Martha Stewart Testifies in Manhattan Court

March 5, 2013 — -- Martha Stewart referred to herself as an "uber-designer" when she returned to a New York courtroom today to testify in a legal spat between Macy's Inc. and J.C. Penney Co. over which retailer has rights to the domestic diva's product line.

Macy's sued Martha Stewart Living for breach of contract in 2012, saying an agreement to sell products at J.C. Penney in 2011 ran counter to Stewart's deal with Macy's in 2006. Macy's then sued J.C. Penney last year, saying it interfered with its contract.

Stewart, 71, took the stand in New York State Supreme Court in Manhattan. It's been eight years since she was convicted of lying to authorities about her sale of ImClone stock and served a prison term.

"It just boggles my mind that we're here," Stewart testified in court.

Stewart founded Martha Stewart Living Omnimedia in 1997 and she is chairwoman of the public company. The company's stock (NYSE: MSO) fell 0.8 percent to $2.48 a share around 2:32 p.m. EST.

Part of Martha Stewart Living's argument is that its contract with Macy's allowed it to sell products that were in exclusive categories if they were sold through the Internet, television or at retail stores that's operated by and has the Martha Stewart brand, or which "prominently" features the brand.

In a short, light brown skirt and matching vest with a cream colored blouse underneath Stewart answered questions about the Macy's, J.C. Penney dispute.

Asked by Ted Grossman, attorney for Macy's, whether she was comfortable on the witness stand, Stewart replied, "As comfortable as can be."

Macy's insists it has exclusive rights to Stewart's line of linens and other home items and is suing to block J.C. Penney from selling similar products.

Asked whether Stewart's company suggested to Macy's that it could or would sell goods in any competing department store Stewart answered, "There were categories that were non-exclusive to Macy's that we could sell in other department stores."

Stewart said she did business with lots of other stores.

"I don't know if you can consider Petsmart a department store for pets," she said. "Michaels is kind of a department store for crafts."

The attorneys for Macy's repeatedly tried to tar Stewart as cut-throat businesswoman willing to let others assume the risk even as she raked in profits, a characterization that Stewart rejected.

"We take tremendous risk," she said. "Our first obligation is to our consumer."

The contract dispute at the core of the case was mentioned only occasionally in the initial proceedings, leading Stewart to remark, with some exasperation, "If we are getting into the contract maybe we should, you know, do that."

Macy's questions the legality of over 900 home product designs that Martha Stewart Living Omnimedia gave to J.C. Penney, saying they were exclusively for Macy's to sell.

"We thought, and I hope rightly so, that were allowed to do such a thing," said Stewart when asked about the designs.