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Litigation unlikely to save these relationships

by Richard Morgan | Published February 21, 2012 at 1:44 PM

A couple of high-profile lawsuits are destined to make fools of celebrity litigants Martha Stewart and Howard Stern or, if not them, their corporate frenemies. That's Macy's Inc. in the case of Stewart; Sirius XM Radio Inc. in the case of Stern.

Macy's is taking Stewart's publicly traded company, Martha Stewart Living Omnimedia Inc., to court over its recently announced alliance with J.C. Penney Co. A licensing partner of MSLO's since 2006, Macy's claims the domestic diva broke all sorts of exclusivity agreements by hooking up with what its complaint calls "a less upscale retailer."

In the case of Stern, it's the shock jock alleging his corporate partner done him wrong. At issue is whether Stern's "performance-based compensation" should count those who subscribe to the satellite radio broadcaster not because its roster includes the self-styled King of All Media but because they were subscribers of XM Satellite Radio Inc. when it merged with Sirius in 2008.

It's hard to imagine the limits of MSLO's exclusivity weren't fully specified in the original licensing agreement between Stewart and Macy's. But it's even more difficult to think Stern and his satellite broadcaster neglected to address even the most basic implications of a Sirius-XM merger before coming to terms in 2004.

Compounding this apparent negligence is that both celebrities saw fit to blindside their multiyear corporate partners. "Macy's had learned about MSLO's deal with J.C. Penney only the evening before the announcement," the spurned retailer states in an amended complaint filed, incongruously, on Valentine's Day. And, in response to the suit that Stern's production company and agent sprung on Sirius last March, the defendant professed to be "surprised and disappointed."

No doubt the same lawyers who allowed so many shades of gray to creep into contracts that should have specified each party's obligations in black and white have been re-enlisted to sort out the current mess. But it's already obvious that even the lawsuits' winners will be losers.

Say the New York Supreme Court, which in September heard Sirius' arguments for dismissing the Stern suit, determines the $600 million-plus that the radio broadcaster has already paid the shock jock is legally adequate. Will Stern then turn his four-hour broadcast into a bully pulpit to attack his corporate partner? Doubters need only recall the on-air diatribes against his former employer, CBS Corp., before Stern left the confines of terrestrial radio for the regulation-free world of satellite broadcasting.

Or, conversely, assume Macy's is denied the preliminary injunction it's seeking to keep Stewart from skating, scot-free, to Penney. It's inarguable that she really will damage, as Macy's amended complaint contends, "the 'crucial connection' between Macy's and Martha Stewart that Macy's has devoted years and tens of millions of dollars to developing." She really will destroy "the public perception that Macy's is the only place a consumer can turn to purchase Martha Stewart home products in key categories."

There are drawbacks should the other sides win, too. And they seem sufficiently injurious -- in terms of trust alone -- to turn what began as win-win propositions in both cases into their exact opposite.

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Litigation unlikely to save these relationships

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Richard Morgan

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