J.C. Penney gets interim victory in Macy's dispute

A New York judge on Friday handed embattled J.C. Penney Co Inc an interim victory in its dispute with Macy's Inc over goods designed by Martha Stewart.

But the judge said his ruling was only a "bye" in the wider war, and had harsh words for former J.C. Penney CEO Ron Johnson, calling him the "architect" of the dispute.

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The two retailers are battling over the rights to sell Martha Stewart products in what are challenging times for department stores, especially J.C. Penney. Friday's ruling capped a week in which J.C. Penney ousted Johnson as chief executive and hired advisers to help it position itself financially.

Macy's claims it has the exclusive right to sell Martha Stewart goods in categories such as bedding, bath, and tableware, under a 2006 agreement that runs to 2018.

Macy's sued J.C. Penney and Stewart's company, Martha Stewart Living Omnimedia Inc, when they announced a partnership in December 2011.

Last year, Justice Jeffrey Oing blocked J.C. Penney from selling goods under a Martha Stewart label.

In his ruling on Friday, he refused a request by Macy's to expand that block to include products that would be branded "JCP Everyday."

Ted Grossman, a lawyer for Macy's, said he would appeal the ruling to prevent its taking effect.

The judge's decision was a reprieve for J.C. Penney, which has already had the products manufactured and is storing them in warehouses. An analyst has estimated the value of the goods at $100 million.

"J.C. Penney has been a given a proverbial bye in this case," Oing said as he made his ruling.

In making his decision, the judge said he could not ignore the economic harm that an adverse ruling would have caused J.C. Penney, "even if it is the result of their own acts."

Those acts, he said, were spurred on by former chief executive Johnson, whose conduct "may be less than admirable."

Johnson, who negotiated the deal with Martha Stewart as a key component of his plan to re-invent J.C. Penney, was ousted on Monday and replaced by his predecessor, Mike Ullman.

"The personal architect of this whole dispute has been fired by J.C. Penney's," the judge said earlier on Friday.

On Thursday, sources said J.C. Penney had hired Blackstone Group LP's financial advisory arm to explore how to position the retailer financially.

The cases are Macy's Inc v Martha Stewart Living Omnimedia Inc, 650197/2012, and Macy's Inc v J.C. Penney Corp, 652861/2012, New York State Supreme Court, New York County.

(Reporting by Karen Freifeld; editing by Gunna Dickson)