Macy's v. J.C. Penney, 652861/2012 (N.Y. Sup. Ct.) (Answer to Amended Complaint, filed Jan. 14,...

7/29/2019 Macy's v. J.C. Penney, 652861/2012 (N.Y. Sup. Ct.) (Answer to Amended Complaint, filed Jan. 14, 2012).pdf

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

MACYS, INC. AND MACYS MERCHANDISING GROUP, INC.,

Plaintiffs,v.

J.C. PENNEY CORPORATION, INC.,

Defendant.

MACYS, INC. AND MACYS MERCHANDISING GROUP, INC.,

Plaintiffs,v.

MARTHA STEWART LIVINGOMNIMEDIA, INC.,

Defendant.

Index No. 650197/2012

Hon. Jeffrey K. Oing(IAS Part 48)

ANSWER TO AMENDED COMPLAINT

Defendant J.C. Penney Corporation, Inc. (JCP) answers the Amended

Complaint of Plaintiffs Macys , Inc. and Macys Merchandising Group , Inc. (together,

Macys) , as follows:

JCP asserts that the headings and sub-headings in the Amended Complaint are

argumentative and require no response. To the extent any response is deemed necessary, JCP

denies each and every allegation deemed to be contained in each such heading and sub-heading.

1. Paragraph 1 alleges the nature of the relief Macys seeks in this action and

accordingly does not require a response. To the extent a response is required, JCP admits that

Macys Amended Complaint seeks an injunction, damages, and other relief against JCP.

2. JCP denies the allegations of Paragraph 2.

LED: NEW YORK COUNTY CLERK 01/14/2013 INDEX NO. 652861/2012SCEF DOC. NO. 269 RECEIVED NYSCEF: 01/14/2013


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3. JCP admits that Macys Merchandising Group and MSLO entered into a written

License and Promotion Agreement dated as of April 3, 2006 (the Macys Agreement). JCP

admits the first sentence of footnote 1. JCP lacks information sufficient to form a belief as to the

truth of the remaining allegations in footnote number 1 and the allegations in footnote 2 and

on that basis denies such allegations. To the extent Paragraph 3 makes allegations concerning

the terms of the Macys Agreement, JCP denies such allegations, except to the extent the

allegations accurately reflect the contents of the Macys Agreement, and respectfully refers the

Court to the Macys Agreement itself f or evidence of the complete contents thereof. JCP denies

that a complete copy of the Macy's Agreement is attached to the Complaint as Exhibit 1.4. JCP lacks information sufficient to form a belief as to the truth of the allegations

in Paragraph 4 and on that basis denies such allegations.

5. JCP lacks information sufficient to form a belief as to the truth of the allegations




7. JCP denies the allegations in the first two sentences of Paragraph 7. JCP admits

that a document entitled Press Release is attached to the Complaint as Exhibit 2. JCP denies that

Exhibit 2 accurately describes the Exclusive Products as defined by Exhibit I to the Complaint.

JCP further denies that Exhibit 2 sets forth the term of Exhibit 1. JCP admits that Exhibit 2

refers to options for renewal. JCP lacks information sufficient to form a belief as to the truth

of the remaining allegations in Paragraph 7 and on that basis denies such allegations.


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8. JCP admits that a copy of a letter dated January 23, 2012 is attached to the

Complaint as Exhibit 3. JCP lacks information sufficient to form a belief as to the truth of the

remaining allegations in Paragraph 8 and on that basis denies such allegations.

9. JCP admits that MSLO engaged Blackstone Advisory Partners. JCP further

admits that a copy of a document titled News Release is attached to the Complaint as Exhibit

4. JCP lacks information sufficient to form a belief as to the truth of the remaining allegations in

Paragraph 9 and on that basis denies such allegations.

10. JCP admits the allegations in Paragraph 10.

11.

With respect to the allegations in Paragraph 11, JCP admits that its 2010 saleswere up 1.2% year over year and that its 2010 sales were more than 10% below its 2007 sales.

JCP denies the remaining allegations in Paragraph 11.

12. JCP denies the allegations in Paragraph 12.


in the second sentence of Paragraph 13 and on that basis denies such allegations. JCP denies the

remaining allegations in Paragraph 13.

14. JCP denies the allegations of Paragraph 14, except to the extent the allegations

accurately reflect the contents of the Macys Agreement, and respectfully refers the Court to the

Macys Agreement itself for evidence of the complete contents thereof.

