                                                                                                                           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Precedential or Non-Precedential: Precedential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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