BUSINESS
06/16/2014 05:57 pm ET

Judge Skewers J.C. Penney For 'Colossal And Abject' Failure

ASSOCIATED PRESS

In a devastating 63-page ruling issued Monday, a New York state court judge ripped J.C. Penney for its botched attempt to lure Martha Stewart away from Macy's.

Judge Jeffrey Oing, who sits in Manhattan, tore into J.C. Penney's former chief executive Ron Johnson and his management team, labeling them as both incompetent and immature. "J.C. Penney, its board of directors and its top executives were publicly ridiculed and humiliated as a consequence of this trial," Oing wrote in the ruling. "Their grand strategy was a colossal and abject retail failure."

The judge wrote that Johnson -- who was fired in April 2013, before the trial ended -- was a "casualty of his own hubris."

The case arose over a 2011 partnership between J.C. Penney and Martha Stewart Living to sell the domestic diva's wares. Macy's took the two companies to court, arguing that the agreement breached its contract with Martha Stewart Living to exclusively carry a Martha Stewart branded line of home goods. A tense trial in 2013 saw Stewart herself back on the witness stand. Macy's reached a settlement with Martha Stewart Living earlier this year.

Oing ruled on Monday that J.C. Penney had indeed interfered with the agreement between Macy's and Martha Stewart.

Last October, J.C. Penney and Martha Stewart altered their contract to eliminate the sale of homewares that Macy's was contesting. Oing said J.C. Penney may be liable for damages regarding some designs that Martha Stewart made for the retailer.

"While we appreciate the Court’s efforts in this multi-year litigation, we respectfully disagree with and are disappointed by this outcome," J.C. Penney said in a statement to The Huffington Post, adding that it plans to battle any award of damages to Macy's. "We are also considering our options for appeal."

Beyond J.C. Penney's management missteps, the judge particularly criticized a series of emails sent between J.C. Penney executives in the last few days before signing the Martha Stewart deal. Oing called the remarks of Johnson and his senior team "nothing short of sophomoric." In the emails, senior executives snickered about the trouble they were supposedly giving Macy's and its CEO, Terry Lundgren.

Oing pointed to this email from Johnson to Executive Vice President Steve Lawrence:

jcpenney email

And this exchange between Johnson and company President Mike Francis:

jcpenney lawsuit

"Such childish behavior displayed by these individuals is unbecoming of top executives of a major corporation, and is nothing to be proud of, particularly given the stakes," the judge said.

Under siege from rising competition, J.C. Penney hired Johnson away from Apple in 2011 to turn the century-old department store around. Trumpeted as the company's savior, Johnson implemented a full transformation of J.C. Penney, changing prices, killing coupons and discounts, and morphing the store into a mini-mall of branded boutique shops.

The results were catastrophic. After a 17-month tenure defined by plummeting sales and disgruntled employees, Johnson was replaced by his predecessor, Mike Ullman. Since then, J.C. Penney has purged many of Johnson's initiatives and parted ways with his cohort of senior executives.

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