Trader Joe's Co. v. Hallatt

Decision Date02 October 2013
Docket NumberCase No. C13–768 MJP.
Citation981 F.Supp.2d 972
PartiesTRADER JOE'S COMPANY, Plaintiff, v. Michael Norman HALLATT, /b/a Pirate Joe's a/k/a Transilvania Trading Company, Defendants.
CourtU.S. District Court — Western District of Washington


Brian M. Berliner, Jordan Raphael, O'Melveny & Myers, Los Angeles, CA, Scott T. Wilsdon, Jeremy E. Roller, Yarmuth Wilsdon PLLC, Seattle, WA, for Plaintiff.

Nathan Thomas Alexander, Patchen Marie Haggerty, Dorsey & Whitney, Seattle, WA, for Defendants.



This matter comes before the Court on Defendant Michael Norman Hallatt d/b/a Pirate Joe's a/k/a Transilvania Trading Company (collectively, Pirate Joe's)'s motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). (Dkt. No. 25.) The Court considered the motion, Plaintiff Trader Joe's response, Pirate Joe's reply, and all related documents. The motion to dismiss is GRANTED. The Court notes Pirate Joe's has pending a motion to stay discovery. (Dkt. No. 32.) This motion is MOOT because this Court lacks subject matter jurisdiction.


Trader Joe's is a well known grocery store in the United States having its name and “South Pacific” theme since 1967. (Dkt. No. 1 at 3.) More than 390 Trader Joe's grocery stores operate in 30 states and the District of Columbia, including 14 stores in the state of Washington. ( Id.) Trader Joe's alleges its trademarks are also well known in Canada. More than forty percent of credit card transactions at Trader Joe's Bellingham, Washington location are with non-U.S. Residents. ( Id. at 4.) Trader Joe's does not have any locations outside the United States. Trader Joe's has a website featuring its distinctive theme, but visitors cannot purchase Trader Joe's products through the website.

The United States Patent and Trademark Office (“USPTO”) granted Trader Joe's a trademark registration for the TRADER JOE'S trademark (No. 2,171, 157) for “retail services in the field of specialty foods and beverages” in International Class 42. (Dkt. No. 1 at 4, Dkt. No. 1–3 at 1.) The USPTO also granted Trader Joe's a Trademark Registration (No. 4, 001,533) for the TRADER JOE'S mark for “retail grocery services” in International Class 35. ( Id.) Trader Joe's also obtained numerous United States trademark registrations for the TRADER JOE'S mark in connection with branded goods sold at its retail stores. (Dkt. No. 1 at 5.) Trader Joe's uses the TRADER JOE'S mark to identify both its retail stores and services and around eighty percent of goods it sells in its retail stores. (Dkt. No. 1 at 4.)

Defendant Hallatt owns and operates a grocery store in Vancouver, British Columbia, Canada, operating under the name Pirate Joe's. (Dkt. No. 24 at 3.) This store previously operated under the name “Transilvania Trading.” ( Id.) Hallatt admits he and others at his direction have purchased products at Trader Joe's paying full retail prices in the state of Washington. ( Id.) Hallatt transports the products across the United States border to Canada, declaring the transported merchandise to boarder agents. ( Id. at 4.) Hallatt admits re-selling “unmodified” Trader Joe's products in Canada and publically acknowledges the products he sells were purchased from Trader Joe's. ( Id.) Hallatt denies his activity is wrongful or intended to deceive customers into believing Pirate Joe's and/or Transilvania Trading have been authorized or approved by Trader Joe's to sell its branded products. ( Id.) Trader Joe's contends Pirate Joe's prominently displays Trader Joe's trademarks and other intellectual property to pass as an approved Trader Joe's retailer. (Dkt. No. 1 at 8.) Defendant alleges Trader Joe's marks are displayed in notices alerting customers it is not an authorized Trader Joe's retailer. (Dkt. No. 24 at 5.) Defendant admits to using Trader Joe's grocery bags in the past but allege this practice has stopped. ( Id.)

Plaintiff filed its Complaint in federal court alleging Defendant violated the Lanham Act by including Federal Trademark Infringement, 15 U.S.C. § 1114(1); Unfair Competition, False Endorsement and False Designation of Origin, 15 U.S.C. § 1125(a)(1)(A); False Advertising, 15 U.S.C. § 1125(a)(1)(B); and Federal Trademark Dilution, 15 U.S.C. § 1125(c). (Dkt. No. 1 at 9–11.) Plaintiff also brought claims under state law. ( Id. at 12–13.) Defendant moves to dismiss for lack of subject matter jurisdiction, arguing the causes of action under the Lanham Act are the basis for federal jurisdiction and the Lanham Act should not apply extraterritorially in this case. (Dkt. No. 25 at 3–4.) Plaintiff counters the motion, arguing extraterritorial application of the Lanham Act is appropriate.

