LORILLARD TOBACCO COMPANY a Delaware corporation, Appellant v. BISAN FOOD CORP. d/b/a New Way Supermarket, Ali Sayam, Hamed Sayam, Sammy J. Abdul Lorillard Tobacco Company a Delaware corporation, Appellant v. Edwin Liquor Store; Anna Rodriguez Lorillard Tobacco Company a Delaware corporation, Appellant v. John Doe Corp. d/b/a Krauszer‘s; Subhash Patel.
No. 03-3151, 03-3160, 03-3161
United States Court of Appeals, Third Circuit
Filed July 28, 2004
377 F.3d 313
ALITO, SMITH and BECKER, Circuit Judges. BECKER, Circuit Judge.
Argued June 15, 2004.
I would affirm this circuit‘s line of MPPAA cases by following the precedent set in Barker & Williamson. I would hold that judgment against one control group member shall be deemed judgment against all, construe the Fund‘s claim as an action to enforce the 1995 judgment, vacate the summary judgment against the Fund in this proceeding, and remand the case to the District Court for further proceedings consistent with this opinion.25
Notes
(4) The court shall not grant such an application [for ex parte seizure] unless—
(A) the person obtaining an order under this subsection provides the security determined adequate by the court for the payment of such damages as any person may be entitled to recover as a result of a wrongful seizure or wrongful attempted seizure under this subsection; and
(B) the court finds that it clearly appears from specific facts that—
(i) an оrder other than an ex parte seizure order is not adequate to achieve the purposes of section 1114 of this title;
(ii) the applicant has not publicized the requested seizure;
(iii) the applicant is likely to succeed in showing that the person against whom seizure would be ordered used a counterfeit mark in connection with the sale, offering for sale, or distribution of goods or services;
(iv) an immediate and irreparable injury will occur if such seizure is not ordered;
(v) the matter to be seized will be located at the place identified in the application;
(vi) the harm to the applicant of dеnying the application outweighs the harm to the legitimate interests of the person against whom seizure would be ordered of granting the application; and
(vii) the person against whom seizure would be ordered, or persons acting in concert with such person, would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the applicant were to proceed on notice to such person.
(i) Using any reproduction, counterfeit, copy, or colorable imitation of the Lorillard Marks in connection with the importation, sale, offering for sale, or distribution of cigarettes in the United States;
(ii) using the Lorillard Marks or any reproduction, counterfeit, copy, or colorable imitation of the same in any manner likely to cause others to believe that defendants’ products are connected with Lorillard or are genuine Lorillard products if they are not;
(iii) passing off, inducing, or enabling others to sell or pass off any merchandise which is not genuine Lorillard merchandise as and for genuine Lorillard merchandise;
(iv) making any false or misleading statements regarding Lorillard or its respective goods, or the relationship between Lorillard, on the one hand, and Defendants, on the other hand;
(v) committing any other acts calculated to cause purchasers to believe the Defendants’ products are Lorillard products;
(vi) importing, shipping, delivering, distributing, holding for sale, returning, transferring, or otherwise moving or disposing of in any manner such cigarettes falsely bearing one or more of the Lorillard Marks or any reproduction, counterfeit, copy or colorable imitation of the same; and
(vii) assisting, aiding, or abetting any other person or business entity in engaging or performing any of the activities referred to in the above paragraphs (i) through (vi);
The defendants were further restrained from “selling, moving or otherwise disposing of any goods, boxes, labels, packaging or product bearing the Lorillard marks; ... [or] other than pursuant to a discovery instrument propounded by Lorillard or an order of this Court, moving, destroying, or оtherwise disposing of any goods, boxes, labels, packaging or other items or documents bearing any reproduction, counterfeit, or imitation of the Lorillard Marks[; or] removing, destroying or otherwise disposing of any business records or documents relating in any way to the manufacture, importation, acquisition, purchase, distribution, or sale of goods or merchandise bearing any of the Lorillard Marks or any reproduction, counterfeit or imitation thereof.” Finally, the Defendants were ordered to “allow[] a Lorillard representative to inspect all goods, boxes, labels, products, etc. bearing the Lorillard marks to determine their authenticity.”
Before ALITO, SMITH and BECKER, Circuit Judges.
BECKER, Circuit Judge.
