Legal Case Summary

Our next case is the flying pigs. He versus RR or AJ franchise. Okay, so get settled there. We're going to first hear from Mr. Evans representing the appellant, the flying pigs. I thought this was going to be a different subject matter when I just styled the case. This is pretty boring. I'm afraid council and the prior action had the same reaction. They were expecting much more out of the flying pig and I'm afraid I can give you today. I don't mean to do study on that. May I please the court? My name is Brad Evans. I'm the attorney for the appellant flying pigs. It was the plaintiff below in this action. There are two issues before the court here today. The first is whether an action foreclose on a state law equitable lien gives rise to federal jurisdiction. It's only by virtue of the fact that the thing to be foreclosed upon is a federally registered trademark. The second issue is whether the settlement and voluntary dismissal of a lawsuit involving flying pigs' judgment debtor. But to which flying pigs was not a party is claimed perclusive as to flying pigs' equitable lien claim and foreclosure action. We've identified substantial authority establishing that the answer to both questions should be no. And we're therefore asking this court to reverse the ruling of the district court finding jurisdiction and dismissing flight pigs claims. The primary intention is the district court had no jurisdiction and it should have granted a motion to rebound. That's correct. That's our first argument. And if you're right on that, no need to get to the second point. That's correct

. And if you're right on that, what would we do from what would the opinion say at the end of it? The opinion ultimately would find that the district court lacked jurisdiction. No, what would it say? We vacate the reverse district court and order that the district court demand the case to stay court. So we demand for a reman. That's correct, Dr. That's correct. That's correct. I'd just like to highlight a couple of facts in terms of the timeline of events. The two marks in question in this case were registered to an entity called Chelda with the Patent Trade Mark Office many years before the disputes relating to this case arose. Flying pigs established an equitable lien on those two marks in Guilford County Superior Court on July 30, 2010. About three weeks later, the defendant's predecessor in interest related entity purchased the assets of another entity, Ham's Respirance Inc., which was a subsidiary of Chelda. It purchased those assets from bankruptcy. And importantly, the bankruptcy schedules of Ham's Respirance Inc. indicated that it owned no intellectual property. And the assets were purchased as is where it is. They're saying it's known or they're saying it abandoned. It's said there is a column that says intellectual property patents, copyrights, or other intellectual property. And there's a column that says none in the box. The box was checked none. But they did not possess it. The Bank of North Carolina, another creditor of Chelda in Chelda filed a lawsuit seeking to restrict RCR from using the Ham's marks. A preliminary injunction was granted by the middle district in that action finding that Chelda had established a likelihood of success on the merits. Is that Judge Baby? That was Judge Baby here. Finding the Chelda

. And Guilford County thing was Judge Eagle. That's correct. And that was how our equitable lean was established. There's another lawsuit in North Carolina. And that is the action. Three lawsuits underlying this thing. In a sense, Your Honor, that's correct. The action that we're in front of, your Honor's today, was an action that we filed in Guilford County Superior for seeking to four, excuse me, in the North County Superior Court, seeking to four close on the equitable leans that were established in Guilford County Superior Court. Which is in the middle district of North Carolina. Correct. You filed a case in the North County, which is where Kingston? Yes, Your Honor. Which is in the eastern part of North Carolina. Correct. That's where Flying Pigs is based. That's where Flying Pigs originated. So we filed that action in the North County Superior Court to four close on our equitable lean, which is the natural and reasonable place for a party to file a four closure action under Article 29A of Chapter 1 of the North Carolina General Statues. So we filed that action, RRAJ, then removed the action to the Eastern District of North Carolina, citing 28 USC 1338, which provides jurisdiction for actions arising out of laws relating to patents, trademarks and copyrights. Now while trademarks and disputably are the subject of what we're trying to four close upon, and they are the subject of our equitable lean, our federal courts appeal, that the mere involvement of the rights listed in 1338, such as patent trademarks and copyright, does not in and of itself give rise to federal jurisdiction. Instead, we have to look at the Caterpillar versus Williams case, which refers to the well pleated complaint, and viewing the well pleated complaint does the action arise under a federal statute. Now our courts have said that the arising under jurisdiction, the vast majority of cases where there's federal jurisdiction will be cases where a federal statute creates the calls of action. It's the famous statement by Justice Hall as many years ago that the federal calls of action will create the jurisdiction. Unquestionably, that's not the case here. I don't think there's any dispute that our equitable lean is a creature of state law, and our action to four close the procedure that we're pursuing under Chapter 1 of the North Carolina General Statutes is a state court procedure. The question then is the mere federal flavor created by the fact that there is a trademark being foreclosed upon, does that alone create federal question jurisdiction? And we contend that it does not

