This week, the Ninth Circuit considers personal jurisdiction in a trademark declaratory judgment action and assesses an agency’s decision to omit an environmental-impact statement in connection with a forest-fire-management project.
IMPOSSIBLE FOODS, INC. v. IMPOSSIBLE X LLC
The Court holds that the district court had specific personal jurisdiction over the defendant in a trademark declaratory judgment action based on the defendant’s trademark-building activities in the forum state.
The panel: Judges Lucero (10th Cir.), Bress, and Van Dyke, with Judge Bress writing for the Court and Judge Van Dyke dissenting.
Key highlight: “We decline to adopt a rigid rule excluding pre-enforcement commercialization activities from consideration in the personal jurisdiction analysis when it comes to declaratory judgment actions for trademark non-infringement.”
Background: Declaratory judgment plaintiff Impossible Foods, Inc. is a Delaware corporation that sells plant-based meat substitutes, including the “Impossible Burger.” Declaratory judgment defendant Impossible X, LLC is a Texas LLC that sells a variety of products online, including clothing, nutritional supplements, diet guides, exercise plans, and consulting services. Impossible Foods and Impossible X both use “IMPOSSIBLE” in all-caps to market their products, and both have registered trademarks for their versions of that mark.
Impossible X is solely owned and operated by one man, Joel Runyan. Runyan has operated Impossible X in a number of different places. As relevant here, San Diego served as Impossible X’s de facto headquarters between 2014 and 2016. During that time, Runyan worked to market and build Impossible X’s brand in California. After 2016, Runyan moved out of California. Even after moving, however, he continued to travel to the state and continued his business contacts there.
A trademark dispute developed between Impossible Foods and Impossible X in 2020 when Impossible X sent Impossible Foods a cease-and-desist letter and opposed one of Impossible Foods’ trademark applications. Impossible Foods filed a declaratory judgment action in federal court in California, seeking a declaration that its mark did not infringe on Impossible X’s trademark rights and that its rights were superior to Impossible X’s. The district court dismissed the action for lack of personal jurisdiction over Impossible X.
Result: The Ninth Circuit reversed. It held that the district court had specific personal jurisdiction over Impossible X based on its trademark-building activities in California. In determining whether specific personal jurisdiction over a non-resident defendant complies with the Due Process Clause, courts consider three factors: “(1) the defendant must either purposefully direct his activities toward the forum or purposefully avail himself of the privileges of conducting activities in the forum; (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.” Axiom Foods, Inc. v. Acerchem Int’l, Inc., 874 F.3d 1064, 1068 (9th Cir. 2017) (alterations and quotation marks omitted).
First, the Ninth Circuit held that Impossible X had purposefully directed its activities toward California and availed itself of the privileges of doing business there by building its brand in San Diego. For two years, San Diego had functionally been Impossible X’s headquarters, and Runyan had extensively marketed Impossible X from and in California, including by highlighting the connection between the company and San Diego.
Second, the Court held that the trademark declaratory judgment action “arose out of or related to” Impossible X’s brand-building in California. Typically, in actions for trademark infringement, specific jurisdiction is based on whether the defendant’s infringing actions occurred in the forum, but in a declaratory judgment action for non-infringement, the parties are reversed. The Court recognized that, in the context of a declaratory judgment action for patent non-infringement, the Federal Circuit had held that specific jurisdiction could be based only the patentee’s enforcement activities in the forum state, not on the patentee’s sales within the state. The Ninth Circuit declined to adopt a similar rule for the trademark context. It distinguished trademarks from patents based on the nature and basis of the rights they create. Because patents create a right to exclude rather than a right to make or sell, the patentee’s sales of the product are arguably irrelevant to a non-infringement action. In contrast, the Court reasoned, trademark rights and priority are created by use of the trademark, so Impossible X’s trademark-building activities in California would be integral to the rights addressed in the declaratory judgment action. The Court thus concluded that Impossible Foods’ action arose from or related to those trademark-building activities.
Finally, the Court held that the district court’s exercise of personal jurisdiction over Impossible X would be reasonable. It again pointed to the fact that Runyan had operated the business from California for two years and regularly continued traveling to California after moving out of state.
Judge Van Dyke dissented. He believed that Impossible Foods had waived any argument that personal jurisdiction could be based on Impossible X’s brand-building activities by failing to make that argument before the district court. Therefore, he would not have considered that basis for jurisdiction. Moreover, if he reached the question, he would have followed the patent law rule and held that specific jurisdiction exists in a trademark declaratory judgment action only when the defendant purposefully directed at least one enforcement activity into the forum state.
EARTH ISLAND INSTITUTE v. MULDOON
The Court holds that the National Park Service’s decision to forgo an environmental-impact statement in connection with certain fire-management projects was not arbitrary or capricious.
