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Martha Stewart in Hot Water Again


Martha Stewart is in danger of being labeled a career criminal if she is not careful. Well, not really. But she probably wants to be careful when negotiating contracts with department stores. The last thing the former queen of the suburban wife needs is another brush with law darkening her previously pristine image.

But that is exactly what she has got. According to USA Today, Macy's (NYSE: M) has sued Martha Stewart Living (NYSE: MSO) and has requested a preliminary injunction to block the recently signed licensing deal between MSO and J.C. Penney (NYSE: JCP).

Macy's, who filed the lawsuit on Monday, claim that the new deal between MSO and JCP violates a previous agreement between itself and MSO to sell Martha Stewart Living products at its stores.

On the surface, this does not sound like a complicated case at all. A judge should be able to read the contract between MSO and M and know straight away if Stewart's company is in breach of that contract by entering into a new deal with JCP.

By filing a lawsuit, Macy's obviously believes that it has a case so presumably it is only small print that can save Stewart here. If MSO is guilty as charged, then they deserve to pay M some hefty compensation. Really, what did they think would happen? Did they hope that Macy's just would not notice?

JCP recently acquired a 16.6 percent stake in MSO, and has announced new plans to open mini-Martha Stewart stores within its own stores. That is pretty smart, as it will cause much excitement amongst the many Martha-philes out there. But JCP should really have ensured that MSO was not involved in a relationship with another department store chain first. Maybe it did.

MSO will not comment on legal matters, despite a wealth of experience. Rather, it confirmed that it received an email from Macy's stating that it wants to continue the relationship.

Following the news, shares in MSO dropped 3.5 percent to $4.15 in aftermarket trading.

Posted-In: News Contracts Legal Best of Benzinga


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