I. Standard

Federal courts are courts of limited jurisdiction, but pursuant to 28 U.S.C. § 1331, they “have broad adjudicatory authority over all civil actions arising under the Constitution, laws, or treaties of the United States.” Leeson v. Transamerica Disability Income Plan, 671 F.3d 969, 974 (9th Cir.2012) (internal citations omitted). Because of this extensive power, jurisdictional dismissals in actions based on federal questions are exceptional. Id. at 975. A federal court may dismiss a federal question claim for lack of subject matter jurisdiction “only if (1) the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purposes of obtaining jurisdiction; or (2) such a claim is wholly insubstantial and frivolous.” Id. (internal citations omitted).

In reviewing a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), courts must accept the allegations in the complaint as true, unless the challenger asserts a factual attack with or in place of a facial attack. Wolfe v. Strankman, 392 F.3d 358, 362 (9th Cir.2004). A facial attack asserts the allegations contained in the complaint are insufficient on their face to invoke federal jurisdiction. Id. A factual attack, in contrast, requires submission of evidence that calls into dispute the truth of the allegations that support jurisdiction. Id.

Pirate Joe's argues it mounts both a facial and factual attack. (Dkt. No. 25 at 3.) However, it does not present a single factual argument calling into question the facts alleged by Trader Joe's. Pirate Joe's alleges it supplied evidence going to the “nationality/location of business and achieving compliance factors” of the substantive legal analysis, which are discussed below. (Dkt. No. 30 at 3.) However, the only evidence or argument Pirate Joe's offers is Defendant Hallatt is a Canadian citizen but also holds U.S. Permanent Resident Alien status, Pirate Joe's makes no sales and has no place of business in the United States, and Pirate Joe's knows of no Trader Joe's locations in Canada. (Dkt. No. 25 at 7.) There is no dispute of facts; these facts are not contested by Trader Joe's. (Dkt. No. 28 at 23.)

Pirate Joe's argues it cannot be expected, in making a factual attack, to present evidence in the negative (i.e., lack of effect on U.S. commerce, lack of cognizable injury). (Dkt. No. 30 at 3.) This argument fails. To make a factual attack, Pirate Joe's must actually challenge facts in Plaintiff's complaint that go to jurisdiction. Safe Air v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). Unsupported and conclusory assertions going to Plaintiff's legal arguments are not enough. This is evidenced by the Ninth Circuit's language on the review requirements for a facial attack: “Once the moving party has converted the motion to dismiss into a factual motion by presenting affidavits or other evidence properly brought before the court, the party opposing the motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing subject matter jurisdiction.” Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n. 2 (9th Cir.2003). It cannot be said a factual attack is “clearly mounted” simply because the motion to dismiss says it is making a factual attack; there must be an actual challenge to the facts supporting jurisdiction. (Dkt. No. 30 at 2.)

Pirate Joe's fails to make a factual attack on jurisdiction, and this motion is properly analyzed as a facial attack. However, even construing the motion as a facial attack, there is no basis for extraterritorial application of the Lanham Act in this case.

II. Lanham Act and Extraterritorial Application

The Lanham Act “confers broad jurisdictional powers upon the courts of the United States.” Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952). The Supreme Court has held the Lanham Act can be applied extraterritorially. Id. at 287, 73 S.Ct. 252. The Ninth Circuit says the Lanham Act should be applied extraterritorially where: (1) the defendant's action creates some effect on American foreign commerce, (2) the effect is sufficiently great to present a cognizable injury to plaintiff under the Lanham Act, and (3) “the interests of and links to American foreign commerce [are] sufficiently strong in relation to those of other nations to justify an assertion of extraterritorial authority.” Reebok Int'l v. Marnatech Enters., 970 F.2d 552, 554 (9th Cir.1992). These are known as the Timberlane factors.”

A. Effect on American Foreign Commerce & Effect Sufficient to Present Cognizable Injury

To meet the first two prongs of the Timberlane test, a plaintiff need only show there is “some” effect on United States foreign commerce. Wells Fargo & Co. v. Wells Fargo Express Co., 556 F.2d 406, 428 (9th Cir.1977). To evaluate these factors, a court should look not to the locus of the activity sought to be reached, but to the nature of its effect on that commerce which Congress may regulate. Id. This factor can support extraterritorial jurisdiction where all challenged transactions occurred abroad, and where the injury is limited to deception of consumers abroad, so long as there...

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