Conwood Co., L.P. v. U.S. Tobacco Co., No. 5:98-CV-108-R, 2000 WL 33176057 (W.D. Ky. Aug. 10, 2000) (injunctive relief)

United States District Court, W.D. Kentucky.
CONWOOD CO., L.P. and CONWOOD SALES CO., L.P.
v.
UNITED STATES TOBACCO CO., United States Tobacco Sales and Marketing Co. Inc., United States Tobacco Manufacturing Co. Inc., and UST Inc.
No. 5:98-CV-108-R.

Aug. 10, 2000.

MEMORANDUM OPINION

RUSSELL, D.J.
*1 This matter is before the Court on Plaintiffs' motion for a permanent injunction (docket # 374) and Defendants' motion for a hearing on Plaintiffs' motion for permanent injunctive relief (docket # 397).

As an initial matter, Defendants have not demonstrated that an oral argument on the motion for permanent injunction is necessary. A four week jury trial was held and the factfinder, the jury, found UST violated antitrust laws. This motion can be decided on the pleadings and court record.

In their motion for a permanent injunction, Plaintiffs have requested the following provisions: 1) UST shall not “eliminate, remove, deface, alter, obscure or otherwise manipulate any competitor's smokeless tobacco products, vending systems, counter displays or other advertising” unless it has written consent from the competitor; 2) UST shall not influence others “by agreement, through financial incentives, misrepresentations or otherwise adversely affect the placement or selection of any competitor's smokeless tobacco products, vending systems, counter displays or other advertising;” and 3) UST shall appoint an independent committee of its board of directors to monitor and enforce compliance with the order.

Federal antitrust laws state, “Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, ... against threatened loss or damage by a violation of the antitrust laws.”15 U.S.C. § 26. In seeking a permanent injunction under 15 U.S.C. § 26, Plaintiffs must demonstrate a “significant threat of injury from an impending violation of the antitrust laws or from a contemporary violation likely to continue or recur.”  Bender v. Southland Corp.[1984-2 TRADE CASES ¶ 66,309], 749 F .2d 1205, 1214 (6th Cir.1984). A jury already has determined that UST committed antitrust violations, and this court has rejected Defendants' posttrial motions to vacate or reverse the verdict. The evidence at trial and the jury verdict demonstrate that UST's strategic campaign to limit distribution succeeded in harming competition and consumers. The issue is whether UST's antitrust violations will continue or recur. See15 U.S.C. § 26; Zenith Radio Corp. v. Hazeltine Research, Inc.[1969 TRADE CASES ¶ 72,800], 395 U.S. 100, 130, 23 L.Ed.2d 129, 89 S.Ct. 1562 (1969).

The Court finds that it is likely that the violations will continue. In post-trial pleadings and public statements, UST refuses to admit that any of its business practices violate antitrust laws. UST maintains that it will not change the way it markets its products even in light of the jury verdict. Conwood has presented affidavits of its sales force that indicate that UST's campaign to restrict competitors' distribution has continued after the verdict. Because UST will not alter its business practices voluntarily, a court-ordered permanent injunction is necessary. See  United States v. Microsoft Corp.[2000-1 TRADE CASES ¶ 72,925], 97 F.Supp.2d 59 (D.D.C.2000)(ordering equitable relief where monopolist refuses to admit wrongdoing and will not alter conduct voluntarily).

*2 The court may issue an injunction to restore competition, even if the injunction prohibits conduct that would otherwise be legal. See  United States v. Loew's [1962 TRADE CASES ¶ 70,537], 371 U .S. 38, 53, 9 L.Ed.2d 11, 83 S.Ct. 97 (1962). The Court has carefully considered Plaintiff's proposed order as well as Defendants' objections to its provisions. UST must cease certain anticompetitive conduct, but it is not necessary for the Court to appoint an independent committee to UST's board of directors to enforce compliance with the order.

An appropriate order shall issue.

ORDER FOR PERMANENT INJUNCTIVE RELIEF

Pursuant to 15 U.S.C. § 26, the Court orders that defendants United States Tobacco Company, United States Tobacco Sales and Marketing Company, Inc., United States Tobacco Sales and Marketing Company, Inc., United States Tobacco Manufacturing Company, Inc. and UST, Inc. and all persons acting in concert with defendants (collectively, “UST”) shall be enjoined for a period of five (5) years as follows:

I. UST shall not:

(a) Eliminate, remove, deface, any competitor's smokeless tobacco products, vending systems, counter displays or other advertising (including, but not limited to, “point of sale” advertising such as “header cards”), except with the prior written consent of the relevant competitor, such consent not to be unreasonably withheld, or unless directed to do so by the retailer.

(b) induce, influence materially cause or seek to cause any other persons, by agreement, through material misrepresentations to remove, deface, alter or otherwise adversely affect the placement or selection of any competitor's smokeless tobacco products, vending systems, counter displays or other advertising (including but not limited to “point of sale” advertising such as “header cards”).

Any party may seek modification of this Order, at any time, by written motion and for good cause based on changed circumstances or otherwise.

This Order is based on 15 U.S.C. § 26, the accompanying Memorandum in Support of Plaintiffs' Motion for Permanent Injunctive Relief, the jury verdict, the trial record, and the pleadings and filings in this matter.

This Court shall retain jurisdiction to enforce this Order. This Order will be enforceable against all defendants in this lawsuit, and any and all other persons, affiliated or acting in concert with those persons. In the event that any part of this Order is violated by any of named defendants or other persons, the plaintiff may, by motion with notice to the attorneys for the defendants, apply for sanctions or other relief that may be appropriate.

IT IS SO ORDERED.