. We begin by citing the Republic Pictures case from the Ninth Circuit. In that case, the Ninth Circuit concluded that a federal district court does not have jurisdiction to foreclose a mortgage on a copyright. And we contend that the analysis is similar here, a mortgage on a copyright and a lean on on a trademark for all practical purposes, I think is indistinguishable from the jurisdictional context. In both situations, we have a lean on a federally created right. And in the Republic Pictures case, the Ninth Circuit concluded that there was not a substantial federal issue justified jurisdiction. Now, our AJA seeks to argue, and the District Court apparently accepted that the mere fact that there is a presumption of ownership created by a federal statute is sufficient to give rise to jurisdiction. And we indicated this in our complaint. We referenced the fact that the trademarks had been recorded with the Patent and Trademark Office demonstrating the ownership of celldo when our lean attached. Ownership had already been established. It's been established in the underlying litigation. If you're referring to the middle district litigation, they were fighting over ownership. That was actually an infringement case. And celldo was seeking to... I'm sorry. In your equitable lean and judicial sale action in Guilford County. In Guilford County, Judge Eagles indicated in her order that celldo was the owner of those two trademarks and therefore that our equity... So that's established. Did you argue that we don't even need to go there? As to us. That's our contingent. Now, our AJA seeks to argue, and the District Court apparently accepted that the mere fact of that presumption of ownership gives rise to federal jurisdiction

. And again, make no mistake, the registration does establish ownership. But is that presumption that arises by virtue of a federal statute when we're not suing under the land of land? We're not alleging infringement. We're not seeking land-amac remedies. We're simply seeking to foreclose. We're not seeking to claim that the appellate does not own the Mars. We acknowledge that they own the Mars. We are simply seeking to get paid. And so the question is, does that mere presumption of ownership arising from registration is that sufficient to create a federal question? And we contend that it does not. A good case that I think the courts should consider in that regard is the Merrill Dahl Pharmaceuticals versus Thompson Case, cited in gun versus maintenance. In fact, cited in one of the cases that the appellate noticed yesterday. In the Merrill Dahl Pharmaceuticals case, the plaintiff was a state court tort plaintiff in a negligence action. And the plaintiff sought to use the violation of a federal statute to establish negligence per se in essence to use a federal statute to establish the element of a state court tort. And I think that's analogous to our situation here. Yes, there is a federal statute that establishes ownership, but we are pursuing a state court remedy in that support closure. The second issue before the court deals with Rastu Dukata and the issue is whether the private settlement between Chelda, another creditor, and the appellate's predecessor in interest, operates to essentially extinguish our equitable lien that was established by the Superior Court in Guilford County. And obviously that will be a shocking result of my client that is a half million dollar lien by virtue of an action that it was not involved in. And fortunately, that's not the law. I think the analysis begins with the Taylor versus Sturgial Case from the Supreme Court. And if you read the Taylor versus Sturgial opinion, the Supreme Court is addressing when a non-party can be precluded. It's non-party preclusion. And the Supreme Court in Taylor versus Sturgial goes to great lengths to explain how fundamental the rule is that everyone should have his or her day in court, that it's not appropriate to bind someone who does not have a full and fair opportunity to litigate in the prior action. And therefore, that the exceptions to the non-party preclusion rule will be very discreet and limited. And in Taylor versus Sturgial, the court's first decision was to reject what was referred to as virtual representation. There were some circuits that had a virtual representation analysis that said, we're going to take this on a case-by-case basis, looking at the equities and the relationships between the parties and whether their interests are aligned

. And based on all those factors, we'll decide whether you non-party will be precluded or not. And the Supreme Court says that is completely unworkable. The fundamental nature of your right to a day in court is too important to allow that sort of free flowing analysis. There need to be very discreet and limited exceptions. And in fact, the court stated just last year in the Smith versus Sturgial case, the fundamental nature of the non-party preclusion rule and the narrowness of the exceptions go hand in hand. So Taylor cited six exceptions and the only one that's been identified by the defendant in this case is substantive legal relationships exception. Now in Taylor versus Sturgial, the court gave three examples of substantive legal relationships that will give rise to non-party preclusion. Preceding and succeeding owners of property which does not apply here, Baylor Bayley which does not apply here, and Ascignor and Ascigny which does not apply here. Notably the court did not say debt or creditor, more did you or more did you lean or lean? And I think the conspicuous absence of those relationships, which are the relationships that are at issue in this case demonstrates that that is not one of the relationships that gives rise to non-party preclusion. And in fact, the Supreme Court in the Chase versus Norwalk case cited in our brief many years earlier had said, and this is a quote from the case that a decree against a mortgage or with respect to property does not bind a mortgage. So in Taylor versus Sturgial, you have a list of the exceptions from which debt or creditor, more did you or more did you exclude it. And then the Chase versus Norwalk case, you have a specific holding from the Supreme Court saying that a mortgage or mortgage relationship is not sufficient for non-party preclusion. I think where that leaves us is it really places a pretty heavy onus on the defendant in this case, whose burden it is to establish race to you to God, that for some reason our equitable lean is substantially so substantially different from a mortgage relationship that a lean or should be bound where a mortgagee is not. And while the defendant makes arguments in their brief that there are differences between mortgages and equitable lean and certainly they are, they have different names. There's a difference between the security interests as well. There's no substantial difference that justifies why my client should be bound by decision affecting its debtor, but a mortgagee should not be bound by a decision involving the mortgage or. There's just no fundamental distinction between the two. And in fact the secondary sources include the rest of the second which was cited with favor by the Supreme Court in Taylor versus Sturgial. Section 54 of the rest of the judgment says concurrent owners, including mortgages and owners of comparable equity and security interests should not be bound. And that is exactly what we're asking the Court to do today. The only other argument that I want to address just briefly that's raised by the defendant is the contention that my client somehow had a vested interest in the outcome, I believe is the terms that were used in the outcome of the middle district case and we should therefore be bound. I think that argument's full of holes and I'll just cite a few. First of all, it is not a Taylor versus Sturgial exception. And Taylor versus Sturgial, Ian was very specific about the necessity for bright lines and sharp corners in identifying these exceptions

