Lorillard Tobacco Co. v. Bisan Food Corp.

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
7-28-2004
Lorillard Tobacco Co v. Bisan Food Corp
Precedential or Non-Precedential: Precedential
Docket No. 03-3151
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PRECEDENTIAL a Delaware corporation,
IN THE UNITED STATES COURT OF Appellant
APPEALS
FOR THE THIRD CIRCUIT v.
_______________
JOHN DOE CORP. d/b/a
NO. 03-3151 KRAUSZER’S;
SUBHASH PATEL
LORILLARD TOBACCO COMPANY
a Delaware corporation, _______________________________
Appellant On Appeal From The United States
District Court For The District Of New
v. Jersey
(D.C. Nos. 03-cv-03445, 03-cv-02132,
BISAN FOOD CORP. d/b/a NEW WAY 03-cv-02807)
SUPERMARKET, Honorable Katharine S. Hayden, District
ALI SAYAM, HAMED SAYAM, Judge
SAMMY J. ABDUL _______________________________
______________________ Argued June 15, 2004
Before: ALITO, SMITH and BECKER,
NO. 03-3160 Circuit Judges.
LORILLARD TOBACCO COMPANY
a Delaware corporation, (Filed July 28, 2004)
Appellant ERIC S. ARONSON (ARGUED)
Greenberg Traurig
v. 200 Campus Drive
P.O. Box 677
EDWIN LIQUOR STORE; Florham Park, NJ 07932
ANNA RODRIGUEZ
Attorney for Appellant
______________________
________________________
NO. 03-3161
OPINION OF THE COURT
LORILLARD TOBACCO COMPANY ________________________
1
brand of menthol cigarettes (and the
overall number two brand) in the United
BECKER, Circuit Judge.
States, the Newport brand has become a
This case concerns a District Court’s target of counterfeit cigarette makers. This
refusal to issue, at the behest of cigarette is a consolidated appeal of three cases
manufacturer Lorillard Tobacco Co. against three different defendants who
(“Lorillard”), ex parte orders directing the allegedly dealt in these counterfeit
seizure from three New Jersey retailers Newport cigarettes. Each of the cases was
(collectively, the “defendants”) of allegedly pursued separately in the District Court,
counterfeit Newport brand cigarettes, under though all three were heard by the same
the Trademark Counterfeiting Act of 1984 District Judge. The cases are, in every
(the “Act”), Pub. L. No. 98-473, Title II, ch. relevant sense, indistinguishable, and the
XV, 98 Stat. 2178, codified in relevant part at record in one case (against Edwin Liquor
15 U.S.C. § 1116(d). In ruling on Lorillard’s Store) establishes the reasons for the
applications for ex parte seizure, the District District Court’s refusal to issue the ex
Court declined to find, pursuant to 15 U.S.C. parte seizure orders requested in all three
§ 1116(d), either that (1) “an order other than cases. For the sake of completeness, we
an ex parte seizure order is not adequate to will briefly describe the procedural history
achieve the purposes of section 1114 [relating of the other cases as well.
to counterfeited trademarks],” or (2) the
A. Edwin Liquor Store
defendants or their associates “would destroy,
move, hide, or otherwise make [the Edwin Liquor Store (“Edwin”) is a
counterfeit] matter inaccessible to the court, retail liquor store located in a residential
if [Lorillard] were to proceed on notice.” neighborhood in Newark, New Jersey. On
Accordingly, the District Court refused to April 10, 2003, a Lorillard sales
issue the requested seizure orders, and for two representative, charged with, inter alia,
of the defendants issued broad temporary ensuring that fresh Lorillard cigarettes are
restraining orders (TROs), one of which is available for sale at retailers, discovered
rescribed infra note 2. Finding that the what he believed to be stale Newport
District Court correctly interpreted § 1114(d), products based on product codes imprinted
that its factual findings are not clearly on the packages at Edwin. He removed
erroneous, and that it did not abuse its four packs of cigarettes from the shelves,
discretion, we will affirm. and replaced them with fresh product.
