Reuters: Ron Johnson knew Martha Stewart deal was in conflict with Macy’s

New York -- A Friday report by Reuters revealed that J.C. Penney CEO Ron Johnson was well aware that the retailer’s deal with Martha Stewart would step on Macy’s toes, but testified in court that the company decided to move forward anyway.

Attorneys for Macy’s in New York state court on Friday presented Johnson with an email he sent to a Penney board member saying that Stewart would have to break her agreement with Macy’s if Johnson was going to “pull off” a deal with her.

The testimony was part of the suit brought by Macy’s against Penney and Martha Stewart Living Omnimedia Inc., claiming that the pair’s deal to launch Martha Stewart boutiques in Penney stores breached Macy’s own exclusive contract with Stewart to sell products at Macy's.

The email under fire was one written by Johnson to Penney board member Steven Roth of Vornado Realty, which is Penney's second-largest shareholder.

In court, Johnson denied that he meant to break the contract. He claimed that he was advised by counsel that there was wiggle room in the Macy’s contract to allow Penney to open in-store Martha Stewart boutiques.