In Re Lorillard Tobacco Company

370 F.3d 982, 70 U.S.P.Q. 2d (BNA) 1865, 2004 U.S. App. LEXIS 11082, 2004 WL 1238132

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 7, 2004
• Docket: 03-16553
• Status: Published

Opinions

McKEOWN, Circuit Judge:

This case arises from the district court’s denial of Lorillard Tobacco Company’s application for an ex parte order to seize purportedly counterfeit cigarettes. Upon Lorillard’s timely appeal, we find ourselves confronted with a novel issue of appellate jurisdiction. To date, only one court has faced the question whether a seizure order authorized under the trademark law, 15 U.S.C. § 1116(d), is an injunction, and whether an interlocutory order denying seizure is thus appealable under 28 U.S.C. § 1292(a)(1). See Vuitton v. White, 945 F.2d 569, 572 (3d Cir.1991) (holding appellate jurisdiction proper). Careful analysis of the language and legislative history of the statute that authorizes seizure leads us to the opposite conclusion. Because the district court’s denial of a motion for an ex parte seizure order is neither an automatically appealable literal refusal of an injunction nor a practical denial of ultimate injunctive relief, see Carson v. American Brands, Inc., 450 U.S. 79, 83-84, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981), we lack jurisdiction to consider Lorillard’s appeal.

I. BACKGROUND

Lorillard Tobacco Company manufactures and holds several registered trademarks associated with Newport cigarettes. Lorillard sued John Doe,¹ the operator of a Nevada retail store, for federal trademark violations under 15 U.S.C. §§ 1114 and 1125, alleging that Doe sold cigarettes bearing counterfeit Newport trademarks. Lorillard sought an ex parte order pursuant to 15 U.S.C. § 1116(d)(1) to seize and impound cigarette packages and other evidence of counterfeiting believed to be in Doe’s possession. The district court denied the motion.

II. APPELLATE JURISDICTION

Before we entertain Lorillard’s arguments on the merits, we must have jurisdiction over the appeal. As a general rule, appellate jurisdiction is limited to “final decisions of the district courts of the United States.” 28 U.S.C. § 1291. Recognizing that this is not a case where the district court’s ruling “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment,” Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 89 L.Ed. 911 (1945), Lorillard argues that 28 U.S.C. § 1292(a)(1) allows us to decide its appeal from the district court’s order. We disagree.

Section 1292(a)(1) vests the courts of appeals with jurisdiction over “appeals from ... [ijnterlocutory orders of the district courts of the United States ... granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions.” The touchstone of § 1292(a)(1) is an injunction order. If the § 1116(d) ex parte seizure order is an “injunction,” the district court’s denial of Lor-illard’s motion falls under the umbrella of this statute, and thus is appealable as of right. See Shee Atika v. Sealaska Corp., 39 F.3d 247, 249 (9th Cir.1994) (holding that an order denying a request for an injunction is reviewable on appeal, and declining to impose any further test for ap-pealability). We must “therefore look to the statute before us and ask [whether] Congress intended” the ex parte seizure order to be an injunction. Almendarez-Torres v. United States, 523 U.S. 224, 228, 118 S.Ct. 1219, 140 L.Ed.2d 350 (1998).

A. THE EX PARTE SEIZURE STATUTE

We begin our analysis with the text of 15 U.S.C. § 1116(d)(1)(A),² the statute that authorizes federal courts to grant ex parte seizure orders:³

In the case of a civil action arising under [15 U.S.C. § 1114(l)(a) (creating a right to civil remedies for trademark infringement) ] ... with respect to a violation that consists of using a counterfeit mark ..., the court may, upon ex parte application, grant an order under subsection (a) of this section pursuant to this subsection providing for the seizure of goods and counterfeit marks involved in [a violation involving use of counterfeit marks] and the means of making such marks, and records documenting the manufacture, sale, or receipt of things involved in such violation.

15 U.S.C. § 1116(d)(1)(A). Under this provision, a district court may issue an ex parte seizure order in civil actions alleging a trademark infringement that involves the use of a counterfeit mark. See 15 U.S.C. § 1114(“Any person who shall ... use in commerce any ... counterfeit ... of a registered mark ... shall be liable in a civil action by the registrant for the remedies hereinafter provided.”).

