Trader Joe's is a great brand name: they sell OK products and have developed an incredibly loyal customer base. Pirate Joe's is trading on that popularity.
I'd love to understand the business logic behind Trader Joe's response to this. It's not like they'd have to open up a full national operation. Franchising in Canada is fairly simple and straightforward, so it's hard to believe that licensing Canadian franchises wouldn't be a more profitable approach to this than suing Pirate Joe's. There may be hidden costs, but clearly things like creating Canadian-compliant labeling is a pretty small barrier.
So as a business strategy:
a) refusing to operate in a territory where there is demonstrable demand for your products
and
b) spending oodles of money suing people who are fulfilling customer demand for your products in that territory
seems like the least sensible thing to do. It would be interesting to see the economic reasoning behind it, which has never been clearly explicated ("Trademark protection" clearly won't suffice, as this article points out.)