2004 Decisions

Opinions of the United

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Precedential or Non-Precedential: Precedential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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1

PRECEDENTIAL

IN THE UNITED STATES COURT OF

APPEALS

FOR THE THIRD CIRCUIT

_______________

NO. 03-3151

LORILLARD TOBACCO COMPANY

a Delaware corporation,

 Appellant

v.

BISAN FOOD CORP. d/b/a NEW WAY

SUPERMARKET,

ALI SAYAM, HAMED SAYAM,

SAMMY J. ABDUL

______________________

NO. 03-3160

LORILLARD TOBACCO COMPANY

a Delaware corporation,

 Appellant

v.

EDWIN LIQUOR STORE;

ANNA RODRIGUEZ

______________________

NO. 03-3161

LORILLARD TOBACCO COMPANY

a Delaware corporation,

 Appellant

v.

JOHN DOE CORP. d/b/a

KRAUSZER’S;

SUBHASH PATEL

_______________________________

On Appeal From The United States

District Court For The District Of New

Jersey

(D.C. Nos. 03-cv-03445, 03-cv-02132,

03-cv-02807)

Honorable Katharine S. Hayden, District

Judge

_______________________________

Argued June 15, 2004

Before: ALITO, SMITH and BECKER, 

 Circuit Judges.

(Filed July 28, 2004)

ERIC S. ARONSON (ARGUED)

Greenberg Traurig

200 Campus Drive

P.O. Box 677

Florham Park, NJ 07932

Attorney for Appellant

________________________

OPINION OF THE COURT

________________________
2

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”), Pub. L. No. 98-473, Title II, ch.

XV, 98 Stat. 2178, codified in relevant part at

15 U.S.C. § 1116(d). In ruling on Lorillard’s

applications for ex parte seizure, the District

Court declined to find, pursuant to 15 U.S.C.

§ 1116(d), either that (1) “an order other than

an ex parte seizure order is not adequate to

achieve the purposes of section 1114 [relating

to counterfeited trademarks],” or (2) the

defendants or their associates “would destroy,

move, hide, or otherwise make [the

counterfeit] matter inaccessible to the court,

if [Lorillard] were to proceed on notice.”

Accordingly, the District Court refused to

issue the requested seizure orders, and for two

of the defendants issued broad temporary

restraining orders (TROs), one of which is

rescribed infra note 2. Finding that the

District Court correctly interpreted § 1114(d),

that its factual findings are not clearly

erroneous, and that it did not abuse its

discretion, we will affirm.

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 every

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
3

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 15 U.S.C.

§ 1114 to preserve to Lorillard its remedies

for trademark infringement.” 1 The Court did,

 

1

In full, the statute at issue reads:

(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 order 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

denying 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,
4

however, grant a broad TRO pending a

preliminary injunction hearing. The TRO

directed Edwin to cease dealing in counterfeit

Lorillard products and preserve the goods in

question, along with all materials, packaging,

documents, and business records related to

any goods bearing genuine or counterfeit

Lorillard marks.2

move, hide, or

otherwise make such

matter inaccessible to

the court, if the

applicant were to

proceed on notice to

such person.

15 U.S.C. § 1116(d)(4).

 

2

In full, Edwin and its proprietor, Anna

Rodriguez, “and any of their officers, agents

servants, employees, and attorneys and

those persons in active concert or

participation with them who receive actual

notice of this Order by personal service or

otherwise” (collectively referred to as

“Defendants” here and in the District

Court’s order) were temporarily restrained

from “directly or indirectly”:

(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
5

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:

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 otherwise

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.”
6

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 representative 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

prod ucts 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 preliminary 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 15 U.S.C. § 1114

to preserve to Lorillard its remedies for

trademark infringement.”

Although the District Court did not

hear oral argument 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
7

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 have voluntarily dismissed the

action as settled.

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 Fed. R. Civ. P. 4). Lorillard filed

a notice of appeal from the denial of the ex

parte seizure order, and asked this Court

for a stay of the District Court’s order to

proceed against Bisan on notice. We

denied the stay, and Lorillard subsequently

withdrew its request for an ex parte TRO

against Bisan, so as to avoid giving them

notice of the litigation before the District

Court. Lorillard has since served Bisan

with certain materials (its brief and

appendices) in connection with the present

appeal.

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 under

28 U.S.C. § 1292(a)(1) over interlocutory

appeals from orders denying ex parte

seizure. 945 F.2d at 571-74; but see In re

Lorillard Tobacco Co., 370 F.3d 982 (9th

Cir. 2004) (holding that the denial of an ex

parte seizure order is not immediately

appealable). We are, of course, bound by

Vuitton here. See Third Circuit IOP 9.1

(“Policy of Avoiding Intra-Circuit Conflict

of Precedent”). In Vuitton, we also noted

that the apparent mootness of the dispute

did not deprive us of Article III

jurisdiction. “Now that notice has been

given, a seizure order cannot be granted ex

parte and may well be ineffective.

Nevertheless, we agree with Vuitton that

while this case might otherwise be moot, it

falls within the exception from the
8

mootness doctrine for cases ‘capable of

repetition, yet evading review.’” Vuitton, 945

F.2d at 571 n.1 (quoting Weinstein v.

Bradford, 423 U.S. 147, 149 (1975)).

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—Lorillard does not allege that,

prior to the events at issue here, it knew or

even suspected any of the defendants of

dealing in counterfeit cigarettes—and

consequently, we have no basis to suspect

that this dispute is likely to be repeated

among these same parties.

