Philip Morris Usa v. King Mountain Tobacco Co.

• Decision Date: 11 June 2009
• Docket Number: No. 06-36066.,06-36066.
• Parties: PHILIP MORRIS USA, INC., Plaintiff-Appellant, v. KING MOUNTAIN TOBACCO COMPANY, INC.; Mountain Tobacco; Delbert L. Wheeler, Sr.; Richard Kip Ramsey, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

569 F.3d 932

PHILIP MORRIS USA, INC., Plaintiff-Appellant, v. KING MOUNTAIN TOBACCO COMPANY, INC.; Mountain Tobacco; Delbert L. Wheeler, Sr.; Richard Kip Ramsey, Defendants-Appellees.

No. 06-36066.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 10, 2007.

Filed June 11, 2009.

Daniel P. Collins (argued), Kelly M. Klaus, Adam B. Badwai, Munger, Tolles & Olson LLP, Los Angeles, CA; Roberta L. Horton, Arnold & Porter, LLP, Washington, DC; Leslie R. Weatherhead, William M. Symmes, Witherspoon, Kelley, Davenport & Toole, Spokane, WA, for the plaintiff-appellant.

J. Michael Keyes, Theresa L. Keyes, and Bart J. Freedman, Kirkpatrick & Lockhart Preston Gates Ellis LLP, Spokane, WA, for the defendants-appellees.

Appeal from the United States District Court for the Eastern District of Washington, Robert H. Whaley, United States District Judge, Presiding. D.C. No. CV-06-03073-RHW.

Before: MELVIN BRUNETTI, M. MARGARET McKEOWN, and W. FLETCHER, Circuit Judges.

ORDER AMENDING OPINION AND AMENDED OPINION

ORDER

The opinion and concurrence filed on January 20, 2009 are hereby amended. No petition for panel rehearing or petition for rehearing en banc may be filed.

OPINION

McKEOWN, Circuit Judge:

This case is yet another of the difficult Indian jurisdiction cases considered by this court. The precise question presented is whether there is colorable tribal court jurisdiction over a nonmember's federal trademark and related state law claims against tribal defendants for alleged passing off of cigarettes on the Internet, on the reservation of another tribe, and elsewhere. Philip Morris USA, Inc. manufactures and markets Marlboro cigarettes, one of the most recognized brands in the United States. King Mountain Tobacco Company, Inc., a tribal corporation on the Yakama Indian Reservation, along with Delbert L. Wheeler, Sr. and Richard "Kip" Ramsey, company founders and members of the tribe (collectively, "King Mountain"), sell King Mountain cigarettes in packaging that Philip Morris claims infringes and dilutes its trademarks and trade dress.

We are faced with dueling lawsuits. Philip Morris sued King Mountain in federal court, alleging various federal and state law claims and seeking, among other things, injunctive relief against King Mountain's continued sale of its products. King Mountain followed with an action for declaratory relief against Philip Morris in Yakama Tribal Court, which prompted Philip Morris to seek an injunction in federal court against the tribal proceedings. King Mountain asked the district court to stay its proceedings pending the Tribal Court's determination of its jurisdiction.

The district court granted King Mountain's requested stay, concluding there was a colorable claim to tribal court jurisdiction under the formulations found in Montana v. United States, 450 U.S. 544, 101 S.Ct. 1245, 67 L.Ed.2d 493 (1981), Strate v. A-1 Contractors, 520 U.S. 438, 117 S.Ct. 1404, 137 L.Ed.2d 661 (1997), and Nevada v. Hicks, 533 U.S. 353, 121 S.Ct. 2304, 150 L.Ed.2d 398 (2001). We agree that these cases provide the foundation for our analysis, but we disagree that they point to a colorable claim of jurisdiction. Rather, we conclude that the Tribal Court does not have colorable jurisdiction over nonmember Philip Morris's federal and state claims for trademark infringement on the Internet and beyond the reservation.

FACTUAL BACKGROUND AND PRIOR PROCEEDINGS

Philip Morris, the maker of Marlboro-brand cigarettes, claims that Marlboro is the most well-known and best-selling brand of cigarettes. Philip Morris sells Marlboro cigarettes throughout the United States and the world, including to stores on the Yakama Reservation. Philip Morris contracts directly with some of these stores, while others obtain its products through distributors.

Delbert Wheeler and Richard "Kip" Ramsey are both enrolled members of the Yakama Indian Nation. Together they own Mountain Tobacco Company, d/b/a King Mountain Tobacco Company, Inc., which is a corporation that was formed and licensed under the laws of the Yakama Indian Nation in 2004. King Mountain began selling cigarettes to stores on the Yakama Reservation in early 2006, and shortly thereafter to members of other Indian tribes, including the Onodaga Nation and Seneca Tribe in New York, via phone and mail orders. King Mountain cigarettes are also sold to the general public via the Internet, through websites such as www.cheap-cig.com and www.123smoke. com, but King Mountain denies that it markets its cigarettes on the Internet or sells directly to those that do. There is no contractual or other relationship between King Mountain and Philip Morris.

