Martha Stewart Takes the Stand in Contracts Case

By LORETTA CHIN

Martha Stewart took the stand in Manhattan’s Supreme Court on Tuesday and testified before a packed court room to defend her namesake company against charges that she breached an exclusive contract with Macy’s by selling her merchandise in J.C. Penney.

“It’s a contract dispute—an understanding of what’s written on the page,” Stewart said to Judge  Jeffrey Oing.  “It just boggles my mind that we are here…it’s a real problem for a company like ours.”

The juryless trial began three weeks ago in the civil case of Macy’s Inc. v. Martha Stewart Living Omnimedia Inc. (MSLO).  Stewart, 71, was wearing a brown mini-skirt with matching vest over a light beige shirt and dark brown suede booties.  She maintained her composure throughout her questioning by Macy’s lawyer, Theodore Grossman and the lawyer for her company, Eric Seiler.

At the center were Macy’s CEO Terry Lundgren and J.C. Penney’s CEO Ron Johnson who testified earlier.  Stewart had a personal and business relationship with Lundgren before her deal with Penney.  When questioned by Grossman, Stewart said that she was flabbergasted by Lundgren’s response when she called him to tell her about the Penney deal.  “I was quite taken aback by his response and then he hung up on me,” she said.

“I think I expressed my concern that there were problems with the interpretation of our contract” said Stewart when asked about her initial talks with Johnson, who had the potential to offer 700 outlets across America to sell Martha Stewart home products. Stewart cited her inability to talk to anyone else because of a confidentiality agreement between MSLO and Penney, but said that her company was “very careful with all of this” and “every single aspect of our relationship to anybody else that might have a problem or question has been  taken into consideration.”   “To us, it’s business as usual—it’s not any breach of confidentiality whatsoever,” she added.

Stewart talked about the mutually beneficial relationship with Macy’s, that it was a $300 million business for her company; as a business woman,  she anticipated that amount to grow over five years. “They have really kept us pretty static–we could have been much bigger,” said Stewart.

A considerable length of time was spent discussing the concept of a “store within a store” called Martha Stewart Home within J.C. Penney.  Although she asked for it, “Macy’s had never, never proposed that we could have our own store,” said Stewart who explained her motivation for the deal with Penney.  She said that she had an obligation to her company, shareholders, and customers when she strategically decided to move the company forward by entering into the contract with Penney.

She believed that the store within a store arrangement would not violate her contract with Macy’s and that her plan was to hire completely separate design teams.  When asked if  she ever asked for permission to have people who worked on Macy’s designs to also work on Penney’s designs, Stewart responded, “It is nowhere in our contract that specifies that our designers are exclusive to Macy’s.”

Referring to a temporary order that Judge Oing put in place earlier to stop Penney from selling her products that were under dispute as exclusive to Macy’s, Stewart said that the injunction was a major problem because goods were already designed and on the way to the store.

Stewart left the courthouse around 3:00 p.m.  A number of key people were supposed to testify but were not present.  Judge Oing told the lawyers that he needed to have the head honchos present and not just the role players, before making his decision. The trial was adjourned till the following morning.