15. JCP admits that it asked MSLO for a copy of the Macys Agr eement as part of its

due diligence in connection with JCPs substantial investment in MSLO and contemporaneous

commercial arrangement. Except as expressly admitted, JCP denies the allegations of Paragraph

15.


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16. JCP admits that MSLO informed JCP that the Ma cys Agreement contained a

confidentiality provision. Except as expressly admitted, JCP denies the allegations of Paragraph

16.

17. With respect to the allegations in Paragraph 17, JCP admits that MSLO provided

JCP with summaries and excerpts of certain terms of the Macys Agreement, as well as a

redacted version of the Macys Ag reement. JCP denies the remaining allegations in Paragraph

17.

18. With respect to the allegations in Paragraph 18, JCP admits that it made an

investment in MSLO and that it negotiated a contract with MSLO in 2011. JCP lacksinformation sufficient to form a belief as to the truth of the allegations in the third sentence of

Paragraph 18 and on that basis denies such allegations. JCP denies the remaining allegations in

Paragraph 18.

19. JCP admits the allegations in the first, third, and fourth sentences of Paragraph 19.

JCP lacks information sufficient to form a belief as to the truth of the allegations in the second

sentence of Paragraph 19 and on that basis denies such allegations. JCP admits that a copy of the

December 7, 2011 News Release is attached as Exhibit 6 to the Complaint. JCP denies the

remaining allegations in Paragraph 19.

20. To the extent Paragraph 20 makes allegations concerning the terms of the JCP

Agreement, JCP denies such allegations, except to the extent the allegations accurately reflect

the contents of the JCP Agreement, and respectfully refers the Court to the JCP Agreement itself

for evidence of the complete contents thereof. JCP admits that it invested $38.5 million in

MSLO. JCP denies the remaining allegations of Paragraph 20.


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21. To the extent Paragraph 21 makes allegations concerning the terms of the JCP


the contents of the JCP Agreement, and respectfully refers the Court to the JCP Agreement itself

for evidence of the complete contents thereof. JCP denies the remaining allegations of

Paragraph 21.


23. JCP admits that Macys commenced a lawsuit against MSLO on January 23,

2012 , and that in the course of that lawsuit, Macys publicly disclosed a copy of the Macys

Agreement, except for certain sensitive terms that were redacted. JCP denies the remainingallegations of Paragraph 23.


25. JCP admits that JCP and MSLO entered into an amendment of the JCP

Agreement that is dated July 11, 2012. To the extent Paragraph 25 makes allegations concerning

the terms of the JCP Agreement (including as amended), JCP denies such allegations, except to

the extent the allegations accurately reflect the contents of the JCP Agreement, and respectfully

refers the Court to the JCP Agreement itself for evidence of the complete contents thereof. JCP

lacks information sufficient to form a belief as to the truth of the allegations in the fourth

sentence in Paragraph 25 and on that basis denies such allegations. JCP denies the remaining

allegations of Paragraph 25.

26. JCP admits that it has publicly promoted the JCP Agreement on numerous

occasions since December 2011, including at a press conference on January 25, 2012. JCP

denies the remaining allegations of Paragraph 26.


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27. JCP admits that according to MSLO, the Macys Agreement expires in January

2013. To the extent Paragraph 27 makes allegations concerning the terms of the Macys


the contents of the Macys Agreement, and respectfully refers the Court to the Macys

Agreement itself for evidence of the complete contents thereof. JCP lacks information sufficient

to form a belief as to the truth of the remaining allegations in Paragraph 27 and on that basis

denies such allegations.

28. JCP denies the allegations in the fourth sentence of Paragraph 28. JCP lacks

information sufficient to form a belief as to the truth of the remaining allegations in Paragraph 28and on that basis denies such allegations.

29. JCP admits that this Court held a hearing on July 13, 2012 in the Macys/MSLO

Lawsuit, and that this Court entered an Order in that Lawsuit on July 31, 2012, a copy of which

is attached as Exhibit 9 to the Amended Complaint. To the extent Paragraph 29 makes

allegations concerning the Courts ruling, JCP denies such allegations except to the extent the

allegations accurately reflect the contents of the Courts July 31, 2012 Order, and respectfully

refers the Court to the July 31, 2012 Order itself for evidence of the complete contents thereof.

30. JCP denies the allegations in the last sentence of Paragraph 30. JCP lacks

information sufficient to form a belief as to the truth of the remaining allegations in Paragraph 30

and on that basis denies such allegations.


32. The first sentence of Paragraph 32 allege s the nature of the relief Macys seeks in

this action and accordingly does not require a response. To the extent a response is required,


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JCP admits that Macys Amended Complaint seeks an injunction, damages, and other relief

against JCP. JCP denies the remaining allegations of Paragraph 32.