Upon closer examination, the stale
prod ucts were determined to be
I. Facts and Procedural History counterfeits. They also either lacked valid
state tobacco tax stamps or were
Lorillard is the holder of several registered
improperly stamped under state law.
trademarks affiliated with the Newport brand
of mentholated cigarettes. As the number one Lorillard commenced this suit on May
2
12, 2003, by filing a complaint and making an
emergency ex parte application for a seizure
order and a TRO, and seeking a preliminary
(i) an order other than an
injunction. Though it agreed with Lorillard at
ex parte seizure order is not
oral argument that many of the statutory
adequate to achieve the
requirements for ex parte seizure had been
purposes of section 1114 of
met, the District Court declined to find that
this title;
“Defendants, or other persons acting in
concert with the defendants, may destroy,
(ii) the applicant has not
move, hide, or otherwise make the
publicized the requested
merchandise bearing a counterfeit of the
seizure;
Lorillard Marks inaccessible to the Court if
Lorillard were to proceed on notice to
(iii) the applicant is likely to
Defendants,” or that “[e]ntry of an order other
succeed in showing that the
than an ex parte seizure order will not
person against whom seizure
adequately achieve the purposes of 15 U.S.C.
would be ordered used a
§ 1114 to preserve to Lorillard its remedies
counterfeit mark in connection
for trademark infringement.” 1 The Court did,
with the sale, offering for sale, or
distribution of goods or services;
1
In full, the statute at issue reads: (iv) an immediate and irreparable
injury will occur if such seizure is
(4) The court shall not grant not ordered;
such an application [for ex
parte seizure] unless— (v) the matter to be seized will be
located at the place identified in
(A) the person obtaining an the application;
order under this subsection
provides the security (vi) the harm to the applicant of
determined adequate by the denying the application outweighs
court for the payment of such the harm to the legitimate interests
damages as any person may of the person against whom
be entitled to recover as a seizure would be ordered of
result of a wrongful seizure or granting the application; and
wrongful attempted seizure
under this subsection; and (vii) the person against
whom seizure would be
(B) the court finds that it ordered, or persons acting
clearly appears from specific in concert with such
facts that— person, would destroy,
3
however, grant a broad TRO pending a
preliminary injunction hearing. The TRO
directed Edwin to cease dealing in counterfeit
counterfeit, copy, or
Lorillard products and preserve the goods in
colorable imitation of the
question, along with all materials, packaging,
same in any manner likely
documents, and business records related to
to cause others to believe
any goods bearing genuine or counterfeit
that defendants’ products
Lorillard marks.2
are connected with
Lorillard or are genuine
move, hide, or Lorillard products if they
otherwise make such are not;
matter inaccessible to
the court, if the (iii) passing off, inducing,
applicant were to or enabling others to sell or
proceed on notice to pass off any merchandise
such person. which is not genuine
Lorillard merchandise as
15 U.S.C. § 1116(d)(4). and for genuine Lorillard
merchandise;
2
In full, Edwin and its proprietor, Anna
Rodriguez, “and any of their officers, agents (iv) making any false or
servants, employees, and attorneys and misleading statements
those persons in active concert or regarding Lorillard or its
participation with them who receive actual respective goods, or the
notice of this Order by personal service or relationship between
otherwise” (collectively referred to as Lorillard, on the one hand,
“Defendants” here and in the District and Defendants, on the
Court’s order) were temporarily restrained other hand;
from “directly or indirectly”:
(v) committing any other
(i) Using any reproduction, acts calculated to cause
counterfeit, copy, or colorable purchasers to believe the
imitation of the Lorillard Defendants’ products are
Marks in connection with the Lorillard products;
importation, sale, offering for
sale, or distribution of (vi) importing, shipping,
cigarettes in the United States; delivering, distributing,
holding for sale, returning,
(ii) using the Lorillard Marks transferring, or otherwise
or any reproduction, moving or disposing of in
4
The Court explained its refusal to issue
any manner such the ex parte seizure order at oral argument:
cigarettes falsely
I am constrained to conclude that
bearing one or more
Lorillard has failed to make the
of the Lorillard Marks or any
requisite showing that no other
reproduction, counterfeit,
method of preserving a state of
copy or colorable imitation of
affairs on which a court can
the same; and
provide effective final relief exists.
