Opinion ID: 187362
Heading Depth: 1
Heading Rank: 10

Heading: Point-of-sale displays

Text: The district court ordered each Defendant with a retail merchandising programwhereby retailers agree to use the manufacturer's in-store advertisingto design countertop and header displays containing the corrective statements and require retailers who participate in such program to display them for two years. Philip Morris, 449 F.Supp.2d at 939-40. The freestanding countertop displays must be at least thirty inches high and eighteen inches wide, and retailers must place them on their counters within the line-of-sight of any customer who is standing in line for the register. Id. at 946. The header displays must be of at least equivalent size to Defendants' other brand advertising headers and placed in an equivalent position with any other brand advertising header at the top of the cigarette display case. Id. at 939-40, 947. Under the injunctive order, each Defendant must suspend from its Retail Merchandising Program for a period of one year any retailer that fails to comply with this provision. Id. at 940. Retailers affected by this ordernone of whom were involved in the litigation in any waydid not receive notice of this remedy or an opportunity to present evidence or arguments to the district court regarding the impact the injunction would have on their businesses. Nor does it appear that the district court independently considered the impact of this program on affected retailers. In their appellate brief as amicus curiae and in affidavits filed with Defendants' motion for a stay of final judgment pending appeal, the National Association of Convenience Stores represents that this injunction will cost retailers substantial revenue. The convenience stores indicate that countertop space is the most important space within a convenience store, and the loss of one square foot of countertop space can cost the industry $82 million in sales per year. Yet if the retailers choose not to carry the countertop displays, Defendants must suspend them from their retail merchandising program for one year, which one retailer asserted would cost ten to fifteen percent of his convenience stores' annual profits. See Hartman Aff. at 2. Section 1964(a) explicitly cautions that in crafting an injunctive remedy the court must mak[e] due provision for the rights of innocent persons. 18 U.S.C. § 1964(a). We believe that the district court exceeded its authority by failing to consider the rights of retailers and crafting an injunction that works a potentially serious detriment to innocent persons not parties to or otherwise heard in the district court proceedings. Even though not explicitly bound by the terms of an injunction on pain of contempt, third parties may be so adversely affected by an injunction as to render it improper. See, e.g., Cook Inc. v. Boston Scientific Corp., 333 F.3d 737, 744 (7th Cir.2003). We therefore vacate the order regarding point-of-sale displays and remand for the district court to evaluate and mak[e] due provision for the rights of innocent persons, either by abandoning this part of the remedial order or by crafting a new version reflecting the rights of third parties. 18 U.S.C. § 1964(a). Of course, any such remedy the district court imposes on remand can only affect contracts entered after the injunctive order issues. See Nat'l Wildlife Fed'n v. Burford, 835 F.2d 305, 315 (D.C.Cir.1987) (explaining an injunction's validity due to the fact that it does not affect the contractual rights of third parties). In addition, we agree with Defendants that the injunction appears to order each Defendant separately to require the same retail store to display substantively identical, but separate, signs. The government concedes that, despite the language of the order, the district court could not have intended to require the burden of multiple duplicative displays at each retail store. We therefore direct the district court, if it concludes that some form of a point-of-sale display injunction is still appropriate after considering the rights of third parties and existing contracts, to clarify that its order does not require duplicative displays.