I'm not clear on how US courts were allowed to hear a case about events in Canada. Is that a thing?
This is pretty straightforward legal bullying, in my opinion.
Even though copyright infringement might not have been his intent, intent doesn't matter. That said, this does look like egregious legal bullying even if the case holds water.
IANAL
FWIW, I live 4 blocks from Pirate Joes and can tell you that no-one thought of it "as a kind of Trader Joe's".
Okay, maybe there are a few uninformed people but it's still a very long way from "everyone".
I think this debate is more about how one can define "kind of Trader Joe's" than about how one associated it with the company.