And this is the sole method, this
(vii) assisting, aiding, or
seizure order, this ex parte seizure
abetting any other person or
order is the sole method.
business entity in engaging or
performing any of the There is no showing of prior
activities referred to in the disobedience or destruction of
above paragraphs (i) through evidence on the part of Edwin
(vi); Liquor Store or its owner, its
registered owner Anna Rodriguez.
The defendants were further There is an assertion by Lorillard of
restrained from “selling, moving or the opportunity to destroy evidence,
otherwise disposing of any goods, boxes, but that is based upon Lorillard’s
labels, packaging or product bearing the assertions and not based upon a
Lorillard marks; . . . . [or] other than showing of this particular, to this
pursuant to a discovery instrument particular entity. Nor did I hear
propounded by Lorillard or an order of this from [counsel for Lorillard], who
Court, moving, destroying, or otherwise has been candid and forthright and
disposing of any goods, boxes, labels, clearly experienced in this area, that
packaging or other items or documents other merchants with which Edwin
bearing any reproduction, counterfeit, or Liquors might reasonably be
imitation of the Lorillard Marks[; or] combined [sic; compared?] have
removing, destroying or otherwise disposing destroyed evidence in the past.
of any business records or documents Merely that there is the opportunity
relating in any way to the manufacture, to do so.
importation, acquisition, purchase,
The District Court continued:
distribution, or sale of goods or
merchandise bearing any of the Lorillard
Marks or any reproduction, counterfeit or
imitation thereof.” Finally, the Defendants labels, products, etc. bearing the
were ordered to “allow[] a Lorillard Lorillard marks to determine their
representative to inspect all goods, boxes, authenticity.”
5
I do not find that an order other than a and replaced with fresh product. As with
seizure order is not adequate to the packs taken from Edwin, the stale
provide final and effective relief to prod ucts t u r n ed out, on cl o se r
Lorillard. . . . I do not find that there examination, to be counterfeit and lacking
has been any showing that the person valid tax stamps or improperly stamped
against whom the seizure is to be under state law.
ordered, “would destroy, move, hide,
Lorillard commenced suit on June 12,
or otherwise make such matter
2003, again by filing a complaint and
inaccessible to the court” if notice
making an emergency ex parte application
were given, other than the assertion
for a seizure order and a TRO, and seeking
that there exists the opportunity for
a preliminary injunction. As with the
such. . . . [I]t is really a failure to
Edwin case, the District Court agreed that
demonstrate, number one, of §
some statutory factors were met, but again
1116(d)(4)(B) that an order other than
declined to find that “Defendants, or other
a seizure order is not adequate. And
persons acting in concert with the
number seven, that the person against
defendants may destroy, move, hide, or
whom seizure would be ordered would
otherwise make the merchandise bearing a
destroy, move, hide, or otherwise
counterfeit of the Lorillard Marks
make such matter inaccessible to the
inaccessible to the Court if Lorillard were
court if notice were given. And
to proceed on notice to Defendants,” or
therefore, I am denying the application
that “[e]ntry of an order other than an ex
for a seizure order.
parte seizure order will not adequately
In short, the Court concluded that “more than achieve the purposes of 15 U.S.C. § 1114
anything else, the statute contains rock solid to preserve to Lorillard its remedies for
requirements that I find are not met here.” trademark infringement.”
