Judge allows J.C. Penney to sell unbranded Martha Stewart goods

Score one for J.C. Penney, the beleaguered retailer that just kicked out its chief executive in search of a better reputation. The department store chain Friday won the right to sell Martha Stewart products – as long as they’re unbranded.

This to the consternation of Macy’s, which is in the middle of a court battle with J.C. Penney and Martha Stewart Living Omnimedia claiming that the two violated its exclusive contract with the domestic diva.

In New York State Supreme Court, Macy’s had asked Justice Jeffrey Oing to expand an existing preliminary injunction barring J.C. Penney from selling Stewart-branded home goods until the non-jury trial concludes.

Oing declined the request Friday. He also dismissed Macy’s claim of unfair competition against J.C. Penney.

J.C. Penney can, for now, sell Stewart items under its Everyday label, which does not carry Stewart’s name. The disputed items, which had been held in storage, will reach shelves in May.

In a statement, J.C. Penney said it was “pleased with the court’s ruling” and that it believes the Everyday line “will be a compelling part of our overall home assortment.”

The chain’s new home section, featuring partnerships with brands such as Royal Velvet and Happy Chic by Jonathan Adler, was also designed as a showcase for Stewart.

Ron Johnson, a key architect of the retailer’s dealings with Stewart, was ousted as J.C. Penney’s chief executive on Monday and replaced with his predecessor.

Macy’s, in a statement, said it is “disappointed” in the ruling. The company stressed that the decision is “not a final determination of Macy’s claims” and said it plans “to file an immediate appeal.”

J.C. Penney, Stewart and Macy’s returned to court this week after a monthlong mediation effort ordered by Oing failed. But Gregory G. Little, a partner at law firm White & Case, thinks that Friday’s action could bring them back to talks.

“It is a bit of a compromise decision that may encourage the parties to reach a settlement of this dispute,” he said.

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