Macy's claims substantial damages and said the maneuver by Penney "threatens to inflict incalculable further harm on Macy's." The company claims that "billions of dollars of sales are involved."
But according to a memo filed by Penney, Macy's rights to Martha Stewart aren't nearly as sweeping as it suggests. Under Macy's interpretation of the contract, Martha Stewart Living is "little more than an in-house designer for Macy's," according to Penney.
And in court documents, Martha Stewart Living said it will prove that it was Macy's that breached the contract because it didn't "use commercially reasonable efforts to maximize net sales of Martha Stewart Collection products."
Last summer, Macy's won a preliminary injunction against Martha Stewart Living that would prevent it from selling housewares and other exclusive products at Penney. Judge Oing granted Penney permission to open Martha Stewart shops, as long as the items under the exclusive contract with Macy's are not sold in them.
Penney plans to open shops featuring designs from Martha Stewart on May 1, but spokeswoman Daphne Avila said that the some products, including bedding, have been stripped of the home maven's moniker and instead feature the label "JCP Everyday." Window treatments and paper products like stationery, which are not included in the exclusive arrangement with Macy's, will bear Martha Stewart's name.
But Macy's is trying to stop Martha Stewart from providing designs to J.C. Penney — whether or not it gets rid of the Martha Stewart moniker on the products it sells.
The stakes are high for both retailers as well as for Martha Stewart. For Macy's, having another major department store sell Martha Stewart towels, pots and other merchandise could dilute its business. And Penney has struggled with mounting losses and sharp sales declines since early last year after shoppers were turned off by a new strategy that eliminated most sales in favor of lower prices every day.
For its part, Martha Stewart Living is trying to fatten merchandising revenue as it struggles to offset declines in its broadcast and publishing business, a segment that accounts for more than 60 percent of its total business.
The stakes also are high for the personalities involved in the suit. Lundgren said that he hasn't spoken with the lifestyle guru since 2011.
"I was completely shocked and blown away," he testified on Monday. "It was so far from anything I could imagine."