. Second, although the defendant's content that it is not a virtual representation analysis, if you look at the substance of what is being argued in that portion of the defendant's brief is precisely a virtual representation analysis that the parties generally had the same interest that we wanted them to win that there was some connection between the two. And that's exactly what the Supreme Court rejected in Taylor versus Sturgial Supreme Court said that that sort of free form analysis is insufficient. And finally, any contention that my client benefited from the middle district action is completely illusory. The contention is that we lost our equitable lien by virtue of a payment from the defendant's predecessor and interest to someone else. And how that could possibly help us, we don't see. There is an argument that we moved up in priority and are closer to being able to enforce our judgment against shelter, but at the same time we've lost our position as a secured party. And there's no indication that there's anything to recover from shelter at this point. We needed those trademarks in order to recover in this case. With that, I'll reserve the rest of my time. Thank you. Thank you, Mr. Adden. Mr. Reardon. Thank you, Your Honour. May I please the court I'm Gavin Reardon from Guildford County and I represent the defendant in this matter, RRAJ, Franchising, and I'll see. I'd like to summarize first. In the present case, federal jurisdiction was appropriate because the face of the complaint itself revealed two separate federal questions. The first question was whether or not Chalda owned the marks. These are federal trademarks and whether or not they own them and that's a necessary element of their claim. They predicated their ownership on the federal registration and federal law. The second federal question was whether or not plaintiffs are entitled to get an injunction against the owner of a trademark preventing a trade, an owner of federal trademarks from using their own trademarks. These two questions are substantial because the federal government and not the states provides the substantive law on the registration, enforcement, and use of trademarks. Therefore, under the facts of this case, the federal government has a direct interest in ensuring that state courts do not, under the guise of equity, give parties, rights, and remedies that are contrary to that federal substantive law

. The questions are especially substantial because this is an issue of first impression regardless of what the plaintiffs try to frame it. No circuit court has ever examined the limits of an equitable lien. Furthermore, no federal court has ever held that an owner can be enjoined from using their own federal trademarks. Why is it necessary to determine in a federal action in this case whether children owned the trademarks or not? Wasn't that already established? No, your honor. They have never argued that they agreed with your point Judge Thacker but they never argued that themselves. And their complaint doesn't say that. What their complaint does, I mean their brief is very clear. They say, we, a child, they had a federal registration, it was five years it's incontestable. That's their case. Why is it important? Because there is no, and let's clear some of the chaff away. We have never said at this point that their lien is invalid. We may get to that at some point because we believe it violated the federal, the bankruptcy state. That's a federal defense. That's not grounds for removal. So at this point, we admit that they have a lien. But what they have a lien in is whatever child owned as of that lien date. So the entire case comes down to what did they get a lien in? So the, you know, their point they argue that that child had a lien on these trademarks. We say they did. Where they have a lien in that estate law question? Whether they have a lien, yes, they have a lien. Where they have a lien is the state law question. Is the state law question? You can't raise a federal question as a federal defense and create jurisdiction. You agree with that? We do agree with that. But the argument, let me back up to one of the questions that Judge Boyle asked them consistently. Why didn't you just move for a closure action? They didn't need to bring this action to foreclose on their equitable lien

. Judge Eagles already gave him an order. They could have gone right to the clerk and got an order that said, sell whatever trademarks, shelter owned as of, as of that date in 2010. They didn't do that. They wanted something more. Why didn't they do that? Because if the sheriff had tried to sell that or they had tried to sell it through a private sale, who's going to buy that? Because there was a question of what children owned. So they wanted to go to court and have the court stick their own premature on it and say, hey, children owned those trademarks. So if you buy it the sale, you're going to get those trademarks. That's what they really wanted. Because they knew there was a dispute over who owned those trademarks. That's what this case is really about. Who owned those trademarks? Isn't that a question of state law? No, that is not a question of state law. That's a question of federal law because they're federal trademarks and they're relying on the federal registration and the Lanemack to try to prove that on the court. But a state court can assess a state of federal law in that context. If you have questions of ownership or a state law question. Well, absolutely. And if that was the only thing if they had stopped there, there would be no federal jurisdiction. If they had stopped there saying, hey, we just need a determination of who owns these trademarks because the state courts have to turn jurisdiction. They can interpret or apply the Lanemack. There's no objection to that. That's okay. But they didn't stop there. They asked for an injunction to prevent the owner from using its own trademarks. And that's another federal question. Once they've already said, hey, we're trying to prove it on the Lanemack