The statutory reference to “granting] an order under subsection (a) of this section” refers to 15 U.S.C. § 1116(a). Section 1116(a) vests federal district courts with the “power to grant injunctions” and the power to enforce”[a]ny such injunction granted upon hearing, after notice to the defendant.” 15 U.S.C. § 1116(a) (emphasis added). The “injunction” language in subsection (a) is the only possible source of support in the statute for the argument that the subsection (d) seizure order is an injunction.⁴ See Vuitton, 945 F.2d at 572 (reasoning that because § 1116(d) states that a court may “grant an [ex parte seizure] order under subsection (a),” the power to do so must arise from subsection (a) (emphasis added)).

In our view, subsection (d) itself creates the power of the court to grant an ex parte seizure order. The words “under subsection (a)” were included simply to specify that this power is intended to apply to civil proceedings in equity for trademark violations — and that § 1116(d) was not meant to enable the court to grant an ex parte seizure order under other circumstances. After careful consideration of the relationship between subsections (a) and (d), we are not persuaded that this single statutory cross-reference can transform an ex parte order into an appealable injunction.

Although there may be some superficial appeal to the Vuitton court’s interpretation, its approach yields awkward results. Subsection (a) authorizes enforcement only of injunctions issued following notice and a hearing — which, by definition, excludes ex parte seizure orders. Thus, in order to conclude that the seizure order is a subsection (a) injunction, we would have to attribute to Congress the illogical intent to empower courts to grant unenforceable injunctions. Because we decline to take such a dim view of the legislative endeav- or, we conclude that the plain language of § 1116 does not support Lorillard’s argument that an ex parte seizure order is an injunction.

B. LEGISLATIVE HISTORY

Even if we viewed the cross-reference to subsection (a) as introducing an element of ambiguity into the statute, which we doubt, the legislative history of 15 U.S.C. § 1116(d) clarifies that Congress did not intend to create an injunction.⁵ The House Report on the Trademark Counterfeiting Act of 1984 is explicit: “A seizure is not the same as an injunction, which generally restrains the defendant from acting in a certain way.” H.R.Rep. No. 98-997, at 15 (1984).⁶

The Senate Report is in accord, explaining that “at the hearing held after the seizure, ... the court may retain custody of the [seized] goods, even if the plaintiff fails to meet some other requirement for issuance of an injunction .... ” S.Rep. No. 98-526, at 17 (1984), U.S. Code Cong. & Admin.News at 3627, 3643 (emphasis added). The report pointedly distinguishes between the seizure order and the injunction, and contemplates that the seizure order issues before the court decides whether an injunction is proper. If the seizure order were itself an injunction, the italicized language would make little sense.

Finally, although the legislative history also reveals that the procedures for ex parte orders “are largely derived from the existing requirements of rule 65 of the Federal Rules of Civil Procedure,” Joint Statement on Trademark Counterfeiting Legislation, 130 Cong. Rec. H12,076, H12,-080 (1984), this characteristic is, at best, neutral in divining congressional intent. Rule 65 governs both preliminary injune-tions and temporary restraining orders, and the latter are generally not appealable as of right. Fed.R.Civ.P. 65(b); Religious Tech. Ctr. v. Scott, 869 F.2d 1306, 1308 (9th Cir.1989). Adaptation of Rule 65’s procedures does not somehow transform the ex parte order into an appealable injunction.

Taken together, the House and Senate Reports indicate that Congress intended to create something sui generis — and not an injunction — when it enacted 15 U.S.C. § 1116(d).

C. THE NATURE OF AN “INJUNCTION”

Although the language of 15 U.S.C. § 1116 and its legislative history plainly show that Congress intended to distinguish the ex parte seizure order from an injunction, it is useful to consider whether the seizure order nevertheless bears the indicia of an injunction. The target of our inquiry is well-defined by this circuit’s case law. “The three fundamental characteristics of an injunction are that it is (l)‘directed to a party,’ (2) ‘enforceable by contempt,’ and (3)’designed to accord or protect some or all of the substantive relief sought by a complaint in more than [temporary] fashion.” Orange County, Cal. Airport Hotel Assocs. v. Hongkong & Shanghai Banking Corp., 52 F.3d 821, 825 (9th Cir.1995) (quoting 16 Charles Alan Wright et ah, Federal Practice and Procedure § 3922, at 29 (1977)) (bracketed word changed from “preliminary” to “temporary” to reflect the 1996 edition of Federal Practice and Procedure; internal quotation marks omitted); see also Gon v. First State Ins. Co., 871 F.2d 863, 865 (9th Cir.1989).⁷

The ex parte seizure order misses the mark on all three criteria of an injunction. It is not “directed to a party.” Instead, the order commands action from a federal or local law enforcement officer. See 15 U.S.C. § 1116(d)(9). It is not enforceable by contempt. See 15 U.S.C. § 1116(a) (permitting contempt proceedings to enforce only injunctions “granted upon hearing, after notice to the defendant”).⁸ And finally, it does not protect “the substantive relief sought by [the plaintiff] in more than [temporary] fashion.” Orange County, 52 F.3d at 825.