Philip Morris's Marlboro packaging bears a distinctive "red roof" design, featuring two red triangles filling the top corners of its otherwise white package such that there is a white peak with red above it. King Mountain's cigarette packages feature an image of a snowcovered mountain against a red backdrop. Several aspects of Philip Morris's package design are registered with the United States Patent and Trademark Office ("the USPTO"). Registration Nos. 938,510; 1,544,782; and 1,038,989.

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Philip Morris claims that the appearance of King Mountain's packaging is a close copy or imitation of its Marlboro packaging such that consumers are both actually and likely to be confused, that Philip Morris's Marlboro trademark is infringed and diluted, and alleges that its reputation is tarnished. King Mountain, on the other hand, argues that its packaging depicts Mt. Adams—known as "Pahto" in the Yakama Nation—a mountain of spiritual and cultural significance to the Yakama Tribe and that any resemblance to Philip Morris's packaging is inadvertent and incidental. King Mountain applied to register its package design but the USPTO refused registration, citing two of Philip Morris's registrations.

Philip Morris filed suit against King Mountain in federal district court, alleging violations of the Lanham Act and Washington state law. The amended complaint includes claims for trademark infringement, trade dress infringement, trademark dilution, and unfair competition. King Mountain responded by filing an action for declaratory relief in the Yakama Tribal Court, claiming that Philip Morris "[had] come upon the reservation to do business without permission of the Yakama Indian Nation, [was] not licensed thereby, and in so doing ... submitted itself to the jurisdiction of the Yakama Tribal Court." King Mountain sought a declaration that it was not infringing Philip Morris's trademark and trade dress and further alleged that Philip Morris's actions violated the Yakama Treaty of 1855. Once it received notice of this tribal court action, Philip Morris sought an injunction in federal court against those proceedings.

In response to Philip Morris's effort to enjoin King Mountain's continued use of its packaging, King Mountain argued that Philip Morris had failed to exhaust tribal remedies, and that it had not shown a likelihood of success on the merits of the Lanham Act claims. The district court denied Philip Morris's requested injunctions and granted King Mountain's motion to stay the federal case to allow the Tribal Court to address its own jurisdiction. The district court reasoned, relying on Stock West Corp. v. Taylor, 964 F.2d 912, 919 (9th Cir.1992) (en banc), that "abstention is appropriate where there exists a `colorable question' whether the tribal court has jurisdiction over the asserted claims." The court framed the question as whether "the Yakama Indian Nation could regulate the activities at issue in this case" and concluded that "[i]t is not clear that the tribe would not have regulatory authority over trademarks...." The court also concluded that it is not clear "whether tribal courts have adjudicative authority to address trademark claims against tribal members whose conduct occurred on reservation lands." In light of these uncertainties, the district court held there was a colorable question of the existence of tribal court jurisdiction over the case.

On appeal from this order, Philip Morris argues that the court improperly denied its motions for injunctions and erred in granting King Mountain's motion to stay the district court proceedings. We have jurisdiction under 28 U.S.C. § 1292(a)(1) to review the order denying these injunctions and granting the motion to stay the proceedings. Agcaoili v. Gustafson, 870 F.2d 462, 463 (9th Cir.1989) (holding that jurisdiction over appeal from grant of motion to stay is proper under 28 U.S.C. § 1292(a)(1)).

ANALYSIS

Tribal jurisdiction cases are not easily encapsulated, nor do they lend themselves to simplified analysis. The Supreme Court itself observed that questions of jurisdiction over Indians and Indian country are a "complex patchwork of federal, state, and tribal law." Duro v. Reina, 495 U.S. 676, 680 n. 1, 110 S.Ct. 2053, 109 L.Ed.2d 693 (1990). And we have acknowledged that "[t]here is no simple test for determining whether tribal court jurisdiction exists." Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1228 (9th Cir.1989). Despite these complications, the answer to the tribal jurisdiction question in this case can be divined in a logical fashion from the teachings of three Supreme Court cases: Montana, Strate, and Hicks. These teachings are affirmed in important respects by the Court's most recent tribal jurisdiction decision in Plains Commerce Bank v. Long Family Land & Cattle Co., ___ U.S. ___, 128 S.Ct. 2709, 171 L.Ed.2d 457 (2008).

These cases provide the foundation for the following guiding principles. In considering tribal jurisdiction, we look first to the member or nonmember status of the unconsenting party, which is, in this case, Philip Morris, a nonmember. Hicks, 533 U.S. at 382, 121 S.Ct. 2304 (Souter, J., concurring) ("It is the membership status of...