Article (Reuters) – Macys Inc is suing Martha Stewart Living Omnimedia Inc, accusing the company of…

Article
(Reuters) – Macys Inc is suing Martha Stewart Living Omnimedia
Inc, accusing the company of breach of contract for entering into
an agreement to sell certain products at stores run by its rival
J.C. Penney Co Inc.
Martha Stewart attends the Chado Ralph Rucci Spring 2010
collection during New York Fashion Week, September 12, 2009.
The operator of Macys department stores says Martha Stewart
Living granted it the exclusive right to manufacture and sell
certain products under a 2006 agreement, according to a New York
State Supreme Court filing on Monday.
Yet in December, J.C. Penney took a large stake in Martha
Stewart Living and announced plans to open shops within its stores,
starting in 2013, that sell Martha Stewart-branded goods.
Macys is seeking a preliminary injunction stopping Martha
Stewart from violating the contract. It also is seeking an order
sealing the lawsuit and motion, saying it is prohibited from
disclosing certain information.
The court filing does not detail the products in question.
But Macys said in a statement that it had renewed its
agreement to exclusively sell Martha Stewart-branded product in
categories such as cookware, kitchen utensils, bed and bath for
another five years, meaning until January 2018.
Macys said it went to court to enforce the agreement signed by
Martha Stewart Living in 2006 in which the right for Macys to
sell product exclusively in these categories was clearly
outlined.
Martha Stewart Living said it typically does not comment on
legal matters. However, a company statement pointed out Macys
intent to extend its commercial agreement with MSLO to feature and
promote the Martha Stewart Collection its #1 home brand in
Macys stores.
J.C. Penney did not immediately return a call for comment.
The case is Macys Inc. v. Martha Stewart Living Omnimedia,
Inc., 650197/2012, New York State Supreme Court (Manhattan).
Pertinent
facts:
The record
reveals the following pertinent facts:
In 2006, Macy’s and
MSLO entered into a licensing agreement granting Macy’s certain
exclusive rights with respect to products designed by MSLO. These
products were defined in the agreement as “Exclusive Product
Categories” and included bedding, bathware, housewares and
cookware. In conjunction with Macy’s, MSLO would design goods in
those categories, which were branded with the MSLO mark. Macy’s
would manufacture the goods and sell them in Macy’s stores.
The agreement further
provided that Macy’s would be the exclusive outlet for sales of
these items and that MSLO would not, without Macy’s consent, enter
into any new agreement or extend any existing agreement “with any
department store or manufacturer or other retailer of department
store merchandise that promotes the sale of any items” in Macy’s
Exclusive Product
Categories that are
branded with a Martha Stewart Mark. The agreement further provided
that if MSLO ultimately contracted, with Macy’s approval, tacit or
otherwise, to sell goods in the Exclusive Product Categories
through other outlets, such goods were to be manufactured solely by
Macy’s and could not be sold through a downscale retailer. The
agreement was subject to several limitations, the key one being
MSLO’s reservation of the right to open its own retail stores.
These stores were
defined as “retail store[s] branded with Martha Stewart Marks or
Stewart Property that [are] owned or operated by MSLO or an
Affiliate of MSLO or that otherwise prominently feature Martha
Stewart Marks or Stewart Property.” Even with respect to those MSLO
stores, however, only Macy’s could manufacture and sell products in
its Exclusive Product Categories at Macy’s cost plus 20%.
This arrangement was
designed to prevent MSLO stores from undercutting Macy’s prices on
those goods. The contract had a five-year term, with Macy’s having
a unilateral right to renew for a maximum of three subsequent
five-year terms. The initial contract was set to expire in 2013 and
Macy’s timely notified MSLO of its intent to renew in 2012. The
subject is Business Law.

1. What are the terms
of the contract?
2. What was MSLO
allowed to do and what did they do?
3. This case was
settled, however; how do you think the court would have
decided?
4. Pose a question as
well.