This case concerns a District Court‘s refusal to issue, at the behest of cigarette manufacturer Lorillard Tobacco Co. (“Lorillard“), ex parte orders directing the seizure from three New Jersey retailers (collectively, the “defendants“) of allegedly counterfeit Newport brand cigarettes, under the Trademark Counterfeiting Act of 1984 (the “Act“),
I. Facts and Procedural History
Lorillard is the holder of several registered trademarks affiliated with the Newport brand of mentholated cigarettes. As the number one brand of menthol cigarettes (and the overall number two brand) in the United States, the Newport brand has become a target of counterfeit cigarette makers. This is a consolidated appeal of three cases against three different defendants who allegedly dealt in these counterfeit Newport cigarettes. Each of the cases was pursued separately in the District Court, though all three were heard by the same District Judge. The cases are, in еvery relevant sense, indistinguishable, and the record in one case (against Edwin Liquor Store) establishes the reasons for the District Court‘s refusal to issue the ex parte seizure orders requested in all three cases. For the sake of completeness, we will briefly describe the procedural history of the other cases as well.
A. Edwin Liquor Store
Edwin Liquor Store (“Edwin“) is a retail liquor store located in a residential neighborhood in Newark, New Jersey. On April 10, 2003, a Lorillard sales representative, charged with, inter alia, ensuring that fresh Lorillard cigarettes are available for sale at retailers, discovered what he believed to be stale Newport products based on product codes imprinted on the packages at Edwin. He removed four packs of cigarettes from the shelves, and replaced them with fresh product. Upon closer examination, the stale products were determined to be counterfeits. They also either lacked valid state tobacco tax stamps or were improperly stamped under state law.
Lorillard commenced this suit on May 12, 2003, by filing a complaint and making an emergency ex parte application for a seizure order and a TRO, and seeking a preliminary injunction. Though it agreed with Lorillard at oral argument that many of the statutory requirements for ex parte seizure had been met, the District Court declined to find that “Defendants, or other persons acting in concert with the defendants, may destroy, move, hide, or otherwise make the merchandise bearing a counterfeit of the Lorillard Marks inaccessible to the Court if Lorillard were to proceed on notice to Defendants,” or that “[e]ntry of an order other than an ex parte seizure order will not adequately achieve the purposes of
The Court explained its refusal to issue the ex parte seizure order at oral argument:
I am constrained to conclude that Lorillard has failed to make the requisite showing that no other method of preserving a state of affairs on which a court can provide effective final relief exists. And this is the sole method, this seizure order, this ex parte seizure order is the sole method.
There is no showing of prior disobedience or destruction of evidence on the part of Edwin Liquor Store or its owner, its registered owner Anna Rodriguez. There is an assertion by Lorillard of the opportunity to destroy evidence, but
that is based upon Lorillard‘s assertions and not based upon a showing of this particular, to this particular entity. Nor did I hear from [counsel for Lorillard], who has been candid and forthright and clearly experienced in this area, that other merchants with which Edwin Liquors might reasonably be combined [sic; compared?] have destroyed evidence in the past. Merely that there is the opportunity to do so.
The District Court continued:
I do not find that an order other than a seizure order is not adequate to provide final and effective relief to Lorillard.... I do not find that there has been any showing that the person against whom the seizure is to be ordered, “would destroy, move, hide, or otherwise make such matter inaccessible to the court” if notice were given, other than the assertion that there exists the opportunity for such.... [I]t is really a failure to demonstrate, number one, of
§ 1116(d)(4)(B) that an order other than a seizure order is not adequate. And number seven, that the person against whom seizure would be ordered would destroy, move, hide, or otherwise make such matter inaccessible to the court if notice were given. And therefore, I am denying the application for a seizure order.
In short, the Court concluded that “more than anything else, the statute contains rock solid requirements that I find are not met here.” Lorillard filed a notice of appeal, and moved to proceed ex parte on appeal, that is, without giving Edwin notice of the appeal. The Court denied Lorillard‘s motion.
B. John Doe Corp. (Krauszer‘s)
John Doe Corp. (“Krauszer‘s“) is a retail grocery store located in Wallington, New Jersey. On May 28, 2003, a (different) Lorillard sales representativе discovered at Krauszer‘s what he believed to be stale Newport products, again based on product codes imprinted on the packages. Five packs of cigarettes were removed from the shelves, and replaced with fresh product. As with the packs taken from Edwin, the stale products turned out, on closer examination, to be counterfeit and lacking valid tax stamps or improperly stamped under state law.
