Macy's, Martha Stewart Living Settle Lawsuit

Martha Stewart's company has settled a lawsuit by Macy's over Stewart's home products deal with rival retailer J.C. Penney.

Martha Stewart Living Omnimedia Inc. gave Macy's an exclusive contract to sell products from the "Martha Stewart Collection." But Stewart's company and J.C. Penney were able to find a "loophole" in the contract, CNNMoney reports.

Though terms of the settlement were not disclosed, the corporate dispute provides a teachable moment for small business owners when it comes to contract law.

What Happened in the Lawsuit?

Despite Macy's exclusive contract, Martha Stewart Living struck a deal with J.C. Penney in 2011 to start selling Stewart's products in its stores. The Martha Stewart products were branded "JC Penney Everyday" -- similar to, but slightly different from, the well-known "Martha Stewart Everyday" brand, according to CNNMoney.

Macy's claimed that the deal with J.C. Penney to sell essentially the same type of Martha Stewart Living products significantly hurt its sales, and sued Stewart and J.C. Penney for breach of contract. During the legal battle, Stewart's lawyers asserted that the brand had a right to sell its products through other stores as long as they were sold in "stores within stores" -- which create exclusive and separate spaces for products, reports The Wall Street Journal.

In response to the lawsuits, J.C. Penney scaled back its partnership with Stewart's company. Penney's is now only selling hardware, window treatments, lighting, rugs, and holiday products from Stewart's line.

The Macy's settlement allows Stewart to continue working with J.C. Penney, reports Reuters. Macy's, however, is still pursuing its legal claims against J.C. Penney.

Tips for Small Business Contracts

Although the Macy's and Martha Stewart lawsuit involve large corporations, it still provides lessons relevant to small business owners. For example:

Always have a lawyer look over your business contracts to make sure there aren't any loopholes that may come back to haunt you.
Make sure the contract terms and clauses clearly describe your goals.
Be specific about what you want to accomplish in the contract and make sure that the other party understands what's being enforced.

Of course, since every contract is different, each one can raise unique questions and concerns. That's why it's wise to consult an experienced business and commercial lawyer in your area whenever you're considering a contract.

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