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Macy’s CEO: “sick to my stomach” over J.C. Penney deal

Terry Lundgren testified that he hung up on Martha Stewart when she told him of deal

By Cathleen Flahardy

February 26, 2013 • Reprints

As the fight between Macy’s Inc. and J.C. Penney Co. Inc. over the sale of Martha Stewart products battles on in the courtroom, the true emotions of the parties involved are coming to light.

Yesterday, Macy’s CEO Terry Lundgren testified that he became physically ill when Martha Stewart told him her company, Martha Stewart Living Omnimedia Inc. (MSLO), would be entering a deal with a rival department store.

"I was completely shocked and blown away," Lundgren said in his testimony. "I was literally sick to my stomach."

The battle began back in 2011 when J.C. Penney announced it purchased 17 percent of MSLO and planned to open Martha Stewart Living shops within its stores. In early 2012, Macy’s sought preliminary injunction against MSLO to block the deal. Macy’s claimed MSLO breached its contract with Macy’s when it entered into the agreement because Macy’s had an exclusive right with MSLO to sell Martha Stewart Living products. MSLO and J.C. Penney argued that the deal didn’t breach MSLO’s contract with Macy’s because they say that contract allows MSLO to sell Martha Stewart Living products in stand-alone stores—and they say the shops within J.C. Penney fall into that category. Macy’s didn’t buy it, and filed suit against J.C. Penney in August. The trial began last week.

During their phone conversation, Lundgren said in his testimony that Stewart tried to tell him that the deal would be good for Macy’s. "I think that's when I hung up," he said. "The thought this was going to be good for Macy's was so far from anything I could comprehend." He also said that although he had considered Stewart a friend, he has not talked to her since.

J.C. Penney CEO Ron Johnson is expected to take the stand this week. Stewart is also expected to testify, but it is unclear when.

For more InsideCounsel coverage of this case, see:

Macy’s claims J.C. Penney and Martha Stewart teamed up to steal customers

Macy’s sues J.C. Penney over Martha Stewart Living contract

Judge temporarily blocks Martha Stewart Living from selling at J.C. Penney

Martha Stewart Living brings Macy’s battle to a boil

Macy’s seeks injunction in spat with Martha Stewart

Macy’s sues Martha Stewart Living