# Trader Joe's v. Hallatt: 'Pirate Joe's,' Cross-Border Resale, and a Merits Question in Disguise

> The Ninth Circuit revived Trader Joe's claims against a Canadian reseller, holding that the Lanham Act's foreign reach is a question on the merits (not federal jurisdiction) and that buying and harming a brand inside the U.S. can supply the needed domestic nexus.

Topic: Trademarks  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/trader-joes-v-hallatt-pirate-joes-domestic-nexus/


*Trader Joe's Co. v. Hallatt*, No. 14-35035, 835 F.3d 960 (9th Cir. Aug. 26, 2016), is the modern extraterritoriality decision that quietly reframed the entire inquiry before the Supreme Court took it up. The Ninth Circuit panel held two things that matter enormously to practitioners: first, that the Lanham Act's extraterritorial reach is a *merits* question, not a question of subject-matter jurisdiction; and second, that a Canadian reseller who bought genuine Trader Joe's goods inside Washington State and resold them in Vancouver (under a knock-off "Pirate Joe's" banner) had a domestic nexus to U.S. commerce sufficient to survive dismissal. The case is a vivid fact pattern wrapped around a doctrinal pivot that the Supreme Court would later vindicate in *Abitron* (2023).

## At a glance

- **Case:** *Trader Joe's Co. v. Hallatt*, No. 14-35035, 835 F.3d 960 (9th Cir. 2016)
- **Court:** U.S. Court of Appeals for the Ninth Circuit
- **Decided:** August 26, 2016
- **Holdings:** (1) The extraterritorial reach of the Lanham Act goes to the merits, not subject-matter jurisdiction; (2) Trader Joe's adequately alleged a nexus between Hallatt's conduct and U.S. commerce to warrant possible extraterritorial application
- **Disposition:** Dismissal of the federal Lanham Act claims reversed and remanded; dismissal of the Washington state-law claims affirmed
- **Defendant's status:** Canadian citizen and U.S. lawful permanent resident

## The facts: a one-man gray market

Michael Norman Hallatt is a Canadian citizen who is also a lawful permanent resident of the United States. He repeatedly drove from British Columbia to Trader Joe's stores in Washington State, bought large quantities of Trader Joe's-branded goods at retail, and transported them across the border to Vancouver. There he resold them, at marked-up prices, from a store he called "Pirate Joe's." The name and look-and-feel deliberately evoked the Trader Joe's brand, complete with imitative trade dress and signage. He even, the complaint alleged, took steps to evade detection by Trader Joe's employees who tried to stop him from buying.

Trader Joe's sued in the Western District of Washington under the Lanham Act and Washington law, alleging trademark infringement, false endorsement, dilution, and unfair competition. Its theory of harm was distinctly American: Hallatt was reselling perishable, brand-sensitive goods that may have been stored and transported improperly, risking the health and safety of consumers and degrading the reputation and goodwill that Trader Joe's had built in the United States. The district court dismissed the federal claims for lack of subject-matter jurisdiction, reasoning that the alleged infringement occurred in Canada, and dismissed the state claims as well. Trader Joe's appealed.

## The doctrinal pivot: merits, not jurisdiction

The Ninth Circuit's first move reshaped the procedural landscape. Drawing on the Supreme Court's instruction in *Morrison v. National Australia Bank Ltd.*, 561 U.S. 247 (2010), that the extraterritorial reach of a statute is a merits question about the statute's scope rather than a limit on the court's adjudicatory power, the panel held that the district court erred in dismissing under Rule 12(b)(1) for lack of subject-matter jurisdiction. The Lanham Act confers jurisdiction broadly; whether the Act actually *reaches* a defendant's foreign conduct is a question about the claim's merits, properly tested under Rule 12(b)(6).

That reclassification is not academic. It changes who bears what burden, whether courts may look beyond the pleadings, how the issue is preserved, and how appellate review proceeds. By moving extraterritoriality from the jurisdictional column to the merits column, the panel aligned the Ninth Circuit with the trajectory that the Supreme Court would later confirm in *Abitron Austria GmbH v. Hetronic International, Inc.*, 600 U.S. 412 (2023), which treated the Lanham Act's foreign reach as a merits inquiry centered on the location of the infringing "use in commerce."

## The nexus: enough American conduct to go forward

Turning to whether the Act could reach Hallatt's conduct, the panel applied the Ninth Circuit's three-prong *Timberlane* test, imported into Lanham Act cases by *Wells Fargo & Co. v. Wells Fargo Express Co.*, 556 F.2d 406 (9th Cir. 1977), and concluded that Trader Joe's allegations cleared the bar at the pleading stage. Three features did the work.

First, Hallatt's conduct was not purely foreign. He purchased the goods inside the United States, in Washington stores, and conducted significant activity on the U.S. side of the border: hiring people in Washington, using U.S. transportation, and operating, in part, as a U.S. permanent resident. The infringing enterprise had a real American footprint, not merely a Canadian storefront.