. They've said in their reply brief that they haven't given any stress in the state court to protect their ownership rights. Well, they've said they haven't cited any authority for where the court can do that. And actually statutorily, there is no authority in North Carolina, which makes it a lot like the Bracato case. When you look at the reasons why the North Carolina Court can grant an injunction and the general statute 1-485, it does not allow, there's no provision in there that says you can tell an owner of the court. The owner to not use its own thing. You can tell them not to go do something. You can't destroy it. You can't waste it. You can't sell it. All those things are okay. But they've already put themselves under the Lanemack by having to rely on that ownership. So now we have to look and say, because the state court doesn't give it, is this something you can do under the Lanemack? You argue that they're beyond ownership because they're asking now, not only is their ownership, but now, what does ownership mean? What does ownership mean and what can we do about it? And they are trying to get a remedy that you can't get. The Lanemack. The state court could decide that. No, the state court, this is because this is a question of first in my opinion or on, or an opinion, a state court cannot determine that because this is a question of first impression. It goes to the interpretation of the Lanemack. Can you under the Lanemack? And a state court can interpret the federal law. Well, that seems to me that this is a federal defense that you got to raise. And I'm having trouble with the jurisdiction here. Well, you're trying to stretch it. And I'm worried about that. Make a new law with this thing. New federal jurisdictional law. Well, you're on, and I think we're in any way, if it goes back to the state court, but that's another matter

. Well, Your Honor, I think, and we're grateful for the opportunity to have oral argument in this case because, you know, I think we're very inefficient in our brief. We missed the case that we really should have been talking about, which was gun. That's where this argument should have started. I'm sorry, the Grable case. The Grable and the gun cases were two forms. That's a Supreme Court case. Yes, Your Honor. And it laid out the four factors that we need to show. And that's really where we needed to be because I think so much of the argument has been in other places. But why is it a necessary federal question? Well, first of all, as we say, the first one is they've raised ownership. And we can't combine them all. We need to walk through them. The first question is, is they've raised federal ownership and that they have the authority to impose an injunction on a federal trademark? Those are federal questions. The next thing is we dispute them. We say, you don't own it under the, you can't prove ownership. We've got to have go to the facts of that and we have to look at the land of matter to do that. And we don't agree as a fundamental matter that it's possible to get an injunction for this. That it's legally possible. So we have got the first two. There's a federal question and it's in dispute. The next two questions really are substantiality and that federal state balance. Well, is it substantial? Well, we believe it is. And it's, and really the substantiality comes from that injunction. Again, if it was just whether or not state courts can apply the land of matter, the ownership provisions, the, you know, that's easy. They do that all the time. They should be allowed to continue to do that. But what they've never done is decided that they can keep an owner from using its own trademark. And that's a question that if state courts are allowed to just start saying, oh, we're going to apply our equitable principles to ignore the land of matter. Well, where does that go? Right now the land of matter says only the owner can, can sue for infringement. Can, can a state court say, well, equitably, we're going to, we're going to let other people do it also. And it's a question of first impression. Now, two years down the road after this court spoken, then maybe the issues no longer substantial because there's some sort of guidance on it. There's some, there's either a yes or no, you can do it or you can't do it. And then there's that whole issue of the federalism concern, the balance. Well, as several cases talk about, if this case were allowed into federal court, it would affect a microscopic number of cases because it's an equitable lane and they're seeking an injunction against the owner. How many of those cases are, is any federal court to see? But it would create some of those lines that we need to see. That's why we believe it is substantial and that it's, and that it doesn't upset that balance. I see from your skepticism that I think we're still on the, on the federal question issue. I think I may not have answered your question, Judge. That's fine. I just, I just kind of had to feeling you're trying to stretch things a little bit. You get this thing in federal court. On the substantial prong, are you arguing that it is substantial because it's an issue of first impression? That's a part of it. That's definitely a part of it. Not every, not every issue of first impression would ever be substantial. There's plenty of them that, okay, we've never considered, but why not at the state court? But this goes so much farther than any case has ever done, and there's certainly nothing in the federal statute that would allow it. And there's nothing even in North Carolina statute that would allow it. That's why it's substantial

