377 F.3d 313 | 3rd Cir. | 2004
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 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;
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 Lorillard products if they
move, hide, or are not; otherwise make such matter inaccessible to
(iii) passing off, inducing, the court, if the or enabling others to sell or applicant were to pass off any merchandise proceed on notice to which is not genuine such person. Lorillard merchandise as and for genuine Lorillard
15 U.S.C. § 1116(d)(4). 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 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.”
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 close 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 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 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 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 b e f o r e i t — a r e 1 5 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, these are in effect two sides of the same [3] 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. 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 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. 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
NOTES
[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,