Trader Joe's Co. v. Michael Hallatt
2016 U.S. App. LEXIS 15792
| 9th Cir. | 2016Background
- Trader Joe’s, a California-based grocery chain with famous U.S. trademarks and trade dress, alleged Michael Hallatt (a Canadian resident and U.S. LPR) purchased Trader Joe’s products in Washington, transported them to Canada, and resold them in a store ("Pirate Joe’s") designed to mimic Trader Joe’s.
- Trader Joe’s alleged Hallatt used Trader Joe’s trademarks and trade dress, operated a website accessible from the U.S., sold perishable goods without Trader Joe’s quality controls, and caused at least one reported illness and reputational harm.
- Trader Joe’s sued in the Western District of Washington under multiple Lanham Act provisions and Washington state trademark dilution and consumer protection laws seeking damages and injunctive relief.
- The district court dismissed the federal Lanham Act claims for lack of subject-matter jurisdiction, concluding Hallatt’s conduct occurred in Canada and Trader Joe’s did not show an impact on U.S. commerce; state claims were dismissed for failure to state a claim.
- The Ninth Circuit reviewed de novo, concluded the extraterritorial reach of the Lanham Act is a merits question (not jurisdictional), and evaluated extraterritorial application under the Timberlane framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lanham Act extraterritoriality is jurisdictional | Trader Joe’s: extraterritorial reach is a merits question (Arbaugh/Morrison) | Hallatt: Ninth Circuit precedent treats extraterritoriality as jurisdictional | Court: Not jurisdictional; it is a merits question (applies Arbaugh/Morrison/La Quinta) |
| Whether Lanham Act applies to Hallatt’s Canada-based conduct | Trader Joe’s: Hallatt’s scheme (U.S. purchases, hires in WA, U.S. LPR status, reputational harm in U.S.) creates "some effect" on U.S. commerce | Hallatt: Conduct occurs in Canada; insufficient U.S. commercial effect | Court: Timberlane prongs satisfied at pleading stage; Lanham Act reaches Hallatt’s conduct — federal claims reinstated |
| Whether Washington trademark dilution statute covers Hallatt’s conduct | Trader Joe’s: dilution in WA can be alleged even if diluting acts occurred abroad | Hallatt: statute requires commercial use in Washington | Court: Statute requires defendant’s use in Washington; claim dismissed |
| Whether Washington Consumer Protection Act (CPA) applies | Trader Joe’s: CPA applies because conduct affects commerce and harms Trader Joe’s interests tied to Washington stores/customers | Hallatt: defendants and offending acts are not Washington-based; CPA inapplicable | Court: Thornell does not extend CPA to this dispute; pleadings fail to allege deceptive acts in WA or harm to WA people; claim dismissed |
Key Cases Cited
- Steele v. Bulova Watch Co., 344 U.S. 280 (Lanham Act can apply to foreign conduct)
- RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090 (two-step test for extraterritoriality)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (distinguishing claim elements from jurisdictional requirements)
- Morrison v. Nat’l Aust. Bank, Ltd., 561 U.S. 247 (extraterritorial reach is a merits question)
- La Quinta Worldwide LLC v. Q.R.T.M., S.A. de C.V., 762 F.3d 867 (9th Cir.) ("use in commerce" element is non‑jurisdictional)
- Timberlane Lumber Co. v. Bank of Am. Nat’l Trust & Sav. Ass’n, 549 F.2d 597 (establishing three‑part test for extraterritorial application)