. They do that all the time. They should be allowed to continue to do that. But what they've never done is decided that they can keep an owner from using its own trademark. And that's a question that if state courts are allowed to just start saying, oh, we're going to apply our equitable principles to ignore the land of matter. Well, where does that go? Right now the land of matter says only the owner can, can sue for infringement. Can, can a state court say, well, equitably, we're going to, we're going to let other people do it also. And it's a question of first impression. Now, two years down the road after this court spoken, then maybe the issues no longer substantial because there's some sort of guidance on it. There's some, there's either a yes or no, you can do it or you can't do it. And then there's that whole issue of the federalism concern, the balance. Well, as several cases talk about, if this case were allowed into federal court, it would affect a microscopic number of cases because it's an equitable lane and they're seeking an injunction against the owner. How many of those cases are, is any federal court to see? But it would create some of those lines that we need to see. That's why we believe it is substantial and that it's, and that it doesn't upset that balance. I see from your skepticism that I think we're still on the, on the federal question issue. I think I may not have answered your question, Judge. That's fine. I just, I just kind of had to feeling you're trying to stretch things a little bit. You get this thing in federal court. On the substantial prong, are you arguing that it is substantial because it's an issue of first impression? That's a part of it. That's definitely a part of it. Not every, not every issue of first impression would ever be substantial. There's plenty of them that, okay, we've never considered, but why not at the state court? But this goes so much farther than any case has ever done, and there's certainly nothing in the federal statute that would allow it. And there's nothing even in North Carolina statute that would allow it. That's why it's substantial. It really gives a non-owner, and we're talking about an equitable lean holder. It's not a mortgage or it's not a license or, as the case is, other cases talk about a privy in law. Someone who is a very, very tiny right or interest, not even a right, an interest in a trademark, and suddenly they're going to have the power to stop the owner from using a trademark and interstate commerce. If all they had said was for the trademark was for their injunction, hey, you can't waste it, you can't try to transfer it, you can't do any of those things. Well, that's normal things that state courts can do to protect the interest of a lawsuit, but this goes beyond that. This goes to the point of injuring interstate commerce saying you cannot use that anywhere in this nation, and there's just no ruin in the Lanham Act for that. Now, granted, on review, maybe a court's going to say, what the heck? Let's let that happen. But it's never happened, and it is such a strange and unusual request that it should be looked at first by the federal courts, not by the state courts who have no guidance on this matter. If there's no further questions on that, I would like to address the race due to Cata issue. Obviously, the Taylor case is the case to look at, and we believe that this is one of those preexisting legal, substantial relationships. And again, this is an issue of first impression. No courts ever had to decide where does an equitable lien fit, so we are asking you to put it in a basket, either put it in the non-privileged basket. And we believe it should be put in the privity basket because of its nature and what it's more like. Now, of course, if you want us to decide two issues of first impression. Unfortunately, that's absolutely right. But yes, it would be easier to decide the first one against us, but both of them should be deciding in our paper. And the reason there are two issues of first impression is because equitable liens are an unusual thing. On their face, they're kind of dubious because they look a lot like an assignment in gross. Now, the cases have said you can do it, but you have to transfer it with its goodwill, and your only interest is in having the thing sold and getting paid for it. And again, that's one of the problems. In case of say, those are your only interest. Get it sold, have it paid. There's no federal case that says, get it sold, have it paid, get it in a junction in that meantime. But, you know, again, we pointed out some of the cases that talk about that, that that equitable lien is a privy in law alone

. It really gives a non-owner, and we're talking about an equitable lean holder. It's not a mortgage or it's not a license or, as the case is, other cases talk about a privy in law. Someone who is a very, very tiny right or interest, not even a right, an interest in a trademark, and suddenly they're going to have the power to stop the owner from using a trademark and interstate commerce. If all they had said was for the trademark was for their injunction, hey, you can't waste it, you can't try to transfer it, you can't do any of those things. Well, that's normal things that state courts can do to protect the interest of a lawsuit, but this goes beyond that. This goes to the point of injuring interstate commerce saying you cannot use that anywhere in this nation, and there's just no ruin in the Lanham Act for that. Now, granted, on review, maybe a court's going to say, what the heck? Let's let that happen. But it's never happened, and it is such a strange and unusual request that it should be looked at first by the federal courts, not by the state courts who have no guidance on this matter. If there's no further questions on that, I would like to address the race due to Cata issue. Obviously, the Taylor case is the case to look at, and we believe that this is one of those preexisting legal, substantial relationships. And again, this is an issue of first impression. No courts ever had to decide where does an equitable lien fit, so we are asking you to put it in a basket, either put it in the non-privileged basket. And we believe it should be put in the privity basket because of its nature and what it's more like. Now, of course, if you want us to decide two issues of first impression. Unfortunately, that's absolutely right. But yes, it would be easier to decide the first one against us, but both of them should be deciding in our paper. And the reason there are two issues of first impression is because equitable liens are an unusual thing. On their face, they're kind of dubious because they look a lot like an assignment in gross. Now, the cases have said you can do it, but you have to transfer it with its goodwill, and your only interest is in having the thing sold and getting paid for it. And again, that's one of the problems. In case of say, those are your only interest. Get it sold, have it paid. There's no federal case that says, get it sold, have it paid, get it in a junction in that meantime. But, you know, again, we pointed out some of the cases that talk about that, that that equitable lien is a privy in law alone. That's all you have. And it makes sense now as the plaintiffs point out a lot of these privity analysis go back to property law. Well, that's exactly what we pointed to. And it makes a lot of sense in the reformation concept and the reformation type cases, you've got this tiny little interest. You didn't pay for it. You didn't change your position based on it. And they're not taking away anything you ever really had in reformation what the court is doing is looking at the date and fixing it. It's going backwards in time and pointing out, hey, look, this is what the date should have been. We'd also point out that, you know, again, a critical difference between mortgages. They keep saying that we haven't shown any relevant differences between mortgages and leans. Well, again, this is not a lien. It is an equitable lien. And that's something they continually allied over that, you know, leans are very much like mortgages. They're just mortgages. They're just security interests in a different type of property. And as, you know, North Carolina law and many courts have said, one of the things you get with a normal lien is a right to possession. That's the same major right you have in a mortgage. Is that right to possession? You never have a right to possession with an equitable lien. That's what distinguishes it from all of these other interests. You have a very, very tiny interest. You don't have a right to possession. And again, that's going back to the rule. Well, that's one of our problems. We believe their injunction is really trying to assume possession in a way