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 review

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 15
9

U.S.C. § 1116(d). The standard is the same

used for review of an order granting or

denying a preliminary injunction: “We

review a district court’s ruling . . . only to

determine if there has been (1) an abuse of

discretion, (2) an error of law, or (3) a clear

mistake of fact.” Vuitton, 945 F.2d at 574

(quoting Hoxworth v. Blinder, Robinson &

Co., 903 F.2d 186, 198 (3d Cir. 1990)). Here,

the form and substance of the District Court’s

ruling places our review in the first and third

categories: Did the District Court abuse its

discretion, or were its factual findings clearly

erroneous?3

The two statutory elements at issue

here—the elements that the District Court

pointedly declined to find on the record

before it— a r e 15 U .S.C . §

1116(d)(4)(B)(i) and (vii), which require a

court issuing an ex parte seizure order to

find, respectively, that “an order other than

an ex parte seizure order is not adequate to

achieve the purposes of section 1114 of

this title” and that “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.” Though not identical,

these are in effect two sides of the same

coin: “Proceed[ing] on notice” (i.e., not ex

parte) will usually entail serving the

defendant with a TRO and proceeding to

an adversary hearing on a preliminary

injunction. A finding upon emergency

application that proceeding on notice

would result in the destruction, removal, or

hiding of the counterfeit matter is arguably

tantamount to a finding that the defendant

will not comply with a TRO, which in turn

would suggest that nothing less than ex

parte seizure is required to vindicate the

trademark holder’s rights.

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 order of a Federal District Court?

Finding no evidence that the defendants

 

3Lorillard argues strenuously that the

District Court’s comments at oral argument

on the Senate Report accompanying the Act

led to an erroneous legal conclusion that the

Act contains a “one free bite” exception,

that is, that ex parte seizure is not available

absent a showing of prior disobedience of a

court order by the defendant. Prior

disobedience is surely highly probative of

some of the statutory elements—for

example, § 1116(d)(4)(B)(vii) requires a

determination that “the person against

whom seizure would be ordered . . . would

destroy, move, hide [etc.]” the counterfeit

matter. But there is no statutory basis for a

per se requirement that prior disobedience

be shown to obtain an ex parte seizure

order. At all events, we do not understand

the District Court to have relied on such a

legal conclusion in reaching the

determination it did; as our excerpts from

oral argument make clear, Lorillard was

ultimately denied relief on factual and

discretionary grounds, not on a legal ground.
10

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 Lorillard 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,

Vuitton, 945 F.2d at 570, the unmistakable

lesson from prior proceedings was that

these street vendors would not even appear

in court after being served, let alone

comply with a TRO, id. at 575. Moreover,

though the Vuitton Court did not discuss it,

common sense suggests that street

vendors, being itinerant and lacking

significant assets, have relatively little to

fear from the District Court’s contempt

powers.

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 even 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,” 15 U.S.C. § 1116(d)(4)(B),

the District Court’s factual findings were

not clearly erroneous.
11

One argument from Lorillard—perhaps its

strongest—remains. The cigarettesrecovered

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 cigarettes 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, N.J. Stat. Ann.

56:7-18 to -38.4 The defendants’ actions

seemingly expose them to the criminal

sanctions of the Unfair Cigarette Sales

Act, N.J. Stat. Ann. 56:7-20(b), in addition

to their possible federal criminal liability

under 18 U.S.C. § 2320 for trafficking in

counterfeit goods, and possible violations

of criminal laws against illegal importation

and tax evasion. This, Lorillard contends,

gives the defendants a strong incentive to

destroy or otherwise dispose of the

cigarettes if they learned (by receiving

notice of Lorillard’s civil trademark

infringement suit) that they had been

discovered.

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 discretionary

and predictive than it is factual, we review

the District Court’s decision for abuse of

discretion rather than for clear error.

Though the District Court could have more

fully articulated its reluctance to accept

this particular line of argument, it did not

abuse its discretion in rejecting Lorillard’s

position, especially in light of the

otherwise weak factual record.

Two reasons support our conclusion.

First, Lorillard’s argument establishes an

incentive, but the statute requires

somethingmore certain—for example, one

 

4

Strictly speaking, the Unfair Cigarette

Sales Act provides a mandatory minimum

price for sales by distributors to retailers,

currently $51.03 per carton (200 cigarettes)

for distributor-delivered cigarettes, of which

$20.50 represents the tax paid by the

distributor to the state. Competition among

distributors likely stabilizes distributor sales

prices at this level, and competition among

many outlets for retail purchase of cigarettes

likely keeps retail prices at a level just

above the distributor price. The ultimate

effect is a stabilization of retail prices

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

authentic and (presumably lower-cost)

counterfeit cigarettes. The profit margin,

and motive, are thus enormous.
12

of the requirements is met only by a finding

that the defendant “would destroy, move, hide

[etc.]” the counterfeit matter. §

1116(d)(4)(B)(vii) (emphasis added).

Second, if we found an abuse of discretion

here, Lorillard’s argument would become a

per se rule that ex parte seizure must be

ordered when counterfeit cigarettes are

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 incentivebased 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 incentivebased 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

to exercise its sound judicial discretion.

For the foregoing reasons, we conclude

that the District Court did not commit an

error of law, make clearly erroneous

factual findings, or abuse its discretion in

refusing to issue ex parte seizure orders in

these three cases. The orders of the

District Court will therefore be affirmed.