Martha Stewart Ordered into Mediation

The New York Times reported here yesterday that the judge in the Martha Stewart-JC Penny-Macy’s contract dispute ordered the parties into mediation.  This is after three weeks of testimony in a bench trial that consolidated two law suits.  According to the NY Times this will be the first mediation in this case.  Apparently, previously, JC Penny and Martha Stewart were willing to go to mediation “but ‘other parties were not amenable.’”

It will be interesting to see the outcome of the mediation as this case seems to be a classic example of a breakdown in communications.  Reportedly, Martha Stewart and Macy’s CEO, Terry J. Lundgren, were good friends until the day that Ms. Stewart called him to tell him about the deal with JC Penny.  Ms. Stewart testified that, “I don’t know if I got through even half the points before he hung up.”  For more of Ms. Stewart’s testimony, see here.  Reportedly, Ms. Stewart and Mr. Lundgren did not speak after that phone call until they were both in court to testify.  And, then they  “had a productive conversation regarding the ongoing contract dispute.”  It seems the Judge’s order to go to mediation was after this “productive conversation.”  If the reports are true, that it is the first time Ms. Stewart and Mr. Lundgren spoke to each other, it makes me wonder why the various parties weren’t brought together earlier in the case.  This seems another example of the value of having the parties present at earlier stages in the case and the potential wasted time and money when the lawyers do all of the appearances without their clients.

11 thoughts on “Martha Stewart Ordered into Mediation”

  1. This example, in my mind, illustrates some of the obstacles involved when people in dispute immediately approach the dispute from a positional, win/lose stance.

    in some situations, this approach may be necessary. However, in situations that involve personal and/or business relationships, this approach tends to create walls between the parties and escalate the issues.

    In litigation, the parties speak through their attorneys – who have the responsibility of advocating for the client under a very structured set of rules and procedures that seek to determine a “winner” and a “loser.” This approach to disputes does not support actual communication between the people involved.

    Mediation, on the other hand, assists people in a dispute to engage from a non-adversarial, “more information is needed” point-of-view. In these situations, the assistance of someone who is external and non-partial to the situation (such as a trained and educated mediator) can be invaluable.

    As human beings, we may be angry and hurt from the words and actions that led to the dispute. Our society and culture (in the U.S.) encourages an individualistic, combative, winner-take-all approach to disputes. It’s no wonder that the initial instinct is to call an attorney.

    However, when people in dispute are unable to successfully communicate, it may be helpful to make that first call be to a mediator, instead. Mediators will encourage the parties to obtain all information that will assist them in making informed decisions, which of course, may include legal advice.

    Yet, from this approach, the involvement (time, energy, financial and emotional costs) is generally significantly less than it would be if the parties begin by retaining legal counsel.

    The term “mediation” is not clearly defined, nor is it understood in a common way by all professions – which can result in people not fully understanding mediation.

    From my perspective, mediation is ideal when it addresses the actual needs and interests of the parties.

    I once had an attorney say to me that mediation amounts to “throwing a person’s rights out the window.”

    As both a mediator and practicing litigation paralegal, it was particularly unsettling to hear this and does not express my approach to mediation by any means.

    Mediation is about having all the information needed to make important decisions. The primary difference between mediation and litigation is that in mediation, I assist a process of engagement and communication as opposed to an approach that separates and distances those in dispute.

    Thanks again for this great example. Seems like it would have been worth an initial call to a mediator before spending valuable time, energy and emotion (as well as a likely significant sum of money) before taking the matter to court.

    Debra Healy

  2. It’s amazing to me that the sides did not realize this case was a perfect scenario for mediation in the first instance. Mediation potentially could have ensured a quick, cost-effective means of settlement while also promising confidentiality in the future.

    This is clearly a breakdown in communication, and points out a clear flaw in legal training today: schools are not adequately training future lawyers in alternative dispute resolution techniques.

    I spoke with a lawyer at Texas Wesleyan’s 5th Annual Energy Symposium, and informed him that I was currently taking an ADR class. He was amazed that some schools were beginning to offer these classes, and told me that he wished those types of classes were offered when he went to school.

    It seems like these lawyers in the Martha Stewart-Macy’s- J.C. Penney case may soon be thinking the same thing!

  3. I am not so sure that the flaw is inadequate training of ADR in law schools; rather I think the flaw is inadequate training of relationship management. Working my 2L and 3L year has taught me that being a lawyer is arguably 95% relationship management: you have to manage the relationship with your client and, perhaps more importantly, you have to manage your client’s relationship with third parties. Justice Oing’s illustrative comment of, “Ultimately you guys played this out” seems all too often to be the case–lawyers have adopted a ‘shoot first and ask questions later’ mentality.