Numerous courts have explained this last prong in greater detail. See, e.g., Henrietta D. v. Giuliani, 246 F.3d 176, 182 (2d Cir.2001) (“To qualify as an ‘injunction’ under § 1292(a)(1), a district court order must grant at least part of the ultimate, coercive relief sought by the moving party.”); Santana Prods., Inc. v. Compression Polymers, Inc., 8 F.3d 152, 154 (3d Cir.1993) (“[T]o be injunctive for purposes of section 1292, the order must grant or deny a party the ultimate relief sought by it.”). The words of Judge Friendly are particularly illuminating:

We think it better ... to continue to read § 1292(a)(1) as relating to injunctions which give or aid in giving some or all of the substantive relief sought by a complaint ... and not as including restraints or directions in orders concerning the conduct of the parties or their counsel, unrelated to the substantive issues in the action, while awaiting trial .... [S]uch a construction provides a better fit with the language of the statute ... and with the policy considerations which led Congress to create this exception to the federal final judgment rule.

Int’l Prods. Corp. v. Koons, 325 F.2d 403, 406-07 (2d Cir.1963).

The purpose of the seizure order is to preserve the evidence necessary to bring trademark counterfeiters to justice. 130 Cong. Rec. H12,080 (“The ex parte seizure order is intended to thwart th[e] bad faith tactic” of “destroying] or transfer[ring] counterfeit merchandise when a day in court is on the horizon.”). It is thus more like an order “concerning the conduct of the parties ... while awaiting trial” than one giving any “of the substantive relief sought by a complaint.” Int’l Prods. Corp., 325 F.2d at 406. Indeed, common sense reveals that the seizure order does not afford any party substantive relief to which it may be entitled under law. The plaintiff “has no proprietary interest in” the seized goods. H.R.Rep. No. 98-997, at 16. The court’s possession of the goods no more vindicates the plaintiffs trademark rights than would the counterfeiter’s own “bad faith tactic” of destruction; both actions keep the defective goods off the market. Nor does the court’s possession give rise to any judicial prohibition on further counterfeiting. The plaintiff has no legal interest in having the court possess the defendant’s property; seizure simply protects the integrity of the evidence in pending civil action.

At best, the procedural attributes of the order are more akin to those of a temporary restraining order, not an injunction. But, even the imperfection of that analog underscores the difference between an ex parte seizure order and injunctive relief. For example, both operate within strict temporal limits and- require a showing of “immediate and irreparable injury.” Compare 15 U.S.C. § 1116(d)(4)(B)(i), (iv) and § 1116(d)(10) with Fed.R.Civ.P. 65(b). Importantly, however, a temporary restraining order is not classified as 'an injunction; nor, under long-standing precedent, is it generally subject to appeal. See Religious Tech. Ctr., 869 F.2d at 1308. Thus, even characterizing the seizure order as a variation on a temporary restraining order would not bring it within the appealability provisions of § 1292(a)(1).⁹

Accordingly, we hold that the ex parte seizure order authorized by 15 U.S.C. § 1116(d) is not an injunction, and that denial of the order is therefore not automatically appealable under 28 U.S.C. § 1292(a)(1).

D. “PRACTICAL EFFECT” DOCTRINE

Deciding that the district court’s order did not literally refuse an injunction does not end our jurisdictional inquiry. A practical construction of § 1292(a)(1) is appropriate in the limited circumstances where the “interlocutory order of the district court might have a serious, perhaps irreparable, consequence,” and it can be “effectually challenged only by immediate appeal.” Carson, 450 U.S. at 83-84, 101 (internal quotation marks omitted). Applying this test, we look to the facts of Lorillard’s case to determine if “1) the order has the practical effect of entering or refusing to enter an injunction; 2) the order has ‘serious, perhaps irreparable consequences’; and 3) immediate appeal is the only way to challenge the order.” Or. Natural Res. Council, Inc. v. Kantor, 99 F.3d 334, 337 (9th Cir.1996). Lorillard has not shown that its claim satisfies any aspect of the Carson test. As a consequence, § 1292(a)(1) does not allow us to exercise appellate jurisdiction.