. That's all you have. And it makes sense now as the plaintiffs point out a lot of these privity analysis go back to property law. Well, that's exactly what we pointed to. And it makes a lot of sense in the reformation concept and the reformation type cases, you've got this tiny little interest. You didn't pay for it. You didn't change your position based on it. And they're not taking away anything you ever really had in reformation what the court is doing is looking at the date and fixing it. It's going backwards in time and pointing out, hey, look, this is what the date should have been. We'd also point out that, you know, again, a critical difference between mortgages. They keep saying that we haven't shown any relevant differences between mortgages and leans. Well, again, this is not a lien. It is an equitable lien. And that's something they continually allied over that, you know, leans are very much like mortgages. They're just mortgages. They're just security interests in a different type of property. And as, you know, North Carolina law and many courts have said, one of the things you get with a normal lien is a right to possession. That's the same major right you have in a mortgage. Is that right to possession? You never have a right to possession with an equitable lien. That's what distinguishes it from all of these other interests. You have a very, very tiny interest. You don't have a right to possession. And again, that's going back to the rule. Well, that's one of our problems. We believe their injunction is really trying to assume possession in a way. I'd also like to. Councilman asked this. Yes. In your mind, what do you think the equitable lien meant everything with, well, there was no question that they had to mark they were using nobody else would use. They were used. What would it mean in terms of collection? What would it mean to you? To us? What would that mean? It depends on their rights against your client. Assuming that we actually owned it? Yeah. Well, then they could have a foreclosure set. And then the foreclose, what would they get on the foreclose? They can force a sale of the trade block and end its associated goodwill. And somebody can come along and they can pay some amount of money for that. Which is ending the red federally registered trade bomb. Isn't it not? Well, I believe that. And again, you know, there's just no cases that have no, no, no, no, no, I'm asking you. Isn't that their practical effect? You can foreclose on it means that if you have a right state right of foreclose, that means you have a right to as well as means or closure. Ended notwithstanding whatever federal registration makes it. Correct? Well, that's what I would think would happen. But they don't you can see then that this is an integral part of state power here then. For the, as to the lean aspect and I think that's what they argue. Well, I think what a, what a foreclosure actually doesn't foreclose it because that would not help the buyer doesn't want it foreclosed. Cut off. Well, you told me that room and it was just to go foreclosed means to end the federal registration as an only share. Well, if it was foreclosed, our argument would be that it had been foreclosed and we could just re register. You know, that would be our, that it was foreclosed, it's cut off. We've got to, it becomes a common law trademark

. I'd also like to. Councilman asked this. Yes. In your mind, what do you think the equitable lien meant everything with, well, there was no question that they had to mark they were using nobody else would use. They were used. What would it mean in terms of collection? What would it mean to you? To us? What would that mean? It depends on their rights against your client. Assuming that we actually owned it? Yeah. Well, then they could have a foreclosure set. And then the foreclose, what would they get on the foreclose? They can force a sale of the trade block and end its associated goodwill. And somebody can come along and they can pay some amount of money for that. Which is ending the red federally registered trade bomb. Isn't it not? Well, I believe that. And again, you know, there's just no cases that have no, no, no, no, no, I'm asking you. Isn't that their practical effect? You can foreclose on it means that if you have a right state right of foreclose, that means you have a right to as well as means or closure. Ended notwithstanding whatever federal registration makes it. Correct? Well, that's what I would think would happen. But they don't you can see then that this is an integral part of state power here then. For the, as to the lean aspect and I think that's what they argue. Well, I think what a, what a foreclosure actually doesn't foreclose it because that would not help the buyer doesn't want it foreclosed. Cut off. Well, you told me that room and it was just to go foreclosed means to end the federal registration as an only share. Well, if it was foreclosed, our argument would be that it had been foreclosed and we could just re register. You know, that would be our, that it was foreclosed, it's cut off. We've got to, it becomes a common law trademark. We were first in use. We get to use it. That would be our argument if we ever have to get it. And you still can argue that. Yes. But there are no cases that say what happens after you get the, the, the lean. That's one of the problems. There's just, there's no cases out there. The, the Adam's apple and a couple other cases say, oh, yeah, you can get a lean and you can foreclose on. But the fact that that's, that question is not answered, that mean that this is intrinsically a federal question though. That's what I'm trying to say. Mr. Hanson. Well, I agree that foreclosure of an echoed lean is not a federal question. You know, if there was no question of whether or not they owned it, that, that child that had owned it. And if they weren't seeking to enjoin the owner, there would be no federal questions here. There would be no substantial federal questions here. You know, that's why we don't agree with their framing that this is just about foreclosure of the lean. If, if those were the cases, if, if, if instead of representing RRJ, we were representing children. That, those issues wouldn't come up. But they're not suing the judgment, then. They're suing somebody else. And they're trying to get, they've got to make that link in ownership before they can get anywhere. And then again, they don't stop there