34. JCP admits the allegations of Paragraph 34, including that JCP directly competes

with and is one of Macys main competitors, but denies that it is a direct competitor of MMG.

35. JCP admits the allegations of Paragraph 35.


37.

To the extent Paragraph 37 makes allegations concerning the terms of the MacysAgreement, JCP denies such allegations, except to the extent the allegations accurately reflect














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41. JCP denies the allegations of Paragraph 41, except to the extent such allegations



42. JCP denies the allegations of Paragraph 42 and footnote 3, except to the extent

such allegations accurately reflect the contents of the Macys Agreement or any amendments

thereto , and respectfully refers the Court to the Macys Agreement and any amendments thereto

for evidence of the complete contents thereof.







45. JCP denies the allegations in the last sentence of Paragraph 45. JCP lacks

information sufficient to form a belief as to the truth of the remaining allegations in Paragraph 45

and on that basis denies such allegations.



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Macys Agreement itself for evidence of t he complete contents thereof.

48. JCP denies the allegations of the fifth and sixth sentences in Paragraph 48. JCP

denies the remaining allegations of Paragraph 48, except to the extent such allegations accurately

reflect the contents of the Macys Agreement, and respectfully refers the Court to the Macys

Agreement itself for evidence of the complete contents thereof.

49. JCP denies the allegations of the second, third, and fourth sentences in Paragraph

49. JCP denies the allegations of the first sentence of Paragraph 49, except to the extent suchallegations accurately reflect the contents of the Macys Agreement, and respectfully refers the

Court to the Macys Agreement itself for evidence of the complete contents thereof.




51. Upon information and belief, JCP admits the allegations in the first sentence of

Paragraph 51. JCP denies the remaining allegations of Paragraph 51, except to the extent such


Court to the Macys Agreem ent itself for evidence of the complete contents thereof.



the contents of the Ma cys Agreement, and respectfully refers the Court to the Macys



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54.

JCP lacks information sufficient to form a belief as to the truth of the allegationsin Paragraph 54 and on that basis denies such allegations.







56. JCP admits that it issued a press release on December 7, 2011, a copy of which is

attached as Exhibit 6 to the Amended Complaint. To the extent Paragraph 56 makes allegations

concerning Exhibit 6, JCP denies such allegations, except to the extent the allegations accurately

reflect the contents of Exhibit 6, and respectfully refers the Court to Exhibit 6 itself for evidence

of the complete contents thereof. JCP lacks information sufficient to form a belief as to the truth

of the allegations in the last sentence of Paragraph 56 and on that basis denies such allegations.


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58. JCP denies the allegations of the second sentence of Paragraph 58. To the extent

Paragraph 54 makes allegations concerning the terms of the JCP Agreement, JCP denies such

allegations, except to the extent the allegations accurately reflect the contents of the JCP

Agreement, and respectfully refers the Court to the JCP Agreement itself for evidence of the

complete contents thereof. JCP lacks information sufficient to form a belief as to the truth of the


59.

JCP denies the allegations of Paragraph 59 except to the extent such allegationsaccurately reflect the contents of the JCP Agreement, and respectfully refers the Court to the JCP


60. JCP denies the allegations of Paragraph 60 except to the extent such allegations

accurately reflect the contents of the JCP Agreement, and respectfully refers the Court to the JCP



62. JCP denies the allegations of the first sentence of Paragraph 62. JCP denies the

allegations of the second and third sentences of Paragraph 62 except to the extent such


Court to the Macys Agreement itself for evidence of the complete contents thereof. JCP lacks

information sufficient to form a belief as to the truth of the allegations in the last sentence in

Paragraph 58 and on that basis denies such allegations.



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in the first and second sentences in Paragraph 64 and on that basis denies such allegations. JCP

denies the remaining allegations in Paragraph 64.

65. JCP admits that it developed a plan to transform the department store experience

and that the JCP Agreement was a part of that plan. JCP denies the remaining allegations of

Paragraph 65, except to the extent such allegations accurately reflect the contents of the JCP

Agreement and the Securities Purchase Agreement between JCP and MSLO (Securities

Purchase Agreement) , and respectfully refers the Court to the JCP Agreement and the Securities

Purchase Agreement themselves for evidence of the complete contents thereof.66. JCP admits the allegations of the first sentence of Paragraph 66. JCP lacks

information sufficient to form a belief as to the truth of the allegations in the second and third

sentences in Paragraph 66 and on that basis denies such allegations. JCP denies the allegations

in the fourth sentence of Paragraph 66.


