MYER has backed down at the last minute from a legal action that would have thrown rival David Jones's fashion week into chaos.
However, Myer will still pursue designer Kimberley Ellery for damages amid allegations she breached an exclusivity contract.
The stores have been battling over the designer and her label Ellery Land, which sells womenswear for between $600 and $3000.
Myer lodged an injunction against Ms Ellery with the Victorian Supreme Court on January 18 after it discovered she would be supplying David Jones this year. Myer had signed a three-year exclusivity deal with her in 2011. David Jones has put Ms Ellery's clothes on the cover of its 2013 catalogue and will showcase her clothes at this year's launch.
The relationship between Myer and Ms Ellery Land started to fray late last year after a business advisor discovered the label was losing money and needed to sell much higher volumes to Myer. Myer had arranged for Rebecca Judd to wear an Ellery dress at the spring racing carnival, but changed its mind, according to an affidavit by business advisor Chris Buchanan.
Instead, Ms Ellery arranged for Mischa Barton to wear one of her designs.
The final straw came with a suggestion by Myer's former general manager of merchandise Judy Coomber that Ms Ellery could increase sales by designing women's officewear. "I was shocked to hear that suggestion . . . Ellery is not a workwear brand," Ms Ellery said.
Attempts to reach Myer's chief executive, Bernie Brookes, led to an email that made Ms Ellery feel "physically sick". According to legal documents, he wrote: "I have no interest in meeting with you. I have many loyal suppliers and designers who I allocate my time to."
In court on Wednesday Myer said it would withdraw the injunction and instead proceed to trial, due to start on April 15.
Ms Ellery alleges "Myer was gaining more for their brand reputation ... than Ellery Land was receiving from the relationship."
Mr Buchanan stated in his affidavit that Myer bought $187,000 worth of stock in 2011-12, while David Jones committed to $600,000 of wholesale purchases in 2013, according to Ms Ellery's affidavit.
A spokeswoman for Myer said it complied with the contract. "We have an enforceable exclusivity agreement and will still be pursuing the injunction at the final trial. With that background, David Jones must decide whether it is appropriate to include Ellery in its fashion launch." On Wednesday Ms Ellery said she was pleased Myer had withdrawn its injunction, which would have kept her clothes out of David Jones until the trial ended.
David Jones confirmed it would be stocking the brand next month. Ms Ellery said David Jones was not paying her legal fees.