Lorillard filed a notice of appeal, and moved
Although the District Court did not
to proceed ex parte on appeal, that is, without
hear oral argument in the Krauszer’s case,
giving Edwin notice of the appeal. The Court
as it had in the Edwin case, the order it
denied Lorillard’s motion.
entered in the Krauszer’s case—which
B. John Doe Corp. (Krauszer’s) granted a TRO similar to the one issued in
the Edwin case, but refused ex parte
John Doe Corp. (“Krauszer’s”) is a retail
seizure—explained that its ruling was
grocery store located in Wallington, New
“consistent with its analysis of the
Jersey. On May 28, 2003, a (different)
applicable statutory and case law set forth
Lorillard sales representative discovered at
in its bench ruling on May 13, 2003 in the
Krauszer’s what he believed to be stale
case of Lorillard Tobacco Co. v. Edwin
Newport products, again based on product
Liquors [sic], Docket No. 03-2131.” We
codes imprinted on the packages. Five packs
understand this to mean that the District
of cigarettes were removed from the shelves,
Court declined, as it had in the Edwin
6
case, to make the factual findings necessary parte seizure order, and asked this Court
under the statute to issue an ex parte seizure for a stay of the District Court’s order to
order. While this appeal has been pending, proceed against Bisan on notice. We
the parties have voluntarily dismissed the denied the stay, and Lorillard subsequently
action as settled. withdrew its request for an ex parte TRO
against Bisan, so as to avoid giving them
C. Bisan Food Corp.
notice of the litigation before the District
Bisan Food Corp d/b/a New Way Court. Lorillard has since served Bisan
Supermarket (“Bisan”) is an independent with certain materials (its brief and
retail grocery store located in Union City, appendices) in connection with the present
New Jersey. On June 26, 2003, the same appeal.
Lorillard sales representative that serviced
Edwin, again acting on product codes,
discovered what he believed to be stale II. Jurisdiction
Newport products at New Way Supermarket.
We have an independent obligation at
Ten packs of cigarettes were removed from
the threshold to examine whether we have
the shelves and replaced with fresh product.
appellate jurisdiction. Gov’t of V.I. v.
As in the other two cases, closer examination
Hodge, 359 F.3d 312, 317 (3d Cir. 2004);
revealed counterfeit goods that were
Vuitton v. White, 945 F.2d 569, 571 (3d
improperly stamped under state law or
Cir. 1991). In Vuitton, we held that we
without valid tax stamps.
have statutory appellate jurisdiction under
Lorillard commenced this suit on July 23, 28 U.S.C. § 1292(a)(1) over interlocutory
2003, again by filing a complaint and making appeals from orders denying ex parte
an emergency ex parte application for a seizure. 945 F.2d at 571-74; but see In re
seizure order and a TRO, and seeking a Lorillard Tobacco Co., 370 F.3d 982 (9th
preliminary injunction. The District Court, Cir. 2004) (holding that the denial of an ex
having by this time adjudicated the Edwin parte seizure order is not immediately
and Krauszer’s matters, in which Lorillard appealable). We are, of course, bound by
had “rel[ied] on virtually identical arguments, Vuitton here. See Third Circuit IOP 9.1
briefs, and supporting certifications,” (“Policy of Avoiding Intra-Circuit Conflict
determined that “a prompt appearance by both of Precedent”). In Vuitton, we also noted
sides is of assistance to the Court in that the apparent mootness of the dispute
evaluating the extent of relief to which did not deprive us of Article III
plaintiff is entitled.” Thus the District Court jurisdiction. “Now that notice has been
did not issue a TRO, and directed Lorillard to given, a seizure order cannot be granted ex
proceed against Bisan on notice (i.e., by parte and may well be ineffective.
serving a summons and complaint upon Bisan Nevertheless, we agree with Vuitton that
pursuant to Fed. R. Civ. P. 4). Lorillard filed while this case might otherwise be moot, it
a notice of appeal from the denial of the ex falls within the exception from the
7
mootness doctrine for cases ‘capable of counterfeiting is a serious and widespread
repetition, yet evading review.’” Vuitton, 945 problem for it; for example, Lorillard
F.2d at 571 n.1 (quoting Weinstein v. represents that by the beginning of 2004 it
Bradford, 423 U.S. 147, 149 (1975)). had filed, in the District of New Jersey
alone, some sixteen different complaints
Though we did not discuss the point at
against different defendants seeking ex
length in Vuitton, one could argue that the
parte seizure relief. Thus we conclude that
history of the relationship between the parties
the appeals fall within the “capable of
there was critical to our conclusion that the
repetition, yet evading review” exception
dispute was “capable of repetition”: Vuitton,
to mootness. See Globe Newspaper Co. v.