Lorillard commenced suit on June 12, 2003, again by filing a complaint and making an emergency ex parte application for a seizure order and a TRO, and seeking a preliminаry injunction. As with the Edwin case, the District Court agreed that some statutory factors were met, but again declined to find that “Defendants, or other persons acting in concert with the defendants may destroy, move, hide, or otherwise make the merchandise bearing a counterfeit of the Lorillard Marks inaccessible to the Court if Lorillard were to proceed on notice to Defendants,” or that “[e]ntry of an order other than an ex parte seizure order will not adequately achieve the purposes of
Although the District Court did not hear oral argumеnt in the Krauszer‘s case, as it had in the Edwin case, the order it entered in the Krauszer‘s case—which granted a TRO similar to the one issued in the Edwin case, but refused ex parte seizure—explained that its ruling was “consistent with its analysis of the applicable statutory and case law set forth in its bench ruling on May 13, 2003 in the case of Lorillard Tobacco Co. v. Edwin Liquors [sic], Docket No. 03-2131.” We understand this to mean that the District Court declined, as it had in the Edwin case, to make the factual findings necessary under the statute to issue an ex parte seizure order. While this appeal has been pending, the parties
C. Bisan Food Corp.
Bisan Food Corp. d/b/a New Way Supermarket (“Bisan“) is an independent retail grocery store located in Union City, New Jersey. On June 26, 2003, the same Lorillard sales representative that serviced Edwin, again acting on product codes, discovered what he believed to be stale Newport products at New Way Supermarket. Ten packs of cigarettes were removed from the shelves and replaced with fresh product. As in the other two cases, closer examination revealed counterfeit goods that were improperly stamped under state law or without valid tax stamps.
Lorillard commenced this suit on July 23, 2003, again by filing a complaint and making an emergency ex parte application for a seizure order and a TRO, and seeking a preliminary injunction. The District Court, having by this time adjudicated the Edwin and Krauszer‘s matters, in which Lorillard had “rel[ied] on virtually identical arguments, briefs, and supporting certifications,” determined that “a prompt appearance by both sides is of assistance to the Court in evaluating the extent of relief to which plaintiff is entitled.” Thus the District Court did not issue a TRO, and directed Lorillard to proceed against Bisan on notice (i.e., by serving a summons and complaint upon Bisan pursuant to
II. Jurisdiction
We have an independent obligation at the threshold to examine whether we have appellate jurisdiction. Gov‘t of V.I. v. Hodge, 359 F.3d 312, 317 (3d Cir.2004); Vuitton v. White, 945 F.2d 569, 571 (3d Cir.1991). In Vuitton, we held that we have statutory appellate jurisdiction undеr
Though we did not discuss the point at length in Vuitton, one could argue that the history of the relationship between the parties there was critical to our conclusion that the dispute was “capable of repetition“: Vuitton, a designer of high quality handbags and luggage, had repeatedly pursued the same defendants, street vendors of counterfeit Vuitton merchandise. See Vuitton, 945 F.2d at 570. There is no such prior history between Lorillard and any of the defendants—Loril-
In the present ex parte procedural posture, however, what matters with respect to mootness is whether the party seeking the order can demonstrate that it is likely to request such orders in the future against some defendant (not necessarily the same defendant). At bottom, “capable of repetition, yet evading review” is a pragmatic exception that tempers the mootness doctrine in situations where denial of appellate rеview works a hardship on the parties. When there is only one party exposed to such hardship—the party seeking the ex parte order—it seems needlessly inflexible to say that that party must demonstrate that it will again confront the same defendants. Lorillard has amply demonstrated that cigarette counterfeiting is a serious and widespread problem for it; for example, Lorillard represents that by the beginning of 2004 it had filed, in the District of New Jersey alone, some sixteen different complaints against different defendants seeking ex parte seizure relief. Thus we conclude that the appeals fall within the “capable of repetition, yet evading review” exception to mootness. See Globe Newspaper Co. v. Superior Court, 457 U.S. 596, 602-03 (1982); Praxis Props., Inc. v. Colonial Sav. Bank, S.L.A., 947 F.2d 49, 61-62 (3d Cir.1991); Publicker Indus., Inc. v. Cohen, 733 F.2d 1059, 1065-66 (3d Cir.1984); Luther v. Molina, 627 F.2d 71, 73-74 (7th Cir.1980).