Second, the alleged harm landed in the United States. Notably, Trader Joe's did *not* allege that the resold goods flowed back into American markets, which is how plaintiffs usually satisfy the first two prongs and is what drove *Steele*. Its theory was reputational instead: if a Pirate Joe's customer got sick from a poorly handled Trader Joe's-branded product, news of the illness would travel across the border, and Trader Joe's alleged it already knew of one customer who became ill. The panel said there was "nothing implausible about the concern that Trader Joe's will suffer a tarnished reputation and resultant monetary harm in the United States from contaminated goods sold in Canada." The false-endorsement theory worked the same way, since Trader Joe's draws international shoppers to its northern-Washington stores and its marks stand to lose value at home.

Third, on the comity prong the panel weighed the seven *Star-Kist* factors and concluded that applying the Lanham Act to Hallatt and Pirate Joe's was appropriate. Trader Joe's had obtained Canadian recognition for its marks in 2012, but no adversarial proceeding was pending in Canada, so the panel found no conflict with foreign law. Hallatt's LPR status, which the panel said subjects him to the laws of this country, nudged the nationality factor into Trader Joe's column as well, at least at that stage of the case. On those allegations, dismissal of the federal claims was reversed and the case remanded.

The state-law claims fared differently. The panel affirmed their dismissal because Trader Joe's had not adequately alleged trademark dilution occurring in Washington or harm to a Washington resident or business. The conduct causing the pleaded harm was, for those purposes, located in Canada.

## Open questions

- **How does the nexus test map onto Abitron's "use in commerce"?** *Hallatt* asked whether the conduct had a sufficient connection to U.S. commerce. *Abitron* (2023) sharpened the question to whether the *infringing use in commerce* is domestic. Hallatt's U.S. purchasing and the U.S.-located harm may or may not satisfy that narrower test, and lower courts are still calibrating the translation.
- **Does buying in the U.S. count as domestic "use"?** Much of Hallatt's relevant activity was *purchasing* genuine goods in the U.S., then reselling abroad. Whether U.S. purchasing plus foreign resale constitutes a domestic infringing use under *Abitron* is an unresolved and recurring gray-market puzzle.
- **What role for a defendant's U.S. residency?** Hallatt was a U.S. permanent resident. Whether that status independently strengthens the domestic nexus, or merely supplies facts about where conduct occurred, remains unsettled after the doctrine moved away from citizenship-based tests.

## Implications

- **For brand owners policing gray markets:** Reputational harm felt by U.S. consumers (especially where goods are bought domestically and resold across a porous border) can anchor a Lanham Act claim even when the resale storefront sits in another country.
- **For resellers and arbitrageurs:** Buying genuine branded goods in the U.S. is not a safe harbor if the operation imitates the brand's trade dress and threatens its U.S. goodwill; the domestic purchasing leg can become part of the plaintiff's nexus theory.
- **For litigators:** Treat extraterritoriality as a merits defense under Rule 12(b)(6) and, where possible, on a developed record rather than as a quick 12(b)(1) dismissal. After *Abitron*, frame the dispute around the location of the infringing use in commerce.
- **For comity analysis:** *Hallatt* treats the conflict factor as turning on a concrete clash. Because no trademark proceeding between the parties was pending in Canada, the panel found no conflict with Canadian law and let the case go forward. A foreign registration alone, without an adversarial proceeding, did not counsel restraint.

## Frequently asked questions

**What did Trader Joe's v. Hallatt actually decide?**
That the Lanham Act's extraterritorial reach is a merits question rather than a matter of subject-matter jurisdiction, and that Trader Joe's had plausibly alleged enough connection between Hallatt's conduct and U.S. commerce (through U.S. purchasing and U.S.-felt reputational harm) to proceed on its federal claims. The court reversed dismissal of the federal claims and affirmed dismissal of the Washington state-law claims.

**Why did the "merits vs. jurisdiction" distinction matter?**
Because it determines the procedural posture: a jurisdictional dismissal (Rule 12(b)(1)) and a merits dismissal (Rule 12(b)(6)) carry different burdens, evidentiary scope, and consequences. The Ninth Circuit's reclassification, consistent with *Morrison*, was later echoed by the Supreme Court's treatment of the issue in *Abitron* (2023).

**Is Hallatt still good law after Abitron?**
Its procedural holding (extraterritoriality is a merits question) aligns with *Abitron* and remains sound. Its nexus analysis, framed around effects on U.S. commerce, must now be reconsidered through *Abitron*'s focus on whether the infringing use in commerce is domestic, so the fact pattern is best analyzed under the newer standard.

## Authorities and sources

- *Trader Joe's Co. v. Hallatt*, No. 14-35035, 835 F.3d 960 (9th Cir. Aug. 26, 2016), slip opinion (Ninth Circuit): https://cdn.ca9.uscourts.gov/datastore/opinions/2016/08/26/14-35035.pdf
- *Trader Joe's Co. v. Hallatt*, Harvard Law Review case comment (Vol. 130): https://harvardlawreview.org/print/vol-130/trader-joes-co-v-hallatt/
- *Abitron Austria GmbH v. Hetronic International, Inc.*, 600 U.S. 412 (2023) (Cornell LII): https://www.law.cornell.edu/supremecourt/text/21-1043
- Orrick, "The World in U.S. Courts — Trader Joe's Company v. Hallatt": https://www.orrick.com/en/Insights/2016/08/The-World-in-US-Courts-Summer-and-Fall-2016-Trader-Joes-Company-v-Hallatt