Macy’s, Inc. v. J.C. Penney Corp.

Martha Stewart Living Omnimedia, Inc. (MSLO) (former defendant), a media and merchandising company founded by Martha Stewart, collaborated with Macy’s, Inc. (Macy) (plaintiff), a national chain of upscale department stores, by entering into a valid license and promotion agreement with Macy (the Macy/MSLO agreement). The Macy/MSLO agreement provided that Macy would be the exclusive manufacturer, distributor, and seller of certain MSLO home products using the Martha Stewart trademark. Macy launched the Martha Stewart Collection at its stores and on its website. MSLO products became the leading brand at Macy’s stores. MSLO began to explore strategic partnerships to offset heavy losses in its media business. J.C. Penney Corporation (JCP) (defendant), the operator of department stores that competed with Macy, met with MSLO to discuss a strategic partnership. The Macy/MSLO agreement covered the same types of products that JCP wanted to develop with MSLO. JCP encouraged MSLO to breach the terms of the Macy/MSLO agreement by flattering Martha Stewart and offering her financial inducements. MSLO counsel believed that MSLO’s participation in JCP’s shops-within-a-store plan would not breach the Macy/MSLO agreement. JCP and MSLO entered into a licensing agreement (the JCP/MSLO agreement) to sell home products branded with a Martha Stewart trademark. Macy brought an action against JCP for tortious interference with the Macy/MSLO agreement by inducing MSLO to breach certain terms of the exclusivity agreement. The court heard all of the evidence. Prior to the court’s decision, JCP’s deal with MSLO ended and Macy settled its dispute with MSLO. Macy continued to maintain its claim that JCP was liable for tortious interference with the Macy/MSLO agreement.