One final jurisdictional matter commands our attention. As we note above, during the pendency of this appeal, Lorillard settled its case against Krauszer‘s. In many circumstances settlement would moot a pending appeal. See Local No. 8-6, Oil, Chem. & Atomic Workers Int‘l Union v. Missouri, 361 U.S. 363 (1960). This rule of thumb does not apply, however, when a case falls within the “capable of repetition, yet evading review” exception to mootness. See Int‘l Union, United Auto. Workers v. Dana Corp., 697 F.2d 718, 721 (6th Cir.1983) (en banc). Thus we also have jurisdiction over the appeal in the Krauszer‘s case.
III. The Merits
In Vuitton, we articulated the standard of review over a district court‘s denial of a motion for ex parte seizure under
We pose the issue in this way because it gets us to the fundamental factual inquiry the District Court focused on, and its finding that we review for clear error: Could the defendants be trusted to comply with the ordеr of a Federal District Court? Finding no evidence that the defendants could not be trusted, the District Court concluded that they could, and that they should be presumed to be willing to abide by a TRO. The presumption can run no other way, for absent extenuating circumstances, we generally do not assume that parties will disobey a court order. Cf., e.g., Intermetal Mexicana, S.A. v. Ins. Co. of N. Am., 866 F.2d 71, 78 (3d Cir.1989) (“It is reasonable to expect that a valid court order will be obeyed.“). Moreover, fundamental fairness dictates that presumptions generally should not run against the absent party in an ex parte proceeding. The Act directs the court to consider whether the record discloses reasons to rebut this presumption.
The District Court followed this course. It expressly noted that “Lorillard has failed to make the requisite showing that no other method of preserving a state of affairs on which a court can provide effective final relief exists.” It observed that Lorillard could have put in direct evidence that the defendants had not complied with other court orders, and stated that, on the record before it, “there is no showing of prior disobedience or evidence of destruction on the part of Edwin Liquor Store or its owner, its registered owner Anna Rodriguez.” The District Court further suggested that Lоrillard could have shown that the defendants were comparable to other retailers who had flouted court orders, but again observed that, on the record before it, Lorillard had not shown that “other merchants with which Edwin Liquors might reasonably be combined [sic; compared?] have destroyed evidence in the past.”
Herein lies a critical difference between this case and Vuitton. In Vuitton, the defendants were street vendors who sold counterfeit Vuitton merchandise. Even setting aside that Vuitton had previously secured a permanent injunction against some of the defendants in the new action,
The record before the District Court in the cases now before us supports (though does not compel) the opposite inferences: First, there is no evidence that these defendants have previously failed to appear in court when required; indeed, there has been no prior legal action at all against these defendants. Second, there is not еven the suggestion that small independent retailers with fixed places of business are as a class unlikely to comply with a court order. Third, these defendants—incorporated businesses with inventories, assets, and a fixed physical presence—have much to lose if held in contempt. Lorillard can point to no direct evidence in the record to the contrary. Especially in light of the Act‘s emphatic command that the elements supporting ex parte seizure “clearly appear[] from specific facts,”
One argument from Lorillard—pеrhaps its strongest—remains. The cigarettes recovered from the defendants’ stores did not have the state tobacco tax stamps required by New Jersey law—the stamps were either missing or invalid. As Lorillard points out, authentic cigarettes distributed through legitimate channels will have valid tax stamps, but counterfeit cigarettes, distributed through a black market, do not. This difference provides part of the profit motive for retailers to sell counterfeit cigarettes: The untaxed, counterfeit cigarettes can be procured at a lower cost than taxed, authentic cigarettes, but the untaxed, counterfeit сigarettes will be sold at the same price as the taxed, authentic product—at the statewide mandatory minimum price established by New Jersey‘s Unfair Cigarette Sales Act,
There is much force to this argument. The District Court, however, rejected it, commenting that “[t]here is an assertion by Lorillard of the opportunity to destroy evidence, but that is based upon Lorillard‘s assertions and not based upon a showing of this particular, to this particular entity.” As this determination is more discretion-
Two reasons support our conclusion. First, Lorillard‘s argument establishes an incentive, but the statute requires something more certain—for example, one of the requirements is met only by a finding that the defendant ”would destroy, move, hide [etc.]” the counterfeit matter.
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 сase, as we expressly noted: “If we were to conclude that a
BECKER
CIRCUIT JUDGE