Judge Talks Injunction at Macy’s Trial

Judge Jeffrey Oing’s courtroom was considerably less hectic Wednesday following Martha Stewart’s testimony a day earlier.

NEW YORK — Judge Jeffrey Oing’s courtroom was considerably less hectic Wednesday following Martha Stewart’s testimony a day earlier.

This story first appeared in the March 7, 2013 issue of WWD.  Subscribe Today.

With just a handful of reporters and fewer lawyers, Oing made an effort to speed up proceedings, as he addressed scheduling and housekeeping matters concerning the extension of the preliminary injunction, which he granted to Macy’s over the summer. The injunction keeps J.C. Penney Co. Inc. from selling Martha Stewart-branded goods in its stores for the time being. Earlier in the week, the judge hinted at the larger question regarding whether Penney’s should be able to sell goods designed by Stewart that have been re-branded with either the “JCP Everyday” trademark or a “double-house” logo. Those goods are part of exclusive product categories that Martha Stewart Living Omnimedia Inc. agreed to design for Macy’s Inc. under their 2006 contract. A decision on the extension will likely indicate how the judge is leaning in the overall case.

“You will know perhaps where I’m going to go,” the judge said, referring to the extension. “I’ve been thinking about this case. I may throw something in there that will put a spin on this…and have people scratching their heads.”

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Those ominous words hung over the courtroom as the lawyers scrambled to communicate their thoughts before they formally give their arguments Friday afternoon. MSLO’s lawyer, Eric Seiler, argued that Macy’s violated its contract with MSLO because it “failed to maximize net sales” of its Martha Stewart Collection for Macy’s. Therefore Macy’s extension of its contract with MSLO, which took place in January 2012, is invalid. It couldn’t extend a contract that was violated, he said.

Mark Epstein, Penney’s lawyer, explained that his client owns the re-branded JCP Everyday and double-house branded goods and “has the right to sell them.” For Macy’s, Robert Faxon, of Jones Day, who was standing in for Theodore Grossman, argued that the original violation took place when MSLO inked the deal with Penney’s in December 2011. Faxon didn’t want to get into his client’s position, as Grossman is the lead attorney on the case.

“You’re smart, you’re from a big firm,” Seiler said, goading Faxon on to continue unpacking Macy’s argument.

The judge tabled the discussion and turned to witnesses. With ex-MSLO chairman Charles Koppelman set to appear today, Stewart’s legal team agreed it would bring up one of its witnesses for expediency’s sake, even though Macy’s hasn’t rested its case.

Chanel Riley, a luxury bedding designer for MSLO, was called to the stand, in order to clarify the design process at her company. While she confirmed that MSLO designers do not normally work on both Macy’s and Penney’s accounts simultaneously, the Macy’s legal team brought to light that some designers had worked on one account before switching to the other.

Earlier in the day, Macy’s called Regina Corso, a survey expert from The Harris Poll. Corso administered an online survey to 401 people to determine whether Macy’s shoppers who bought Martha Stewart home goods would prefer to buy those goods at Penney’s. While her results claimed they would opt for Penney’s, the lawyers from MSLO and Penney’s poked many holes in Corso’s methodology. Oing appeared unconvinced that the survey was reliable, as it did not take into account specific home goods by category. He also noted that Stewart products have yet to be sold in Penney’s stores and asked her if the poll should be retaken should those products be available in stores.

“It couldn’t hurt,” Corso said.