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Martha Stewart heads to court for breach of contract lawsuit

Home goods guru Martha Stewart and her company are once again in New York State Supreme Court this week in another legal battle.

Back in January, we covered this commercial litigation lawsuit between Martha Stewart Living Omnimedia Inc. and Macy's Inc. Macy's is claiming that Martha Stewart's company violated a contract with the department store by allowing the same products to be sold by rival retailer J.C. Penney.

J.C. Penney, which is based in Texas, has a store location in New York City's Manhattan Mall, only a short distance from the main Macy's store in Herald Square.

The situation began in December of last year when Martha Stewart herself publicly announced that J.C. Penney would also be selling her home goods. This deal to sell her products next to designer labels William Rast, Cynthia Rowley and Liz Claiborne was allegedly formed between Stewart and Ron Johnson. Johnson is the CEO of J.C. Penney and well-known for generating new ideas in the retail market.

Stewart's items were expected to boost lagging sales at J.C. Penney's department stores, but the experiment has been a disappointment for the most part. The company had to reduce its number of employees by almost 1,000 this year. In addition, the store's stock took a dive of 31 percent in one year and resulted in the removal of J.C. Penney's former marketing executive Michael Francis.

If the presiding judge rules in favor of Macy's, the contract has the potential to keep the store as Martha Stewart's exclusive products seller for another six years. Although the possible consequences of the case are still unclear, Macy's may also receive monetary compensation from Martha Stewart Omnimedia Inc. and J.C. Penney.

Source: Crain's New York Business, "Macy's court battle with Martha begins Friday," Adrianne Pasquarelli, July 12, 2012

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