. We were first in use. We get to use it. That would be our argument if we ever have to get it. And you still can argue that. Yes. But there are no cases that say what happens after you get the, the, the lean. That's one of the problems. There's just, there's no cases out there. The, the Adam's apple and a couple other cases say, oh, yeah, you can get a lean and you can foreclose on. But the fact that that's, that question is not answered, that mean that this is intrinsically a federal question though. That's what I'm trying to say. Mr. Hanson. Well, I agree that foreclosure of an echoed lean is not a federal question. You know, if there was no question of whether or not they owned it, that, that child that had owned it. And if they weren't seeking to enjoin the owner, there would be no federal questions here. There would be no substantial federal questions here. You know, that's why we don't agree with their framing that this is just about foreclosure of the lean. If, if those were the cases, if, if, if instead of representing RRJ, we were representing children. That, those issues wouldn't come up. But they're not suing the judgment, then. They're suing somebody else. And they're trying to get, they've got to make that link in ownership before they can get anywhere. And then again, they don't stop there. If their complaint had just asked for an injunction preventing us from wasting, transferring, selling, doing anything like that. There are no federal questions, but they didn't do that. That's the problem. You know, they just went too far. Again, they could have just gone to the clerk and got an order of say. Well, they already had an order of say. They could have just gone to the clerk and got an execution. They didn't need to bring this action. Why did they bring this action? They wanted something more than just, than just that execution. You don't need to go to the superior report for that. You don't need to ask the judge for that. So what did they want? They in effect wanted a declaration that the buyer was going to get something. And frankly, we think the injunction is just to try to hold RRJ over barrel so that RRJ will have to go to the auction and be the highest bidder. But that's really not the most important thing. The most important thing is they're trying to create new law here. We at least admit that new law has to be created. If there are no further questions. Of course, do you think they could come to? I'm going to seek for conversion. You convert it and ask that they have an equitable lean in and therefore just want the money that you will climb received for. Just conversion was equitable. Lean. And then just to say that you received money for it. We want the money you received for it. Would that make it federal too? Oh, no

. If their complaint had just asked for an injunction preventing us from wasting, transferring, selling, doing anything like that. There are no federal questions, but they didn't do that. That's the problem. You know, they just went too far. Again, they could have just gone to the clerk and got an order of say. Well, they already had an order of say. They could have just gone to the clerk and got an execution. They didn't need to bring this action. Why did they bring this action? They wanted something more than just, than just that execution. You don't need to go to the superior report for that. You don't need to ask the judge for that. So what did they want? They in effect wanted a declaration that the buyer was going to get something. And frankly, we think the injunction is just to try to hold RRJ over barrel so that RRJ will have to go to the auction and be the highest bidder. But that's really not the most important thing. The most important thing is they're trying to create new law here. We at least admit that new law has to be created. If there are no further questions. Of course, do you think they could come to? I'm going to seek for conversion. You convert it and ask that they have an equitable lean in and therefore just want the money that you will climb received for. Just conversion was equitable. Lean. And then just to say that you received money for it. We want the money you received for it. Would that make it federal too? Oh, no. No, absolutely not. I mean, I agree that there's a line. And there's a question of what side of this line there are. And there's a huge range of cases that should not be brought into the federal court based on this. We are not asking for a broad, brush rule. Again, we believe that the substantial federal question is whether or not a non-owner can enjoy the owner's use of a federally registered trade. And we're going to give Mark under the line. That is the narrow issue we are asking for. Thank you, your owners. Thank you very much, Mr. Green. Appreciate it. Mr. Evans? Thank you. The court please. I'll be very brief. You said that you had a lot of arrows in your quiver and you pulled one too many. Well, that appears to be the, now the primary argument from the defendants is that the injunction aspect somehow creates federal jurisdiction. Now, I want to clarify that. First of all, the North Carolina General Statutes, this is section 1-339.3, provides that the judge or clerk of court having jurisdiction has authority to fix and determine all necessary procedural details with respect to all sales and all instances. It is a common practice at the risk of sounding like the U.S. Attorney's Office in the prior case