68. JCP denies the allegations of the first, second, and third sentences of Paragraph

68. JCP denies the remaining allegations of Paragraph 68 except to the extent such allegations

accurately reflect the contents of the JCP Agreement, and respectfully refers the Court to the JCP



70. JCP denies the allegations of the first sentence of Paragraph 70. JCP denies the

remaining allegations of Paragraph 70, except to the extent they accurately reflect the contents of

the Wall Street Journal article attached as Exhibit 13 to the Amended Complaint, and

respectfully refers the Court to Exhibit 13 itself for evidence of the complete contents thereof.


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accurately reflect the contents of August 14, 2011 emails between Steven Roth and Ron Johnson.

JCP respectfully refers the Court to those emails for evidence of the complete contents thereof.

75. JCP admits that its investment advisor, Peter J. Solomon Company, discussed

obtaining a copy of the Macys Agreement with MSLOs investment bankers at Blackstone

Advisory Partners. Except as expressly admitted, JCP denies the allegations of Paragraph 75.76. JCP denies the allegations of Paragraph 76, except to the extent the allegations

accurately reflect the contents of a September 14, 2011 email from Peter Cohen of Blackstone

Advisory Partners. JCP respectfully refers the Court to that document for evidence of the

complete contents thereof.


accurately reflect the contents of an email dated September 14, 2011. JCP respectfully refers the

Court to that document for evidence of the complete contents thereof.

78. JCP admits that Ron Johnson met with Martha Stewart and Lisa Gersh of MSLO

on September 20, 2011, but denies the remaining allegations in Paragraph 78.

79. JCP admits that at the September 20, 2011 meeting, Martha Stewart and Lisa

Gersh conveyed that MSLO had the ability to sell Martha Stewart products through MSLO

Stores, but JCP denies the remaining a llegations in Paragraph 79.


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accurately reflect the contents of an email from Ron Johnson dated September 20, 2011. JCP

respectfully refers the Court to that document for evidence of the complete contents thereof.


accurately reflect the contents of an email from James Kenney dated September 21, 2011. JCP


82. JCP admits that on September 21, 2011, Rich Brail of Peter J. Solomon Company

sent a due diligence request list to Peter Cohen of Blackstone Advisory Partners. JCP denies the

remaining allegations in Paragraph 82, except to the extent the allegations accurately reflect thecontents of the September 21, 2011 communication from Rich Brail to Peter Cohen, and


83. JCP admits that on October 12, 2011, JCP sent a preliminary, non-binding

proposal to make a substantial financial investment in MSLO, and enter into a contemporaneous

commercial arrangement with MSLO, to Peter Cohen of Blackstone Advisory Partners. JCP

denies the remaining allegations in Paragraph 83.


accurately reflect the contents of the October 12, 2011 preliminary, non-binding proposal. JCP



accurately reflect the contents of an email from MSLO dated November 1, 2011. JCP



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accurately reflect the contents of internal JCP communications dated November 1, 2011. JCP

respectfully refers the Court to those communications for evidence of the complete contents

thereof.


accurately reflect the contents of an email from MSLO dated November 3, 2011. JCPrespectfully refers the Court to that document for evidence of the complete contents thereof.

89. JCP admits that it understood that license agreement number 1 to refer to the

Macys Agreement. JCP denies the remaining allegations in Paragraph 89, except to the extent

the allegations accurately reflect the contents of an email from MSLO dated November 4, 2011,

and respectfully refers the Court to that document for evidence of the complete contents thereof.




91. JCP admits that JCP provided written materials to its board of directors in

connection with the boards approval of JCPs substantial investment in MSLO and

contemporaneous commercial arrangement. JCP further admits that those written materials state

that JCP reviewed non-public MSLO information, including merchandising agreements, as well

as other legal agreements that were provided in redacted form only to JCP lawyers, as part of the


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due diligence process. JCP respectfully refers the Court to those materials for evidence of the

complete contents thereof. JCP denies the remaining allegations in Paragraph 91.

92. JCP admits that its board of directors approved entering into the JCP Agreement

and that the JCP Agreement is dated as of December 6, 2011. JCP denies the remaining

allegations in Paragraph 92.




in Paragraph 95 and on that basis denies such allegations.96. JCP lacks information sufficient to form a belief as to the truth of the allegations






100. JCP admits that it did not inform Macys that it had obtained a redacted version of

the Macys Agreement from MSLO, but denies the remaining allegation s in Paragraph 100.

