Martha Stewart Living Going to Trial Over Pet-Products Deal

(CN) – Claims that Martha Stewart Living cut a business partner out of a deal with a national pet store chain will proceed to trial, after a New York judge rejected the merchandising company’s bid to toss the case.

“MSLO’s summary judgment motion is, with one exception, denied,” Justice Shirley Kornreich wrote in a decision from the Commerce Division of the New York Supreme Court, abbreviating Martha Stewart Living Omnimedia. “Its arguments implicate genuine material questions of fact that cannot be resolved without a trial.”

On Thursday, Kornreich dismissed Age Group’s claim that MSLO breached a confidentiality agreement when it started to directly contact PetSmart, finding that confidentiality was not stipulated in the parties’ agreement.

However, the court left Age Group’s other contract claims in tact.

MSLO and Age Group entered into a four-year licensing agreement in 2009, under which Age Group agreed to market and sell pet products with the MSLO branding. Four months later, Age Group reached a deal with PetSmart, which agreed to sell the pet products through its national retail chain.

Age Group claims that once the PetSmart deal was made, MSLO realized it had undervalued its pet-product line and tried to cut Age Group out of the deal so it could continue working with PetSmart directly.

MSLO allegedly refused to allow Age Group to sell to anyone other than PetSmart, and then enforced unrealistic product designs to undercut Age Group’s ability to fulfill its end of the agreement.

“MSLO knowingly demanded designs that would cost two or three times more than PetSmart’s target, often showing those designs to PetSmart without first discussing with AGE to see if the product was feasible,” according to Age Group’s original 2013 complaint.

In her opinion, Justice Kornriech used Martha Stewart’s own deposition to show that it was not actually clear that Age Group was underperforming under the parties’ agreement.

“I don’t know the exact sales numbers of each of the different products, but it was a nice success,” Stewart said, according to quotes included in the ruling.

Sales figures are likely to come up again in the trial, as Kornreich ruled that Age Group can pursue nominal damages based on the early termination of its contract with MSLO.

“Age has developed a record on which it might be capable of proving damages in the form of the profits it would have earned on pet product sales had MSLO not breached. It is the law of the case that AGE may seek such damages,” the judge wrote. “Indeed, the only damages Age could have suffered from MSLO’s breach are the profits it lost the opportunity to make on the MSLO agreement.”

A spokesperson for MSLO did not respond Friday to an email request for comment.

Age Group is represented by Marc Kasowitz, Albert Shemmy Mishaan and Thomas J. Amburgy with Kasowitz Benson Torres.

“Martha Stewart Living breached the license agreement with Age Group by, among other things, directly impeding and interfering with Age Group’s ability to fully exploit its bargained-for exclusive license,” a spokesperson for Kasowitz Benson Torres said in a statement. “The case is now set for trial.”

%d bloggers like this: