All Things Stewart

Martha Stewart in the Dock Over Macy’s Lawsuit: ‘I Did My Time!’

She was mobbed by paparazzi and testifying under oath. But Stewart looked happy. Lloyd Grove reports.

After nearly five hours on the grill in a bitter lawsuit, Martha Stewart looked as fresh and crisp on Tuesday afternoon as one of her Etched Peony comforter sets. It was, oddly enough, given her checkered past in the American justice system, Stewart’s first experience testifying under oath. “I never have before,” she told me, “and it’s not fun.”

Yet she seemed to know precisely what she was doing up there on the witness stand—as though she were creating the perfect silk-tie Easter egg and daring mere mortals to match her skill.

“Do I know what I’m doing?” Stewart protested afterward in a crowded elevator at New York State Supreme Court, where Macy’s has been suing Martha Stewart Living Omnimedia and JCPenney for the past year over alleged breach of contract. Macy’s, which has an exclusivity agreement to merchandise various Martha-branded products, claims MSLO’s proposed marriage to JCPenney, with plans for Martha Stewart stores-within-stores in 700 JCPenney outlets, amounts to corporate bigamy. “I don’t think you ever know what you’re doing in this situation,” the star witness mused.

Stewart, who is proof positive that 71 is the new 40, was being too humble by half. Even if her case turns out to be shaky—and the presiding judge, state Supreme Court Justice Jeffrey Oing, has already stopped MSLO and JCPenney from consummating their betrothal, issuing a temporary injunction last summer until Macy’s complaint is decided—she was as commanding as ever. She even managed to joke about that spot of bother from a decade ago, when she went to federal prison for five months on various convictions arising from a criminal securities fraud investigation. Her defense team at the time declined to put her on the stand.

“I stumbled in 2003. I had a terrible time personally,” she said under gentle questioning from civil defense attorney Eric Seiler. “That could have taken down the company. It did not. That could have taken down the brand. It did not. They emerged whole and healthy.”

Seiler asked: “How do you spend your time?”

“I did my time!” Stewart quipped, adding with a laugh as even Justice Oing chuckled, “That’ll be the headline. Don’t read the [New York] Post tomorrow!”

In due course Stewart answered her lawyer seriously: “I have a very busy work schedule with very little time off and I enjoy it. I have no intention of slowing down. My mind is as fertile as when I graduated from Barnard College. Actually it’s more fertile.”

The impression was enhanced not only by her blond power helmet (not a strand out of place) but also by her cream-colored Hermès blouse, matching taupe Lanvin tunic and miniskirt, and black suede booties, showing off those gams to best advantage. No JCPenney for this domestic diva! The effect, quite the contrary, was astronomically expensive. “This is not a fashion show,” Stewart scolded good-naturedly when I asked her to catalog her courtroom-ready wardrobe.

Stewart’s audience, of course, was not simply Justice Oing—who is trying the lawsuit without a jury and occasionally rubbed his eyes and bald pate against the tedium of it all—but also the wider world, where she exists as both a celebrity and a brand. “Look at all the press,” she marveled during a break, when she ventured into the peanut gallery where I was seated among a dozen or so laptop-wielding business journalists. “There’s a lot at stake,” she told me. “A lot at stake. Many, many jobs. Many customers. It’s a big deal.”

The basic facts of the case are that Macy’s chief executive, Terry Lundgren, and MSLO, of which Stewart today is nonexecutive chairman, signed an agreement starting in 2007 for Macy’s to have exclusive rights to sell a variety of Martha Stewart products, from cookware to bedding. The arrangement, in which MSLO designed hundreds of products for Macy’s and Macy’s paid MSLO a substantial royalty on sales—around $300 million thus far—didn’t prevent Stewart’s company from losing money, largely due to an industry-wide downturn affecting media and Internet properties. Desperate to reverse the trend, MSLO’s board hired the Blackstone Group in mid-2011 to find a strategic partner to provide new revenue streams, and in short order JCPenney’s chief executive, Ron Johnson, showed up as an ardent suitor.

Love, maybe even lust, was in the air. JCPenney, Johnson wrote to MSLO execs in one of a series of fulsome emails, will “place Martha where she belongs—as the unquestioned authority for living for our generation.” Stewart reciprocated. “One of the great things about Ron Johnson is he is a visionary,” she testified on Tuesday. “He had the foresight to reimagine the American department store.” He also had the foresight to butter Stewart up to fare-thee-well. “I find it very flattering and very appealing,” she acknowledged.

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In the end Johnson paid nearly $40 million for 16 percent of MSLO and agreed to have branded Martha Stewart stores inside all of JCPenney’s outlets. Both suspected that Macy’s might be less than thrilled at this assignation with a competitor, and Stewart, claiming that Blackstone, MSLO’s bankers, had sworn her to secrecy, didn’t inform Lundgren of Macy’s until December 6, 2011, in a phone call the night before the public announcement.

Enraged at what he saw as a betrayal, Lundgren hung up on her. “I was very unhappy with the conversation,” Stewart testified. “I was quite taken aback by his response. When he hung up on me I was kind of flabbergasted.”

Macy’s lawyer, Theodore Grossman, kept going over the fateful phone call and tried to get Stewart to admit her perfidy, demanding over and over whether she and Johnson appreciated they were running around behind Lundgren's back, but in the end he drew barely a drop of blood.

At which point Stewart and her entourage exited the building, only to encounter a crazed, undulating, many-headed beast of television cameras and paparazzi, which blocked her path to a waiting Escalade. Stewart gamely raised her own pocket-size camera and aimed it at the beast. “Stop it,” a passer-by exhorted the heedless animal, as the object of its appetite pushed her way to safety, “you’re making Martha miserable!”

But she looked sort of happy.