenney sued for breaking ‘Fair and Square’ contract

(Chad Rachman/NY Post)

Looking for a square deal at JCPenney? See you in court!

A New York design firm has sued the department store for $40 million, claiming CEO Ron Johnson’s executive team broke a big contract for it to supply square-shaped store fixtures to promote the retailer’s new “Fair and Square” pricing strategy.

TriBeCa-based Hudson + Broad, whose clients include Macy’s, Nine West and Ralph Lauren, charges that Penney took the firm’s idea to anchor store displays with giant, brightly lit squares that cost nearly $10,000 each — then looked for another supplier to do the job on the cheap.

“JCPenney’s Fair and Square campaign is nothing but a sham,” Hudson + Broad president James Maharg fumed in an interview yesterday with The Post. “This was a proprietary product — designed, developed and engineered solely by us.”

The suit, filed in Manhattan federal court, is the latest headache for Johnson, a former Apple exec who took up Penney’s reins in November.

In January, Macy’s sued to block a 10-year, $200 million licensing pact that Johnson had signed in December with Martha Stewart, charging the deal violated her contract with Macy’s.

“We don’t comment on pending litigation,” a Penney rep said yesterday.

In a twist, the lawsuit over the squares cites a string of alleged e-mails between Penney execs, in which they floated the idea of paying the New York firm a fee to keep the episode quiet.

“[I am] concerned given all our ‘fair and square’ positioning that the media could pick something like this up should James (Maharg) opt to air their issues publicly,” Penney senior vice president Greg Clark wrote April 4.

“Legal will review and advise,” wrote Steven Wysong, Penney’s procurement director. “Please cease any further communication with them at this point.”

Indeed, Maharg confirmed there’s been silence from Penney since then — despite months of prior meetings and discussions to develop the project, and the installation of a pair of the glowing, 79-inch squares outside Johnson’s office at the retailer’s Texas headquarters.

On Jan. 25, after a splashy New York City presentation by Johnson on Penney’s new pricing strategy, the lawsuit alleges that James Francois, Penney’s vice president for visual marketing, gushed about the squares over lunch.

“During the meal, Francois said to Maharg, ‘It’s a new day for JCP,’” according to the suit. “And putting his hand on Maharg’s shoulder, Francois looked him in the eye and said earnestly, ‘It’s all about integrity.’ ”

Maharg alleges that Francois told him a week later that the deal, valued at more than $25 million, had personally been approved by operating chief Mike Kramer — a former Apple exec recently hired by Johnson.

In late February, however, Maharg’s staff was told by his supplier for the squares “that other vendors had approached him for a large order with JCPenney and that the product was a square.”