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Macy’s, Martha and J.C. Penney Await Appeals Decision

A New York State appeals court judge put sale of Martha-designed goods on hold for 36 hours to consider issue.

NEW YORK — J.C. Penney Co. Inc. and Martha Stewart may want to wait to uncork the Champagne.

An appeals court judge said late Tuesday that Penney’s would be unable to sell Martha Stewart-designed goods bearing the “JCP Everyday” and “double-house” logos in its stores until Thursday, when he renders a final ruling on whether to grant Macy’s Inc. a temporary restraining order.

Penney’s can sell the goods on its Web site, however, and it currently has the wares up for sale there until instructed otherwise.

The decision, which was rendered by New York Associate Appellate Court Judge Richard Andrias, comes after New York Supreme Court Judge Jeffrey Oing ruled that Penney’s could sell the goods. Oing’s ruling on Friday denied Macy’s’ request to broaden the preliminary injunction that he issued over the summer to include wares designed by Stewart. Under the existing injunction, Penney’s can’t sell certain goods that fall under Macy’s exclusive categories that are branded with the Martha Stewart trademark.

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Should Andrias grant Macy’s the temporary restraining order, Penney’s will be barred from selling the unbranded goods until a panel of appeals court judges mulls over whether to reverse Oing’s decision and decide on a host of other rulings he made last week. This will likely take place within a week to 10 days, according to Macy’s.

Calling Andrias “very competent,” Oing professed his respect for his colleague, but noted in court Wednesday: “I think he may reverse me, but that’s OK.”

Whether or not that transpires, the trial will continue Thursday morning with Martha Stewart Living Omnimedia Inc. trying its side of the case.

The breach of contract trial, which began in late February, pits Macy’s against MSLO and Penney’s. In late 2011, MSLO inked a deal with Penney’s to design goods for its stores bearing the Martha Stewart trademark. As part of the transaction, Penney’s also paid $38.5 million for a 16.6 percent stake in MSLO and two board seats. By doing this, Macy’s claims, MSLO violated its contract, which it signed in 2007 and renewed last year, to design wares for the retailer in exclusive product categories.

Although Macy’s rested its case last week, its lead attorney, Theodore Grossman, tried Wednesday to reopen discovery on products MSLO designed for Penney’s. That request was quickly shot down, as Oing, whose patience has been wearing thin, told the lawyer that his side of the case was “done.”

“I’m ready to take on the defendants’ case,” Oing said. “This case has got to be wrapped up by next Friday, April 26.”

MSLO attorney Eric Seiler chimed in, adding: “You don’t get a do-over in the middle [of the trial].”

Seiler said starting Thursday morning, he intends to prove that there was no “design exclusivity” written into the Macy’s-MSLO contract, and that his client was free to design for any partner, in any product categories. He wouldn’t “push” the issue of contract violation, however.

Penney’s lawyer Mark Epstein did not outline his case but noted that he would be able to wrap up his side by April 26 as well. Oral arguments are likely to take place soon after, as both Oing and Seiler have other trials coming up.

Before adjourning for the afternoon, Oing addressed the issue of the Martha Stewart-branded stemware currently being sold by Penney’s. Macy’s contends that this is a violation of the preliminary injunction, but Penney’s and MSLO said the merchandise, including plastic glasses and pitchers, falls under the “celebrations” category, which isn’t covered under the Macy’s contract.

“It’s not as pressing,” Oing told Grossman, adding that he should enter a motion to “enforce” the injunction and that he will decide the issue from there.

Grossman seemed a bit exasperated, even though he had been beaming earlier from Andrias’ decision.

“This isn’t a game of roulette,” the lawyer said. “This isn’t a game of chance.”