Dispute Between Macy's and J.C. Penny Over Martha Stewart Home Goods Heads Back to Trial

Macy's Inc. and J.C. Penney Co Inc. are expected back in court today after a month-long effort to mediate their fight over Martha Stewart home goods apparently failed.

The trial resumes in New York and focuses on whether Macy's has the right to sell certain Martha Stewart products exclusively.

Macy's sued Martha Stewart Living Omnimedia Inc. in 2012 after it agreed to sell Martha Stewart-branded products at J.C. Penney, Reuters reports. Macy's is arguing the agreement breaches Martha Stewart's contract to sell certain products exclusively at Macy's.

Macy's also filed suit over the deal against J.C. Penney, which has unveiled plans to create Martha Stewart boutiques in J.C. Penney stores.

The Martha Stewart line is the leading home brand at Macy's; J.C. Penney is looking to the brand as a major part of its turnaround strategy, which has been hampered by the legal battle between the two retailers.

J.C. Penney opened the first of its new in-store boutiques last week with a limited offering of Martha Stewart goods.

Justice Jeffrey Oing ordered Macy's, J.C. Penney and Martha Stewart Living into mediation last month, hoping to bring an quicker resolution to the non-jury trial, which was in recess due to scheduling conflicts.

But, no deal had been reached as of Friday, a person familiar with the dispute told Reuters.

Among witnesses scheduled to testify today and Tuesday are J.C. Penney marketing executives, according to the Reuters source, who wasn't authorized to speak publicly and declined to be identified.

"We're all reconvening Monday morning," said Jim Sluzewski, a Macy's spokesman.

A spokeswoman for J.C. Penney declined to comment, as did a spokesman for Martha Stewart Living Omnimedia.

J.C. Penney agreed to delay its plans sell Martha Stewart bedding, cookware and bath items until at least today.

Martha Stewart, 71, Macy's Chief Executive Terry Lundgren and J.C. Penney head Ron Johnson have all testified in the case.

Lundgren asserts Stewart did not tell him she was striking a deal with J.C. Penney until the night before it was announced publicly.

Stewart said she was "flabbergasted" when Lundgren reacted so strongly against the J.C. Penny agreement.

"It didn't occur to me that there weren't enough customers to go around," she said.