Kmart balks at Martha Stewart Living bills

Kmart Holding Corp. has filed a complaint against Martha Stewart Living Omnimedia Inc., claiming that the home furnishings maker has "double-counted" the royalties it is owed for sales of its merchandise in Kmart stores.

But Martha Stewart Living, whose namesake founder is currently on trial on obstruction of justice charges related to questionable stock trades, said on Friday that Kmart was trying to reduce its royalty payments.

Martha Stewart Living and Kmart signed a seven-year agreement in June 2001 to sell Martha Stewart Everyday brand home decorating, garden products and housewares in Kmart stores.

In the complaint, filed with the U.S. Bankruptcy Court in Chicago on Wednesday, Kmart acknowledged that it fell short of several minimum royalties for the year, but said Martha Stewart Living was "double-counting" royalty payments and demanding too much money.

Martha Stewart is "victimizing Kmart by forcing it to pay excessive royalties and advertising dollars based on an untenable interpretation of the agreement," Kmart said in the court filing.

Kmart has said repeatedly that the Martha Stewart brand was selling well, despite the legal woes of lifestyle trendsetter Martha Stewart.

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Martha Stewart Living said the Kmart complaint sought to reduce payments by about $4.5 million to $47.5 million for the year ended Jan. 31, 2004. Kmart was also seeking to reduce advertising spending, Martha Stewart Living said.

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Calls to Kmart and its attorney, Joseph Cohen, were not immediately returned.

Kmart filed for bankruptcy in Chicago in January 2002 and emerged in May 2003 with 600 fewer stores, far less debt and a new management team led by investor Edward Lampert.