Martha Stewart, the doyenne of American domestic life who once ended up in jail after lying about a stock trade, was back in court on Tuesday in a high-profile case that is as much about her public image as it is a seemingly arcane contract dispute.
Stewart is defending her firm in a complex fight involving two of America’s biggest and most famous department stores – Macy’s and its rival JC Penney.
The case revolves around the issue of whether Penney’s 2011 deal with Stewart violates a pre-existing deal to sell many of Stewart’s goods through Macy’s. Macy’s says they have exclusive rights to the products that are branded with Stewart’s well-known name.
Meanwhile Stewart’s company insists that it is allowed to pursue other deals and the Macy’s agreement covers only specific goods and brands.
But, as with all things Stewart, the trial has become as much about the drama of her reputation and personality as much as the more obscure parts of American contract law. Some court testimony has portrayed Stewart as abandoning Macy’s CEO Terry Lundgren – a close personal friend – so she could enrich her troubled company.
During testimony last week, Lundgren described how he hung up the phone on Stewart after she told him about the Penney deal. Such allegations only reinforce Stewart’s reputation as a ruthless businesswoman which is often at odds with the buying public perception of her as their favourite homemaker whose goods sell in their millions across the nation.
Lundgren hasn’t spoken to her since putting the phone down on her, and in court last week even appeared choked up at times. “I was completely shocked and blown away,” he testified. “It was so far from anything I could imagine.” Stewart was asked about the phone call and said in court that she was shocked at Lundgren’s reaction. “I was quite taken aback by his response. When he hung up on me I was kind of flabbergasted,” she said.
But, displaying her now infamously imperious temperament, Stewart engaged in various testy exchanges with Macy’s lawyer Ted Grossman. Grossman asked her at the start if she was comfortable in the witness box, to which she replied with a withering: “As comfortable as could be.”
Dressed in a beige outfit and cream blouse, Stewart also showed a perhaps unfortunate knack for not quite realizing how ordinary Americans live in a country still recovering tepidly from the Great Recession. When asked by Grossman if it was likely that a customer might buy one set of equipment, like a Stewart-branded casserole dish or set of knives and forks, in one store and then walk into a different store and buy them again, Stewart replied: “They might have two houses! They might have two kitchens!”
The two repeatedly sparred over how Stewart interpreted her firm’s obligations to Macy’s and whether or not they clashed over a desire to do a major deal with Penney. Grossman pressed her on her commitment to Macy’s and a timeline of when she started talking to Penney and working on designs for them. “We thought, and I hope rightly so, we were absolutely allowed to do such a thing,” Stewart said.
Macy’s has sued the media and merchandising company Stewart founded alleging she breached their contract when she signed a deal with Penney to open shops at most of its stores this spring. Macy’s, which has sold Martha Stewart products including towels and pots since 2007, is trying to block Penney from selling those products.
The case is a high-risk effort for almost everyone involved. For Stewart any legal disaster could easily hurt her brand and her image which has survived the earlier travails over allegations of insider trading that saw her go to jail.
The latest legal trouble also comes at a time when her business is struggling to fatten merchandising revenue as it tries to offset declines in its broadcast and publishing divisions. Martha Stewart Living Omnimedia is in its fifth straight year of losses. In 2012, the firm posted revenue of $197.6m, down nearly 11% from the previous year. Losses jumped to $56m from $15.5m the year before and its share price is down more than 90% from $36 in February 2005 – when Stewart was about to emerge from jail.
Penney has its own troubles too. The giant retailer is in the middle of a turnaround plan that is struggling in the face of big losses and sales declines for four straight quarters. The deal with Stewart, which included a roll-out of mini-shops inside its stores, had been planning to use the Martha Stewart brand as a core part of its revival.
Finally, Macy’s is keen to protect an area of its own business that has been a success. Sales for the Martha Stewart brand at Macy’s rose 8% last year, double the sales increase for the entire company. In a possible personal olive branch to Macy’s Stewart told the court that she was a huge fan of the store. “I love Macy’s,” she said. “I have shopped at Macy’s since I was a young child.” But at the same time she heaped praise on Penney chief executive Ron Johnson. “He is a visionary,” she said. “He had the foresight to re-imagine the American department store.”
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