Although we recognize the value and importance of ex parte orders in preserving evidence and we acknowledge that trademark holders view the potential destruction of evidence as irreparable, the reality is that denial of an ex parte seizure order is not tantamount to refusing to enter an injunction. Indeed, in the face of a denial of an ex parte seizure order, the applicant may still proceed with a temporary restraining order with notice and/or a request for preliminary injunction. (Here, in fact, Lorillard filed a combined motion for ex parte seizure and temporary restraining order.) The trademark holder is not forced to proceed empty handed and without any infringing goods, as presumably it had sufficient evidence to advance in good faith its initial ex parte application.

As a practical matter, the trademark plaintiff is more likely to secure preservation of the evidence by proceeding with immediate options before the district court rather than awaiting the lengthy appeal process involving docketing, briefing, argument, and the issuance of an opinion from a circuit court. Before this case reached the appellate level, the district court expressed concern with the timeliness of the application because four weeks had already passed since the cigarettes were purchased. By the time we heard argument, even with an expedited appeal, the evidence was almost seven months old.

In undertaking this jurisdictional analysis, we observe that our result accords with strong policy concerns in favor of respecting the “integrity of the congressional policy against piecemeal appeals.” Switzerland Cheese Ass’n. v. E. Horne’s Mkt., Inc., 385 U.S. 23, 25, 87 S.Ct. 193, 17 L.Ed.2d 23 (1966). Indeed, the denial of a motion for an ex parte seizure order raises the very spectre the final judgment rule seeks to eliminate. Appeals of such denials occur so early in a case that they are likely to come with an anemic record, as in this case. Because the nature of the ex parte motion is to catch the defendant by surprise, only the plaintiff will have had the opportunity to present its side of the case. These circumstances add up to ensure a one-sided and ill-developed record before the appellate court.¹⁰ Without a full record and without the benefit of an adversarial proceeding, the appellate court would be in a particularly poor position to pass on the propriety of the district court’s exercise of discretion. Thus, it is particularly true in this context that applying a loose construction of § 1292(a)(1) only “encourages unsuccessful assertions of jurisdiction, wasting precious appellate resources, burdening adverse parties, and perhaps diverting effort from expeditious continuation of trial court proceedings.” 16 Federal Practice and Procedure § 3922.1, at 94.

Because the purpose of the seizure order is to ensure that certain evidence makes it to trial, it is wise to regard with caution the potential intrusion into the heart of the district court judge’s traditional domain. To suggest that it is somehow unfair to deny the ex parte seizure motion without the benefit of immediate review impugns the role of the district court. The § 1116(d) order is an extraordinary mechanism for pre-notice seizure of allegedly infringing goods. The statute sets out specific standards. If the applicant cannot meet those standards, immediate seizure is foreclosed but the ultimate remedy is preserved. We do not take lightly the concern that evidence may evaporate upon notice to a party. But notice is the norm in our courts. The district court has other vehicles available to address disappearing evidence, including sanctions for spoliation of evidence.¹¹ In our view, it is better here to refrain from interfering with the “district judge’s orders advancing a case to trial ... by the cumbersome method of appeal before he has approached the stage of adjudication.” Switzerland Cheese, 385 U.S. at 25 n. 3, 87 S,Ct. 193.

Accordingly, the appeal is DISMISSED for lack of jurisdiction.

1 . All proceedings so far have been ex parte and filed under seal. Because publication of the defendant’s identity at this stage arguably could prejudice Lorillard’s case, the defendant is designated as "John Doe” or "Doe.”

2 . The "language, structure, subject matter, context, and history” are all "factors that typically help ... illuminate[a statute's] text.” Almendarez-Torres, 523 U.S. at 228, 118 S.Ct. 1219. In undertaking our statutory analysis, we of course first turn to the text of the statute. See, e.g., Castillo v. United States, 530 U.S. 120, 124, 120 S.Ct. 2090, 147 L.Ed.2d 94 (2000) (looking first to "the statute’s literal language”). Here, it is particularly important to heed the Supreme Court's guidance that we should look not only to the text of the statute but to the overall structure as well. Id. ("The statute's structure clarifies any ambiguity inherent in its literal language.”).

