Judge Rules on Macy’s v. J.C. Penney & Martha Stewart Living Omnimedia

Judge Jeffrey K. Oing of the New York Supreme Court ruled in Macy’s v. J. C. Penney & Martha Stewart Living Omnimedia last week. In his ruling Judge Oing did not hold back from lambasting J. C. Penney for their unprofessional and sophomoric behavior while attempting to pull Martha Stewart away from Macy’s.

Martha Stewart and Macy’s unveiled their venture in 2007 “with much fanfare and excitement” and an exclusivity agreement.

J. C. Penney Hires Apple Store Creator

Ron Johnson, the creator of the successful Apple Store design, came up with a grand strategy to “re-shape department store retail” using the Martha Stewart brand as an anchor for J. C. Penney’s new “store within a store” paradigm. Executives believed that “the only issue in the way of success” was Martha’s agreement with Macy’s. Their plan was to launch an “offensive so strong” that Macy’s would “simply pick up their toys and go home”. That is where they made their strategic and nearly catastrophic error.

Macy’s did not pick up their toys and go home, they fought back, in the courts.

Judge Oing said this about J. C. Penney’s executives:  “such childish behavior displayed by these individuals is unbecoming of top executives of a major corporation, and is nothing to be proud of, particularly given the stakes.”

No Damages Awarded

In spite of finding that J. C. Penney “tortuously interfered” with Macy’s agreement with Martha Stewart Living Omnimedia, Judge Oing found that Macy’s did not prove that they are entitled to a punitive damages. However, Judge Oing strongly qualified his ruling. “If one were to say that a finding of no liability for punitive damages would be to condone such corporate behavior and let JCP get off easy, consider the following facts. Mr. Lundgren and Macy’s, the loyal and unsuspecting partners, have been vindicated.”

How have they been vindicated? Because of their “colossal and abject retail failure” J. C. Penney was “publicly ridiculed and humiliated” by the trial to the point where they were on the verge of financial collapse. The judge found these circumstances to be a “sufficient deterrent to JCP and other companies from acting in a similar way in the future”.

Causality of His Own Hubris

While attempting to break the relationship between Macy’s and Martha Stewart, Ron Johnson said in an email to a fellow executive, “I’m sure Macy’s is in shock . . . and it must be a bit embarrassing. They look asleep at the wheel.” He was later fired from J. C. Penney, “a causality of his own hubris”.

Conflict Boosts Creativity

Macy’s continued to work with Martha Stewart throughout all of this drama to develop new designs for the 2013 season. According to a senior executive at Macy’s these were the best design presentations she had ever seen from Martha.

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