Stewart's company Martha Stewart Living Omnimedia already had a deal with department store Macy's when MSLO sold 16.6 percent of itself to rival J.C. Penney in December 2011, CNNMoney reported.
Macy's thought it had an exclusive deal with MSLO and filed lawsuits against J.C. Penney and MSLO.
When asked in court if having two stores in the same mall can carry her products, Stewart said, "They might have two houses."
The deal with J.C. Penney involved setting up MSLO kiosks or booths inside J.C. Penney stores. That way, it was reasoned, MSLO could circumvent any exclusivity spelled out in the deal with Macy's, because their contract allowed MSLO to open stores of its own.
J.C. Penney paid $38.5 million to buy its 16.6 percent of MSLO.
In the process, Martha Stewart lost a friend.
Macy's Chief Executive Officer Terry Lundgren said he considered Stewart a friend, but that he "was literally sick to my stomach" when he first heard of the J.C. Penney deal.
The two have not spoken since the deal was announced, CNNMoney reported.