    Think of all the time, money, and judicial resource that could have been spared had Martha’s lawyer simply advised her to call Terry–a close friend of Martha’s–and discuss her J.C. Penny deal before acting. I would be willing to bet that Martha and Terry would have come to a pretty similar solution to the one they will (most likely) adopt as a result of the mediation process. After all, if mediation is a non-binding process which seeks to help parties achieve a collaborative solution, then why not adopt that strategy sooner and call it what is actually is–relationship management.

  4. I am a little surprised that Martha Stewart did not insist on calling Terry Lundgren, Macy’s CEO, again after her failed attempt at an initial phone call. This particuarly surprises me when Martha felt close enough to Terry to call him about the J.C. Penny deal herself, rather than letting someone else deliver the news. While I do believe that the lawyers should have taken steps to see if mediation would’ve been a possible option before a three week bench trial occured, I believe that the parties also have the ability to urge their lawyers to attempt mediation as well. Both parties are sophisticated business-minded individuals, and I am sure that this was not the first time that either party had been exposed to mediation. While the lawyers have a responsiblity to pursue options other than litigation, I believe that when parties are sophisticated business people, they also have a duty to ask their lawyers about the possiblity of pursuing other options. We need to not only educate lawyers about the availability of options beyond litigation, but we also need to educate the public about these opportunities as well. I believe that doing both will allow us, as a society to take greater strides in looking for solutions beyond the courtroom.

  5. It is amazing to think about how much money was wasted on this matter. Three weeks into testimony. Really? It shocks me that the attorneys allowed this matter to get so far before going to mediation. This may be a good illustration that lawyers need to take the counselor idea behind the profession a little more seriously. As has already been stated, these are business minded individuals and even if emotions were running high they still have an eye on the bottom line. I would hope that all the attorneys involved counseled their clients on the benefits, especially the cost efficient benefits, alternative dispute methods like negotiation and mediation can bring. Now that the parties have failed to reach a mediated agreement by their April 8 deadline it makes one wonder if the fact that they have come so far is what really kept them from being able to come to an agreement. If the parties had sat down together to begin with they likely could have come to an agreement before spending months of hating one another and allowing bad feelings to fester. Had they sat down and actually talked with one another at the beginning everyone would likely have been left in a much better position. Let’s face it, the only ones who are going to win in this matter now are the attorneys. With deep pocketed clients like Macys, JC Penny, and Martha Stewart, the attorneys know they are going to be paid. No matter how much it may end up costing. I only hope the attorneys in this case were thinking about what was in the best interest of their client and not about how much they could bill their clients for if they went to trial.

  6. The very fact that they did not speak after the partial phone call until court and then even seemingly being cordial just shows that mediation is an important part of litigation. Cooler heads prevail is a cliche for a reason, sometimes our own Ego gets in the way of reason and allowing for a simple discussion can save cost, time, and even manifest peace of mind. I believe that both parties will discover that their wants are not only capable, but even helpful for each other.

  7. I was very surprised to find out that Mr. Lundgren did not contact Martha at all after she told him the news of the deal with JCP. Given their longstanding relationship and the reliance the brands have on each other, it doesn’t seem like it was the best long term decision.

    I definitely think mediation is the superior route to go about this situation. These parties have a long standing relationship and I think its in the best interest of the companies to continue that relationship. Mediation is a great option when that is the case because the parties are less adversarial and come up with a solution together that furthers their joint interests. Even though they are currently having problems communicating and that can often seem like mediation won’t work, they have had a relationship in the past and the lack of communication was only temporary.

    In the mediation they are going to have to collaborate to come up with some creative options. If I were Mr. Lundgren, I probably would not have ceased contact with Martha. Instead, I would have tried to use this opportunity to emphasize the brand association her company has with Macy’s. I mean, its not like this is the first time the Martha Stewart brand has strayed from Macy’s. I have been a consumer of her products in other stores like Lowes, Home Depot, and Petsmart. I do understand, however, that JCP is currently revamping itself to become a competitor of a powerhouse like Macy’s. But even with that, I still tend to associate the Martha Stewart brand with Macy’s because of its longstanding relationship and I wouldn’t be surprised if many other consumers feel the same way.

  8. Mediation would be a great method for resolving this dispute. Especially because confidentiality seems like it would be important. If the parties were brought into mediation earlier I believe the hostile feeling between the two parties would be limited. Although, the judge must sufficiently evaluate the parties in a lawsuit before referring them to mediation, and it was only after the two parties had a productive conversation that mediation was referred. In my opinion regardless of when mediation was ordered these parties would have been at opposite ends of the spectrum. There are just some disputes where each party feels their own interests are correct and the other’s are not. I believe that mediation could be an effective means to resolve this conflict but it may take some time.

  9. Stephen brings up a good point. The legal timelines and laws, as they exist, need to be amended to preclude a court appearance or judge ruling when a mediation session is probably the better answer. However, this is easier said than done when

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