a designer of high quality handbags and
Superior Court, 457 U.S. 596, 602-03
luggage, had repeatedly pursued the same
(1982); Praxis Props., Inc. v. Colonial
defendants, street vendors of counterfeit
Sav. Bank, S.L.A., 947 F.2d 49, 61-62 (3d
Vuitton merchandise. See Vuitton, 945 F.2d
Cir. 1991); Publicker Indus., Inc. v.
at 570. There is no such prior history
Cohen, 733 F.2d 1059, 1065-66 (3d Cir.
between Lorillard and any of the
1984); Luther v. Molina, 627 F.2d 71, 73-
defendants—Lorillard does not allege that,
74 (7th Cir. 1980).
prior to the events at issue here, it knew or
even suspected any of the defendants of One final jurisdictional matter
dealing in counterfeit cigarettes—and commands our attention. As we note
consequently, we have no basis to suspect above, during the pendency of this appeal,
that this dispute is likely to be repeated Lorillard settled its case against
among these same parties. Krauszer’s. In many circumstances
settlement would moot a pending appeal.
In the present ex parte procedural posture,
See Local No. 8-6, Oil, Chem. & Atomic
however, what matters with respect to
Workers Int’l Union v. Missouri, 361 U.S.
mootness is whether the party seeking the
363 (1960). This rule of thumb does not
order can demonstrate that it is likely to
apply, however, when a case falls within
request such orders in the future against
the “capable of repetition, yet evading
some defendant (not necessarily the same
review” exception to mootness. See Int’l
defendant). At bottom,“capable of repetition,
Union, United Auto. Workers v. Dana
yet evading review” is a pragmatic exception
Corp, 697 F.2d 718, 721 (6th Cir. 1983)
that tempers the mootness doctrine in
(en banc). Thus we also have jurisdiction
situations where denial of appellate review
over the appeal in the Krauszer’s case.
works a hardship on the parties. When there
is only one party exposed to such
hardship—the party seeking the ex parte
III. The Merits
order—it seems needlessly inflexible to say
that that party must demonstrate that it will In Vuitton, we articulated the standard
again confront the same defendants. Lorillard of review over a district court’s denial of a
has amply demonstrated that cigarette motion for ex parte seizure under 15
8
U.S.C. § 1116(d). The standard is the same The two statutory elements at issue
used for review of an order granting or here—the elements that the District Court
denying a preliminary injunction: “We pointedly declined to find on the record
review a district court’s ruling . . . only to before it— are 15 U .S.C . §
determine if there has been (1) an abuse of 1116(d)(4)(B)(i) and (vii), which require a
discretion, (2) an error of law, or (3) a clear court issuing an ex parte seizure order to
mistake of fact.” Vuitton, 945 F.2d at 574 find, respectively, that “an order other than
(quoting Hoxworth v. Blinder, Robinson & an ex parte seizure order is not adequate to
Co., 903 F.2d 186, 198 (3d Cir. 1990)). Here, achieve the purposes of section 1114 of
the form and substance of the District Court’s this title” and that “the person against
ruling places our review in the first and third whom seizure would be ordered, or
categories: Did the District Court abuse its persons acting in concert with such person,
discretion, or were its factual findings clearly would destroy, move, hide, or otherwise
erroneous? 3 make such matter inaccessible to the court,
if the applicant were to proceed on notice
to such person.” Though not identical,
3 these are in effect two sides of the same
Lorillard argues strenuously that the
coin: “Proceed[ing] on notice” (i.e., not ex
District Court’s comments at oral argument
parte) will usually entail serving the
on the Senate Report accompanying the Act
defendant with a TRO and proceeding to
led to an erroneous legal conclusion that the
an adversary hearing on a preliminary
Act contains a “one free bite” exception,
injunction. A finding upon emergency
that is, that ex parte seizure is not available
application that proceeding on notice
absent a showing of prior disobedience of a
would result in the destruction, removal, or
court order by the defendant. Prior
hiding of the counterfeit matter is arguably
disobedience is surely highly probative of
tantamount to a finding that the defendant
some of the statutory elements—for
will not comply with a TRO, which in turn
example, § 1116(d)(4)(B)(vii) requires a
would suggest that nothing less than ex
determination that “the person against
parte seizure is required to vindicate the
whom seizure would be ordered . . . would
trademark holder’s rights.
