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Judge orders mediation for Macy's, Martha Stewart

A New York State Supreme Court Judge has ordered Macy's Inc., J.C. Penney Co. and Martha Stewart Living Omnimedia Inc. to go into mediation as a way to resolve a contract dispute concerning a partnership over the Martha Stewart brand, according to a Macy's spokesman.

The development comes as the companies were finishing up a third week in a trial over whether Macy's has the exclusive rights to sell some Martha Stewart-branded merchandise including bedding, cookware and bath items.

Macy's has sued Martha Stewart Living for allegedly breaching its long-standing contract when it signed a deal with Penney in December 2011 to open about 700 Martha Stewart mini shops in stores this spring.

Macy's, which was one of the first companies to do business with Stewart's company after her 2005 jail stint for obstructing justice and lying to federal investigators about a stock trade, claims it has the exclusive right to sell her products in specific categories.

On Wednesday, Stewart told TODAY she recounted telling Macy's Chief Executive Terry Lundgren in 2011 that she was forming a business relationship with rival Penney.

Lundgren, she said, hung up on her.

"Terry Lundgren is the consummate CEO,'' Stewart told Matt Lauer. "He is an excellent businessman. He should be able to discuss business in a business-like fashion. Hanging up on a woman — businessperson — I think was rude and not right.''

The lawsuit comes in the midst of reports that Stewart's company, Martha Stewart Living Omnimedia, has reported a loss of $56 million in the last year and laid off 12 percent of its staff.

"It's terribly important that we don't lose a case like this,'' she said.

Penney said won't sell any products that are deemed exclusive by Macy's before April 8 when the hearings resume.