. No, absolutely not. I mean, I agree that there's a line. And there's a question of what side of this line there are. And there's a huge range of cases that should not be brought into the federal court based on this. We are not asking for a broad, brush rule. Again, we believe that the substantial federal question is whether or not a non-owner can enjoy the owner's use of a federally registered trade. And we're going to give Mark under the line. That is the narrow issue we are asking for. Thank you, your owners. Thank you very much, Mr. Green. Appreciate it. Mr. Evans? Thank you. The court please. I'll be very brief. You said that you had a lot of arrows in your quiver and you pulled one too many. Well, that appears to be the, now the primary argument from the defendants is that the injunction aspect somehow creates federal jurisdiction. Now, I want to clarify that. First of all, the North Carolina General Statutes, this is section 1-339.3, provides that the judge or clerk of court having jurisdiction has authority to fix and determine all necessary procedural details with respect to all sales and all instances. It is a common practice at the risk of sounding like the U.S. Attorney's Office in the prior case. It is a common practice for creditors to seek to enjoy a party's use of collateral when it is being held for sale. The injunction sought in our complaint, and this is at page 13 of the Joint Appendix. The injunction does not seek a land of Mackinac injunction. We are not alleging infringement. What we are doing is seeking to protect the collateral once a sale is permitted. The injunction specifically says the injunction that we see appear to have been made. Councillor, how in the world could it hurt your client for them to continue to use their mark while you're trying to foreclose on the property? It's helped you. It's only once the sale is permitted. In other words, the purpose that was being sought here is only to prevent two parties from using the collateral at the same time. So once the sale is ordered, once the sale is ordered by the local Superior Court judge, that asset then transfers and that the other party can't continue to use it. For the other party being a registered trademark owner. But once it's sold, they're no longer the owner. That's the purpose of the sale. I don't know if it's the same. Once it's sold, but an injunction is proscripted. You want to prescribe their activity with their registered, federally registered, and owned trademark before it's sold. Is that correct? Now, only once the sale is ordered, we specifically request once a judicial sale of the marks is permitted, then we want the injunction. No, no, a sale, what do you mean? That's not used lawyer terms. A sale is permitted means you're permitted to proceed to sell it. That's called a real estate people call it closed. You want an injunction before the sale is closed, correct? No, your honor. We want an injunction in connection with the sale. When the item is sold, we want them restrained from using it further. We want post-closing

. It is a common practice for creditors to seek to enjoy a party's use of collateral when it is being held for sale. The injunction sought in our complaint, and this is at page 13 of the Joint Appendix. The injunction does not seek a land of Mackinac injunction. We are not alleging infringement. What we are doing is seeking to protect the collateral once a sale is permitted. The injunction specifically says the injunction that we see appear to have been made. Councillor, how in the world could it hurt your client for them to continue to use their mark while you're trying to foreclose on the property? It's helped you. It's only once the sale is permitted. In other words, the purpose that was being sought here is only to prevent two parties from using the collateral at the same time. So once the sale is ordered, once the sale is ordered by the local Superior Court judge, that asset then transfers and that the other party can't continue to use it. For the other party being a registered trademark owner. But once it's sold, they're no longer the owner. That's the purpose of the sale. I don't know if it's the same. Once it's sold, but an injunction is proscripted. You want to prescribe their activity with their registered, federally registered, and owned trademark before it's sold. Is that correct? Now, only once the sale is ordered, we specifically request once a judicial sale of the marks is permitted, then we want the injunction. No, no, a sale, what do you mean? That's not used lawyer terms. A sale is permitted means you're permitted to proceed to sell it. That's called a real estate people call it closed. You want an injunction before the sale is closed, correct? No, your honor. We want an injunction in connection with the sale. When the item is sold, we want them restrained from using it further. We want post-closing. Exactly. You made that clear and you made that clear as post-close counsel seem to be a disconnect. He seems suggested you wanted to prescribe use while you own it. What we specifically sought in our injunction, and again, this is consistent with common practice in a Craggers' right? It's a pair of 49 of the complaints that we're reading. One judicial sale of the Cheldas Marks and Goodwill is permitted, then. Then permitted, but that's not the same thing as closing. It is different. If there was unclarity, I apologize for the ambiguity. We were not seeking a preliminary injunction, a prescriptive use before the sale is closed. But you certainly did believe the sale is closed. Yeah, because you can permit a sale and a sale may not take place for two years. Absolutely. Yes, of course do all the time. I'm permitting you to sell this property. Make two years get a buyer for that. But it just permitted. Correct. But so you're now saying or attendance almost in terms of supplementual pleading that I've meant that to me post closure. Certainly. That was our intention is to protect the asset for the purchaser. We may have seen some time and money if we had done that, maybe. I apologize for being in-artful in my bleeding ironically enough. If there are no further questions, we would ask the court to reverse. Thank you

. Thank you, Mr. Adams. And we'll join court in Charleston, South Carolina. And I, and afterwards we'll come down to the great council