If the companies do not reach an agreement before April 8, Justice Jeffrey K. Oing of New York State Supreme Court will continue hearing the case. Representatives for all three companies said they would participate in the mediation process.
Penney agreed on Thursday not to sell any Martha Stewart-designed goods in the categories Macy’s is fighting over — bedding, bath and kitchen — until April 8. Penney has been vague about when it planned to sell those products, telling investors to expect an introduction in May, though its lawyer said this week that they were supposed to be in stores in April.
Macy’s had a contract with Martha Stewart Living Omnimedia giving it exclusive rights to Ms. Stewart’s products in bedding, bath and kitchen. However, in 2011, Penney made a $38.5 million investment in Martha Stewart Living Omnimedia and announced it would be selling those products, too. Penney and Ms. Stewart’s company say they have not violated the Macy’s contract because the Penney products will be in a “store within a store,” and the Macy’s contract allows Ms. Stewart to have products in her own stores.
The companies have been fighting hard to get their way. Macy’s has said it sells about $300 million worth of Ms. Stewart’s goods a year, and Martha Stewart Living Omnimedia gets a 4 percent royalty from that. And Ron Johnson, the chief executive of Penney, said he did not expect any other vendor at Penney to sell as much as Martha Stewart.
This will be the first mediation talks for the companies. Before the trial, Penney and Ms. Stewart’s company were willing to go into mediation, a Penney spokeswoman, Daphne Avila, said, but “other parties were not amenable.” Macy’s declined to comment on prior mediation efforts. Martha Stewart Living Omnimedia said that in advance of the mediation order on Thursday, Ms. Stewart and Macy’s chief executive, Terry Lundgren, “had a productive conversation regarding the ongoing contract dispute between MSLO and Macy’s. We view today’s actions as a positive step forward and welcome a prompt and fair resolution.”
Though contractual disputes are not always dramatic, the trial has been lively, providing a window into corporate strategy and the thinking — and e-mail habits — of powerful executives like Ms. Stewart, Mr. Lundgren and Mr. Johnson, all of whom have testified.
Despite the witness lineup, Justice Oing has shown impatience with the parties. And he appeared to be warning Penney this week, as he and the companies’ lawyers discussed whether he should broaden a preliminary injunction that would stop it from selling Martha-designed products in the contested categories until the case is decided.
Ordering those products for sale in Penney stores “is a risk that your company and your client took without having a judicial determination as to the rights and remedies or liabilities” involved in this case, Justice Oing said.
“Ultimately, you guys’ve played this out,” he said.
Article source: http://www.nytimes.com/2013/03/08/business/judge-sends-macys-penney-case-to-mediation.html?partner=rss&emc=rss
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