Refusal of seizure order cannot be appealed, rules Ninth Circuit

In In re Lorillard Tobacco Company, the US Court of Appeals for the Ninth Circuit has ruled that it cannot provide appellate review of a district court's refusal to grant an ex parte seizure order under the anti-counterfeiting provisions of the Lanham Act. The ruling is at odds with decisions of two other Circuit Courts. The Third and Sixth Circuits have held that denial of a seizure order under the Lanham Act is tantamount to denial of a preliminary injunction which, unlike other interlocutory orders, can be appealed immediately.

Lorillard Tobacco Company sought an ex parte seizure order for allegedly counterfeit cigarettes bearing the NEWPORT trademark in the possession of the operator of a Nevada retail store. The district court found Lorillard's evidentiary affidavits to be insufficient and refused to grant the seizure order. Lorillard appealed.

The Ninth Circuit dismissed the appeal based on the fundamental principle of appellate jurisdiction that appellate review is limited to "final decisions of the district courts of the United States". "Final decisions" are statutorily identified to exclude interlocutory orders except those "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions". The Ninth Circuit held that the ex parte order sought by Lorillard did not constitute an "injunction".

The court first examined the language of the Lanham Act, which provides that a 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". The referenced subsection (a) gives federal district courts the power to enforce an "injunction granted upon hearing, after notice to the defendant". However, the court concluded that the words "under subsection (a)" were included in the statute "simply to specify that this power is intended to apply to civil proceedings in equity for trademark violations - and … not meant to enable the court to grant an ex parte seizure order under other circumstances". The authorization of orders, the court concluded, should be distinguished from injunctive relief.

The court supported its conclusion with reference to legislative history, noting that reports from both the House of Representatives and the Senate indicate that an ex parte seizure order was meant to be a unique type of order. The court further noted that a seizure order failed to satisfy the established test for what constitutes an injunction. The court drew a distinction between the purpose of the seizure order - the preservation of evidence for an eventual trial on the issue of counterfeiting - and the purpose of an injunction, which is substantive relief to the plaintiff.

The court acknowledged that the ex parte seizure order provision was adopted because, if counterfeit goods could not be seized before giving notice to the defendants, the evidence would often disappear and enforcement efforts would be thwarted. Nevertheless, it held that the practical effect of a denial of a seizure order does not equate to a refusal to enter an injunction. The court stated that a failure to meet the standards for grant of a seizure order would not affect a plaintiff's ability to seek its ultimate remedy in a counterfeiting action.

In a dissenting opinion, Judge Callahan noted the stance taken by the Third and Sixth Circuits: that the denial of a seizure order is tantamount to denial of a preliminary injunction. He argued that appellate jurisdiction existed because denying a request for an ex parte seizure order effectively prevents Lorillard from obtaining any relief. Judge Callahan concluded, however, that the district court did not abuse its discretion nor err in reaching its decision to reject Lorrilard's request.

Virginia S Taylor and Heather Forrest, Kilpatrick Stockton LLP, Atlanta