destroy, move, hide [etc.]” the counterfeit
matter. But there is no statutory basis for a We pose the issue in this way because
per se requirement that prior disobedience it gets us to the fundamental factual
be shown to obtain an ex parte seizure inquiry the District Court focused on, and
order. At all events, we do not understand its finding that we review for clear error:
the District Court to have relied on such a Could the defendants be trusted to comply
legal conclusion in reaching the with the order of a Federal District Court?
determination it did; as our excerpts from Finding no evidence that the defendants
oral argument make clear, Lorillard was
ultimately denied relief on factual and
discretionary grounds, not on a legal ground.
9
could not be trusted, the District Court defendants were street vendors who sold
concluded that they could, and that they counterfeit Vuitton merchandise. Even
should be presumed to be willing to abide by setting aside that Vuitton had previously
a TRO. The presumption can run no other secured a permanent injunction against
way, for absent extenuating circumstances, some of the defendants in the new action,
we generally do not assume that parties will Vuitton, 945 F.2d at 570, the unmistakable
disobey a court order. Cf., e.g., Intermetal lesson from prior proceedings was that
Mexicana, S.A. v. Ins. Co. of N. Am., 866 F.2d these street vendors would not even appear
71, 78 (3d Cir. 1989) (“It is reasonable to in court after being served, let alone
expect that a valid court order will be comply with a TRO, id. at 575. Moreover,
obeyed.”). Moreover, fundamental fairness though the Vuitton Court did not discuss it,
dictates that presumptions generally should common sense suggests that street
not run against the absent party in an ex parte vendors, being itinerant and lacking
proceeding. The Act directs the court to significant assets, have relatively little to
consider whether the record discloses reasons fear from the District Court’s contempt
to rebut this presumption. powers.
The District Court followed this course. The record before the District Court in
It expressly noted that “Lorillard has failed to the cases now before us supports (though
make the requisite showing that no other does not compel) the opposite inferences:
method of preserving a state of affairs on First, there is no evidence that these
which a court can provide effective final defendants have previously failed to
relief exists.” It observed that Lorillard could appear in court when required; indeed,
have put in direct evidence that the there has been no prior legal action at all
defendants had not complied with other court against these defendants. Second, there is
orders, and stated that, on the record before it, not even the suggestion that small
“there is no showing of prior disobedience or independent retailers with fixed places of
evidence of destruction on the part of Edwin business are as a class unlikely to comply
Liquor Store or its owner, its registered owner with a court order. Third, these
Anna Rodriguez.” The District Court further defendants—incorporated businesses with
suggested that Lorillard could have shown inventories, assets, and a fixed physical
that the defendants were comparable to other presence—have much to lose if held in
retailers who had flouted court orders, but contempt. Lorillard can point to no direct
again observed that, on the record before it, evidence in the record to the contrary.
Lorillard had not shown that “other merchants Especially in light of the Act’s emphatic
with which Edwin Liquors might reasonably command that the elements supporting ex
be combined [sic; compared?] have destroyed parte seizure “clearly appear[] from
evidence in the past.” specific facts,” 15 U.S.C. § 1116(d)(4)(B),
the District Court’s factual findings were
Herein lies a critical difference between
not clearly erroneous.
