ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, March 11, 2013

Life Imitates Art; Martha Stewart Imitates Lady Duff

LadyDuffGordon-1917My co-blogger, Meredith Miller has already commented on the ways in which Martha Stewart is the modern Lady Duff.  It really is extraordinary.  Martha Stewart is, of course, far more diverse and perhaps more ambitious in terms of the range of products that her company produces, but Lady Duff was quite the force in her day.  Remember that Mr. Wood sued her because her agreement to endorse merchandise sold in Sears Roebuck stores allegedly violated their agreement that he was to be her exclusive marketing agent.  

As reported in the New York Times, Martha Stewart was in court last week testifying in a showdown between Macy's and J.C. Penney over which company gets to carry Martha Stewart products in its stores.  Alas, the facts in this case are much more complicated than the straightforward Wood v. Lady Duff-Gordon.  However, the kernel of the dispute is very much reminiscent of the older case.  

Martha Stewart's company, now called Martha Stewart Living Omnimedia (MSLO), entered into an agreement with Kmart in 1997 permitting Kmart to sell the company's products in its stores.  Ten years later, MSLO entered into a similar agreement with Macy's, and when the agreement with Kmart expired in 2009, Macy's became "the only retailer to sell [MSLO] products in categories like home décor, bedding and bath," according to the Times.  In 2011, J.C. Penney started attempting to woo Ms. Stewart into a deal to sell MSLO products in its stores as a mechanism for bolstering its shaky financial performance.  James B. Stewart's column in last week's New York Times indicates that, since its new CEO has come on board, J.C. Penney has reported a $4.28 billion loss in sales and laid off 2200 workers, while its share price has dropped 60%.  

Martha_StewartUpon learning that Ms. Stewart was in bedding with J.C. Penney, Macy's was not well-pleased.  In her testimony, Ms. Stewart did not seem to see the problem.  When asked if a consumer was likely to buy the same product, say a knife, at two different stores, Ms. Stewart gamely answered that the consumer might have two houses and need one knife for each kitchen.  This might explain why she no longer sells her goods at Kmart.  What's the point of selling to a demographic that includes renters?  She might have added, "I like to keep an extra knife handy for back-stabbing," but her talents for self-mockery (in response to a question about how she spends her time, she responded "I did my time," to the delight of the courtroom audience), do not extend quite that far.  

In today's New York Times, David Carr presents an apt anaology: the conflict is like a schoolyard fight between two boys over the most popular girl on the playground.  And Carr succinctly explains why Martha Stewart is so popular.  Ms. Stewart, he reminds us, "altered the way that people live by decoupling class and taste. . . .  When you go into Target or Walmart and see a sage green towel that is soft to the touch, it may not carry her brand, but it reflects her hand. Her tasteful touch — in colors, in cooking, in bedding — is now ubiquitous. . . ."  Here too, there are echoes of Lady Duff.

Ms. Stewart expressed surprise that a simple contract dispute would end up in court.  It should be possible for the parties to come to an understanding of words written on a page.  New York Supreme Court Justice Jeffrey K. Oing may agree, since he sent the case to mediation, but according to James Stewart, he might have arrived at that result through a reasoning process that Ms. Stewart would not endorse.  According to James Stewart, the meaning of the contract is clear:

[T]he contract itself seems straightforward, with numerous clauses giving Macy’s exclusive rights to Martha Stewart products in various categories, including “soft home,” like sheets and towels, as well as housewares, home décor and cookware, and specifically limits her rights to distribute her products through any other “department store.”

He adds that there is no question that J.C. Penney is a department store.  Justice Oing appeared to agree, since he repeatedly said that the contract is clear, and he granted an earlier injunction.  J.C. Penney may have hoped to get around the exclusive contract by setting up a MSLO boutique within its own stores, but James Stewart gives a number of reasons, both legal and factual, and citing to the authoritative Charles Fried on the law, for why that argument is unlikely to fly.

What might fly would be a giant Martha Stewart balloon at the next Macy's Thanksgiving Day Parade.  According to James Stewart, Ms. Stewart still asks for and receives free tickets for herself and her grandchildren to that event.  Last year, James Stewart reports, she complained that she did not get to sit with the other celebrities who are seated with Macy's CEO, Terry Lundgren.  Time for Macy's to show Martha Stewart the love.  After all, Macy's does need her products in its stores.


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