Lexplug logoLexplug

Trader Joe’s Company v. Michael Norman Hallatt

United States Court of Appeals for the Ninth Circuit
D.C. No. 2:13-cv-00768-MJP (2016)
ELI5:

Rule of Law:

The Lanham Act applies extraterritorially to a foreign citizen's conduct abroad if the conduct has 'some effect' on American commerce and the interests of and links to American commerce are sufficiently strong in relation to those of other nations to justify its application.


Facts:

  • Trader Joe's is a U.S.-based grocery chain selling its own branded products exclusively in its American stores, which it does not franchise.
  • Michael Norman Hallatt, a Canadian resident and U.S. Lawful Permanent Resident, began purchasing large quantities of Trader Joe's-branded goods from stores in Washington state.
  • Hallatt transported the goods to Vancouver, Canada, and resold them at inflated prices in a store he named 'Pirate Joe's'.
  • The Pirate Joe's store was designed to mimic Trader Joe's' distinctive trade dress, and Hallatt used Trader Joe's' trademarks on his store's sign and website.
  • Hallatt did not adhere to Trader Joe's' quality control standards for transporting and storing perishable goods.
  • Trader Joe's received at least one complaint from a consumer who became sick after consuming a product purchased from Pirate Joe's.
  • After Trader Joe's refused to sell to him, Hallatt used disguises and hired third parties in Washington to purchase products on his behalf.
  • In total, Hallatt spent over $350,000 in the U.S. purchasing Trader Joe's products for his Canadian resale operation.

Procedural Posture:

  • Trader Joe’s sued Hallatt in the U.S. District Court for the Western District of Washington, alleging violations of the federal Lanham Act and Washington state law.
  • The district court granted Hallatt's motion to dismiss the federal claims, ruling it lacked subject-matter jurisdiction because the Lanham Act did not apply to Hallatt's conduct in Canada.
  • The district court denied Trader Joe’s’ motion for reconsideration.
  • After Trader Joe’s filed an amended complaint asserting only state law claims under diversity jurisdiction, the district court granted Hallatt's subsequent motion to dismiss for failure to state a claim.
  • Trader Joe’s (appellant) appealed the district court's final judgment to the U.S. Court of Appeals for the Ninth Circuit, with Hallatt as the appellee.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does the Lanham Act apply extraterritorially to a foreign citizen's unauthorized resale of genuine trademarked goods in Canada, when those goods are purchased within the United States and the foreign resale creates a risk of reputational harm to the U.S. trademark owner?


Opinions:

Majority - Christen, Circuit Judge

Yes, the Lanham Act applies extraterritorially to Hallatt's conduct. The court held that first, the question of the Lanham Act's extraterritorial reach is a merits question, not a jurisdictional one. Applying the three-part 'Timberlane' test to the merits, the court found that Hallatt's conduct had a sufficient effect on U.S. commerce to state a claim. This effect arose from both the significant U.S.-based commercial activity integral to Hallatt's scheme (purchasing all goods in the U.S.) and the plausible reputational harm to Trader Joe's' American-held trademarks from the sale of improperly handled goods in Canada. Finally, a balancing of international comity factors, such as Hallatt's status as a U.S. Lawful Permanent Resident and the absence of conflict with Canadian law, favored the application of U.S. law.



Analysis:

This decision clarifies that the Lanham Act's extraterritorial reach is a question of merits, not subject-matter jurisdiction, aligning trademark law with recent Supreme Court precedent. Substantively, the case is significant for extending the Lanham Act to foreign resale of genuine goods even without evidence of the goods re-entering U.S. markets. By focusing on the defendant's domestic sourcing activities and the potential for reputational harm to the U.S. brand owner, the court provides a framework for U.S. companies to combat foreign gray-market operations that undermine quality control and tarnish brand image.

G

Gunnerbot

AI-powered case assistant

Loaded: Trader Joe’s Company v. Michael Norman Hallatt (2016)

Try: "What was the holding?" or "Explain the dissent"