757 F.3d 177
4th Cir.2014Background
- Flying Pigs obtained a default judgment (>$567,000) in Guilford County state court against Chelda, Inc. and secured an equitable lien (and PTO notice) on two federally registered trademarks and associated goodwill to satisfy the judgment.
- Ham’s Restaurants (related to Chelda) filed Chapter 11; its assets (including alleged goodwill/trademarks) were sold to RCR in bankruptcy, later assigned to RRAJ Franchising after settlement-related events and PTO recordation of assignments.
- BNC asserted a security interest and sued in Guilford County to enjoin the bankruptcy sale; a TRO issued but the sale closed; the federal district court later dismissed BNC’s suit following a settlement among parties.
- Flying Pigs filed a state-court foreclosure action in Lenoir County (Dec. 2012) to enforce its equitable lien against the trademarks; RRAJ removed to federal court asserting federal-question jurisdiction under the Lanham Act (15 U.S.C.).
- The district court denied remand and dismissed Flying Pigs’ complaint on res judicata grounds; the Fourth Circuit vacated that dismissal and remanded, holding removal improper because Flying Pigs’ claim arises under state law and does not necessarily raise a substantial federal issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal-question jurisdiction supported removal | Flying Pigs: complaint is purely a state-law foreclosure to enforce an equitable lien; no federal question on face | RRAJ: adjudication necessarily requires resolving trademark ownership under the Lanham Act, so federal jurisdiction exists | Held: Removal improper — plaintiff’s state-law foreclosure does not necessarily raise a substantial federal issue under Grable/Gunn; remand required |
| Whether res judicata barred Flying Pigs’ foreclosure (district court dismissal) | Flying Pigs: equitable lien was validly imposed and not challenged; foreclosure is state-law remedy | RRAJ: settlement and prior federal proceedings resolved ownership issues, so res judicata precludes foreclosure | Held: Fourth Circuit did not decide the merits of res judicata because remand was required; district court’s dismissal vacated |
Key Cases Cited
- Pinney v. Nokia, Inc., 402 F.3d 430 (4th Cir. 2005) (removal improper where federal question merely lurks in background)
- Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005) (scope of state claim that raises a ‘substantial’ federal issue)
- Gunn v. Minton, 133 S. Ct. 1059 (2013) (clarifies narrow contours for state-law claims that ‘arise under’ federal law)
- Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) (well-pleaded complaint rule limits federal-question jurisdiction to plaintiff’s claim)
- Dixon v. Coburg Dairy, Inc., 369 F.3d 811 (4th Cir. 2004) (plaintiff’s claim depends on federal law only when every theory requires resolving a federal issue)
- George & Co., LLC v. Imagination Entm't Ltd., 575 F.3d 383 (4th Cir. 2009) (registration is prima facie evidence of trademark ownership under the Lanham Act)
- Gibraltar P.R., Inc. v. Otoki Group, Inc., 104 F.3d 616 (4th Cir. 1997) (Lanham Act does not automatically confer federal jurisdiction over trademark ownership disputes)