3 . Following Shee Atika, we are compelled to take on the analysis of whether the appeal "fall[s] directly within the meaning of” 28 U.S.C. § 1292(a)(1). 39 F.3d at 249. The law of this circuit does not allow us to avoid deciding whether a seizure order is an "injunction” by denying jurisdiction on other grounds. Compare Shee Atika, id., with General Motors Corp. v. Gibson Chem. & Oil Corp., 786 F.2d 105, 108 (2d Cir.1986) (declining to "resolve this contest of equivalences” between the parties over whether the seizure order is more like an injunction or an attachment, and holding that jurisdiction over the appeal of the grant of a seizure order was not proper under 28 U.S.C. § 1292(a)(1) because the appellant failed to meet its burden of satisfying the Second Circuit's additional test for appealability).

4 .It is true that the Third Circuit has additionally suggested that because section 1116 is entitled "Injunctive-relief,” the seizure order described in subsection (d) must be a form of "injunctive relief.” Vuitton, 945 F.2d at 572. We find this indiscriminate adherence to the section title unpersuasive. Following the Vuitton court's logic, the other subjects addressed in § 1116, such as the procedural requirements described by subsection (b) ("Transfer of certified copies of court papers”) and subsection (c) ("Notice to Director”), would also be injunctive relief. Courts have generally eschewed reliance on legislative labels to the exclusion of the statutory language. See, e.g., Bhd. of R.R. Trainmen v. Balt. & Ohio R.R., 331 U.S. 519, 528, 67 S.Ct. 1387, 91 L.Ed. 1646 (1947) ("Th[e] heading [of a statutory section] is but a shorthand reference to the general subject matter involved ... [and is] not meant to take the place of the detailed provisions of the text.”).

5 . "Only if an ambiguity exists in the statute, or when an absurd construction results, does this court refer to the statute’s legislative history.” San Jose Christian Coll. v. City of Morgan Hill, 360 F.3d 1024, 1034 (9th Cir.2004).

6 . The report goes on to elaborate the differences between the two remedies: “While the courts have the authority to order 'mandatory' injunctions, which require the defendant to act in a certain way, the Committee believes that seizures of the defendant's property, without giving the defendant the opportunity to be heard, present appreciably different ... issues.” H.R.Rep. No. 98-997, at 15-16.

7 . We express no view as to whether these necessary characteristics are sufficient to define an appealable injunction. See Calderon v. United States Dist. Court, 137 F.3d 1420, 1422 n. 2 (9th Cir.1998) (commenting that for an order "not explicitly labeled an injunction, it is arguable that the requirements of Carson v. American Brands, Inc., 450 U.S. 79, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981), ... [must be] satisfied before an immediate appeal ... [can be] taken”).

8 . It is, of course, only logical that contempt is unavailable against the party against whom a seizure order is issued without notice because the order does not direct the party to either take or refrain from any action.

9 . Curiously, the Third Circuit’s analysis depends on whether the order is granted or denied. It likens the grant of an ex parte order to a grant of a temporary restraining order, which is not appealable. In contrast, it views the denial of a seizure order as a matter that would escape review prior to final judgment and thus an issue that should be subject to immediate appeal. Vuitton, 945 F.2d at 573-74. Although this approach may have surface appeal, as we discuss in the next section, its logic would seriously undermine both the final order and the narrow exception for injunction appeals.

10 . It has been suggested that ex parte seizure orders may be susceptible to abuse by plaintiffs because "a judge, when deciding a request for an ex parte seizure order, is largely limited to the evidence put forth by the plaintiffs.” Michael L. Petrucci, Casenote, Trademark Law: Vuitton v. White and the Ex Parte Seizure Order in Trademark Counterfeit Litigation: The Trend Must End, 18 U. Dayton L.Rev. 217, 231-32 & n. 136 (1992).

11 . We express no opinion on other potential remedies Lorillard may have had at its disposal, such as a writ -of mandamus, which Loril-lard did not request of us. See Cordoza v. Pac. States Steel Corp., 320 F.3d 989, 998 (9th Cir.2003) (mandamus is "an extraordinary remedy that may be obtained only to confine an inferior court to a lawful exercise of its prescribed jurisdiction or to compel it to exercise its authority when it is its duty to do so”) (internal quotation marks omitted). The dissent’s suggestion that we opt for holding that jurisdiction exists because we would have to reach the merits on mandamus is an odd one indeed. Jurisdiction is a matter of statutory authorization; we cannot create jurisdiction where there is none. Moreover, simply because we may treat "a notice of appeal from an otherwise unappealable order ... as a mandamus petition” does not mean we must. Id. Nor does it mean that we should collapse the concepts of appellate jurisdiction under 28 U.S.C. § 1291 and mandamus jurisdiction under 28 U.S.C. § 1651.