this case and Vuitton. In Vuitton, the
10
One argument from Lorillard— perhaps its seemingly expose them to the criminal
strongest—remains. The cigarettes recovered sanctions of the Unfair Cigarette Sales
from the defendants’ stores did not have the Act, N.J. Stat. Ann. 56:7-20(b), in addition
state tobacco tax stamps required by New to their possible federal criminal liability
Jersey law—the stamps were either missing under 18 U.S.C. § 2320 for trafficking in
or invalid. As Lorillard points out, authentic counterfeit goods, and possible violations
cigarettes distributed through legitimate of criminal laws against illegal importation
channels will have valid tax stamps, but and tax evasion. This, Lorillard contends,
counterfeit cigarettes, distributed through a gives the defendants a strong incentive to
black market, do not. This difference destroy or otherwise dispose of the
provides part of the profit motive for retailers cigarettes if they learned (by receiving
to sell counterfeit cigarettes: The untaxed, notice of Lorillard’s civil trademark
counterfeit cigarettes can be procured at a infringement suit) that they had been
lower cost than taxed, authentic cigarettes, discovered.
but the untaxed, counterfeit cigarettes will be
There is much force to this argument.
sold at the same price as the taxed, authentic
The District Court, however, rejected it,
product—at the statewide mandatory
commenting that “[t]here is an assertion by
minimum price established by New Jersey’s
Lorillard of the opportunity to destroy
Unfair Cigarette Sales Act, N.J. Stat. Ann.
evidence, but that is based upon Lorillard’s
56:7-18 to -38.4 The defendants’ actions
assertions and not based upon a showing
of this particular, to this particular entity.”
As this determination is more discretionary
4
Strictly speaking, the Unfair Cigarette and predictive than it is factual, we review
Sales Act provides a mandatory minimum the District Court’s decision for abuse of
price for sales by distributors to retailers, discretion rather than for clear error.
currently $51.03 per carton (200 cigarettes) Though the District Court could have more
for distributor-delivered cigarettes, of which fully articulated its reluctance to accept
$20.50 represents the tax paid by the this particular line of argument, it did not
distributor to the state. Competition among abuse its discretion in rejecting Lorillard’s
distributors likely stabilizes distributor sales position, especially in light of the
prices at this level, and competition among otherwise weak factual record.
many outlets for retail purchase of cigarettes
Two reasons support our conclusion.
likely keeps retail prices at a level just
First, Lorillard’s argument establishes an
above the distributor price. The ultimate
incentive, but the statute requires
effect is a stabilization of retail prices
something more certain—for example, one
within a narrow range, allowing distributors
and retailers of untaxed cigarettes to reap
the $20.50 in unpaid taxes—on top of the
difference in manufacturer price between counterfeit cigarettes. The profit margin,
authentic and (presumably lower-cost) and motive, are thus enormous.
11
of the requirements is met only by a finding to exercise its sound judicial discretion.
that the defendant “would destroy, move, hide For the foregoing reasons, we conclude
[etc.]” the counterfeit matter. § that the District Court did not commit an
1116(d )(4)(B)(vii) (emphasis added). error of law, make clearly erroneous
Second, if we found an abuse of discretion factual findings, or abuse its discretion in
here, Lorillard’s argument would become a refusing to issue ex parte seizure orders in
per se rule that ex parte seizure must be these three cases. The orders of the
ordered when counterfeit cigarettes are District Court will therefore be affirmed.
involved. Indeed, arguably anyone who is
intentionally selling any counterfeit goods
has—by virtue of the threat of criminal
sanction from the criminal trademark
counterfeiting statute, 18 U.S.C. § 2320—an
incentive to dispose of those counterfeit
goods. In that light, Lorillard’s incentive-
based argument could logically be extended
to cover all trademark counterfeiting, which
would render most of the specific factors of §
1116(d)(4) a nullity. We therefore must reject
Lorillard’s argument that the District Court
abused its discretion in rejecting its incentive-
based argument.
IV. Conclusion
On the face of the statute it is clear that ex
parte seizure is not to be ordered as a matter
of course. In this respect, our opinion in
Vuitton represents the extreme case, as we
expressly noted: “If we were to conclude that
a § 1116 seizure order would be inappropriate
in this case, we would be hard pressed to
image a case in which such an order would be
appropriate.” 945 F.2d 575-76. The cases
before us now are not the extreme case, and
the District Court was not required to order
an ex parte seizure. Rather, it was obliged to
scrutinize the record, which Lorillard had the
obligation to develop; to make findings; and
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