The panel: Judges Murguia, Friedland, and Bennett, with Judge Friedland writing for the Court.
Key highlight: “It is always possible to quibble with an agency’s explanation; a motivated litigant will be able to identify parts of any agency explanation that could have been more precise or thorough. But the arbitrary and capricious standard does not demand perfection. As the Supreme Court has instructed, we should uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned. In light of the deference we owe the Agency and the purpose behind the abbreviated categorical exclusion process, we hold that the Institute is not likely to prevail on its argument that the Agency improperly concluded that the Projects fall within the scope of the minor-change exclusion.” (Quotation marks and citations omitted.)
Background: In 2004, the National Park Service (NPS) adopted a comprehensive plan for fire management in Yosemite National Park. That plan included an analysis of the plan’s expected environmental impacts. It also considered various fire-management techniques, including thinning: cutting down and removing trees and vegetation in preparation for controlled burns. In 2021 and 2022, NPS approved two thinning projects in Yosemite. Those projects deviated somewhat from the thinning measures contemplated in the 2004 plan: namely, they authorized the removal of larger trees and expanded the locations in which thinning would take place.
Ordinarily, the National Environmental Policy Act (NEPA) requires that before an agency take an action that will significantly affect the quality of the human environment, it prepare an environmental impact statement describing, among other things, the reasonably foreseeable environmental effects of the proposed action. (In some cases, a less demanding environmental assessment is permitted instead.) NEPA’s regulations, however, encourage agencies to identify certain categories of actions that normally do not have a significant effect on the environment. Once such a “categorical exclusion” is identified, an agency normally need not prepare an environmental impact statement or assessment for an action that fits within that exclusion. One of those exclusions, known as a “minor-change exclusion,” covers “changes or amendments to an approved plan, when such changes would cause no or only minimal environmental impact.” NPS determined that no environmental impact statement for the 2021 and 2022 projects was required because they were changes to the 2004 plan that would cause no or minimal environmental impact.
The Earth Island Institute (the Institute) sued NPS, Yosemite’s Superintendent, and the Department of the Interior (the Agency), arguing that it was unlawful to approve the projects without conducting a full review of their environmental impacts. The Institute sought a preliminary injunction to halt parts of those projects. The district court denied the motion.
Result: The Ninth Circuit affirmed. The Court held that the Institute was unlikely to succeed on the merits of its claim because the Agency’s decision that the 2021 and 2022 projects fell under the minor-change exclusion was not arbitrary or capricious.
Agency action is arbitrary and capricious “only if the agency relied on factors Congress did not intend it to consider, entirely failed to consider an important aspect of the problem, or offered an explanation that runs counter to the evidence before the agency or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Env’t Def. Ctr. v. Bureau of Ocean Energy Mgmt., 36 F.4th 850, 871 (9th Cir. 2022). Here, the Agency “adequately explained its conclusion that” the modifications in the 2021 and 2022 projects “would have no or only minimal environmental impact.” In documents prepared in connection with the projects, the Agency expressly considered the impact they would have on 29 resources, including air quality, vegetation, and wildlife habitats. While it recognized that there would be some potential negative impact, it concluded that the actions would be beneficial to forest health overall. The Agency also considered the projects’ impact on threatened and endangered species. The Court emphasized that, based on the text of the minor-change exclusion, the relevant environmental impact is “the expected environmental impact of the aspects of the Projects that deviate from the Plan, not the expected environmental impact of the Projects themselves.”
The Court then rejected the Institute’s three arguments for why the Agency acted arbitrarily and capriciously. First, it explained that it did not matter whether another exclusion might apply, because an agency need cite and rely only on one exclusion. Second, it disagreed with the Institute that the projects were implementations of the 2004 plan, rather than changes to it. Third, it dismissed the Institute’s argument that the Agency’s analysis of the environmental impact of the projects was deficient. While the Agency’s documents did not discuss the projects’ expected impacts at the same level of detail that the 2004 plan did, that was “not surprising,” as “the entire point of categorical exclusions is to reduce the administrative burden of approving certain projects.”
Finally, the Court rejected the Institute’s argument that, under NEPA’s regulations, the Agency could not rely on the minor-change exclusion because the projects might have highly controversial environmental effects. “A project is highly controversial if there is a substantial dispute about [its] size, nature, or effect.” Safari Club Int’l v. Haaland, 31 F.4th 1157, 1179 (9th Cir. 2022). According to the Institute, some scientists dispute the Agency’s position that tree-thinning aids fire prevention and management. But to the extent such a controversy exists, the Court explained, it concerns the approach taken by the 2004 plan—and the inquiry must focus on the ways in which the projects deviate from that plan. In light of that conclusion, the Institute had failed to offer “substantial evidence” that the projects themselves were highly controversial.
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