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Macy’s, Inc. (M), Martha Stewart Living Omnimedia, Inc. (MSO): More Courtroom Maneuvers in Martha Stewart Case

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NEW YORK (AP) — J.C. Penney Company, Inc. (NYSE:JCP) has started to sell non-branded home goods like towels and pots designed by Martha Stewart on its website, but the fate of the merchandise remains in limbo.

On Friday, New York State Supreme Court judge Jeffrey Oing had ruled that Penney could sell the products under the label JCP Everyday until a lawsuit that Macy’s, Inc. (NYSE:M) is waging against Penney and Martha Stewart is decided. Macy’s had argued that the JCP Everyday products violate its long-standing exclusive agreement with Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).

Macy's, Inc. (NYSE:M)

But Macy’s, Inc. (NYSE:M), based in Cincinnati, filed an appeal Monday, and an appellate judge is expected to make a decision Thursday on the department store’s request to temporarily block Penney from selling the non-branded goods while the appeal is pending. An appellate panel of five judges is expected to rule by late next week on the specific issue.

A temporary order made last summer by Oing still bars Penney from selling Martha Stewart Living Omnimedia, Inc. (NYSE:MSO)-branded goods in certain areas like cookware and bedding that are covered by the exclusive contract. After the order was implemented last year, J.C. Penney Company, Inc. (NYSE:JCP) sidestepped the dispute by going ahead and manufacturing the goods under the JCP Everyday brand.

The JCP Everyday products featured on Penney’s website include eggshell blue cast iron Dutch ovens for $140, $80 stainless steel frying pans, and $200 comforter sets.

The courtroom maneuvers are the latest in a heated court battle that started late February over a partnership with Martha Stewart Living Omnimedia, Inc. (NYSE:MSO). Macy’s, Inc. (NYSE:M), which has had a merchandising contract with the home maven since 2006, sued Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) and Penney after they signed a deal in December 2011 to develop mini Martha Stewart shops slated for this spring.

J.C. Penney Company, Inc. (NYSE:JCP) could face a $100 million hit if it had to liquidate the JCP Everyday inventory that it already purchased, according to Deborah Weinswig, an analyst at Citi Research. Any ruling on the JCP Everyday goods would still be preliminary and if Macy’s, Inc. (NYSE:M) prevails in the overall court case, Penney could face costly damages.

The developments come at a time when the Plano, Texas-based department store chain is in a severe cash crunch after a botched turnaround plan spearheaded by its former CEO Ron Johnson early last year has resulted in disastrous results. Johnson was ousted last week after only 17 months on the job and was replaced by Mike Ullman, who had been his predecessor.

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