101. JCP adm its that it did not ask MSLO to inform Macys that MSLO had disclosed

a redacted version of the Macys Agreement to JCP, but denies the remaining allegations in

Paragraph 101.

102. JCP admits that it received a redacted version of the Macys Agreement from

MSLO, that it reviewed the redacted agreement as part of its due diligence in connection with


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JCPs substantial investment in MSLO, and that it did not return the redacted copy of the Macy s

Agreement to MSLO. JCP denies the remaining allegations in Paragraph 102.






108. JCP admits the allegations of the first sentence of Paragraph 108. JCP admits that

an edited transcript of a May 15, 2012 earnings call is attached as Exhibit 15 to the AmendedComplaint. JCP denies the remaining allegations of Paragraph 108 except to the extent such

allegations accurately reflect the contents of Exhibit 15 to the Amended Complaint, and

respectfully refers the Court to Exhibit 15 itself for evidence of the complete contents thereof.


110. JCP denies the allegations of the first sentence of Paragraph 110. JCP admits that

a MSLO letter dated January 31, 2012 is attached as Exhibit 16 to the Amended Complaint. To

the extent Paragraph 110 makes allegations concerning the contents of Exhibit 16, JCP denies

such allegations except to the extent such allegations accurately reflect the contents of Exhibit

16, and respectfully refers the Court to Exhibit 16 itself for evidence of the complete contents

thereof. JCP lacks information sufficient to form a belief as to the truth of the remaining

allegations in Paragraph 110 and on that basis denies such allegations.




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in Paragraph 115 and on that basis denies such allegations, except that JCP admits that MSLO

filed counterclaims against Macy's and respectfully refers the Court to the counterclaims for thecontent thereof.




118. JCP denies the allegations of the first and third sentences of Paragraph 80. JCP

admits the allegations of the second sentence of Paragraph 118.

119. JCP admits that since the beginning of 2012, MSLO has provided JCP with

hundreds of designs for a wide range of products. JCP denies the remaining allegations of

Paragraph 119.


121. JCP denies the allegations of the second sentence of Paragraph 83. JCP denies

the remaining allegations of Paragraph 121 except to the extent such allegations accurately

reflect the contents of the JCP Agreement (including as amended on July 11, 2012), and


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respectfully refers the Court to the JCP Agreement itself for evidence of the complete contents

thereof.







127.

JCP denies the allegations of Paragraph 127.






133. JCP repeats its responses to the allegations of Paragraphs 1 through 132 as if fully

set forth herein.









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set forth herein.

142. JCP admits that Macys Merchandising Group and MSLO are parties to the

Macys Agreement. JCP lacks information sufficient to form a belief as to the truth of the




accurately reflect the contents of communications JCP received from Blackstone AdvisoryPartners, and respectfully refers the Court to those documents for evidence of the complete

contents thereof.





set forth herein.

149. JCP admits that it directly competes with Macy s, but denies that it is the only

direct competitor of Macy s for retail customers. JCP further denies that it is a direct competitor

of MMG.




AFFIRMATIVE DEFENSES TO ALL CLAIMS


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FIRST AFFIRMATIVE DEFENSE

Plaintiffs claims are barred on the ground that any conduct of J CP was based on

its economic interest or was otherwise justified.

SECOND AFFIRMATIVE DEFENSE

Plaintiffs claims are barred on the ground that any conduct of JCP was

privileged.

THIRD AFFIRMATIVE DEFENSE

Plaintiffs claims are barred on the ground that Pla intiffs have failed to mitigate

damages.

FOURTH AFFIRMATIVE DEFENSE

Plaintiffs claims are barred by the doctrines of waiver, estoppel, laches and

unclean hands.

Dated: January 14, 2013

MILLER & WRUBEL P.C.

By: /s/__________________________ Martin D. EdelAdam J. Safer 570 Lexington Avenue

New York, New York 10022Tel: (212) 336-3500

and

MUNGER, TOLLES & OLSON LLP355 South Grand Ave., 35th Floor Los Angeles, California 90071(213) 683-9100

Attorneys for Defendant J.C. Penney Corporation, Inc.


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TO:

Jones Day

Theodore M. Grossman, Esq.Michael A. Platt, Esq.222 East 41 st Street

New York, NY 10017(212) 326-3939

Attorneys for Plaintiffs Macys, Inc. and Macys Merchandising Group, Inc.

Macy's v. J.C. Penney, 652861/2012 (N.Y. Sup. Ct.) (Answer to Amended Complaint, filed Jan. 14,...

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